Risks of the ‘AntiCommons’ and the Gridlock Econony

 entrepreneurs, innovation, Web 2.0  No Responses »
Oct 242008
 

Michael Heller has just released an ebook Gridlock Economy: The Tragedy of the Anticommons, which provides a short overview of the thinking encapsulated in his new book by the same name.

It provides an interesting counter-point to the growing trend of co-creation and  co-ownership of various assets, from (physical) property through to software, knowledge and IP.

Private ownership usually creates wealth. But too much ownership has the opposite effect—it creates gridlock. When too many people own
pieces of one thing, cooperation breaks down, wealth disappears … everybody loses. Gridlock is a free market paradox.

Heller argues that current wealth creation strategies – particularly knowledge-related (e.g. patents and copyright) – are highly dependent on the ‘assembly’ model: taking bits and pieces of previously created knowledge and assembling them in new ways. A case in point is modern drug research. New discoveries are almost entirely reliant on earlier research activities, some of which may be covered by patents. Similarly, when researchers find new applications for existing drugs, they will almost certainly need to secure permission from the drug’s owner.

Successful ‘assembly’ business models can be tough, but not impossible, when assets are concentrated in the hands of a few. However, when ownership is heavily fragmented and where, as is often the case, a single hold-out can scuttle a deal, then ‘assembly’ business models become highly problematic (hence the term ‘gridlock’).

The ‘tragedy of the anticommons’ arises when ownership of a specific resource is divided among too many entities, with the result that it is under-utilised or lay unused. One example from Heller:

Consider the example of a brother and sister who jointly inherit the family home. “All of us as parents want to believe our children will be friendly when we’re gone,” says an estate planning expert, but leaving the house to the kids is “a sure recipe for disaster.” One wants to rent the house out; the other, tear it down. If they can’t strike a deal, neither can move forward. The house sits empty. That’s gridlock…Now imagine twenty or two hundred owners. If any one blocks the others, the resource is wasted. That’s gridlock writ large—a hidden tragedy of the anticommons. I say “hidden” because underuse is often hard to spot. For example, who can tell when dozens of patent owners are blocking a promising line of drug research? Innovators don’t advertise the projects they abandon. Lifesaving cures may be lost, invisibly, in a tragedy of the anticommons.

The next ‘re-intermediation’ business opportunity?

 entrepreneurs, innovation, Media, Strategy, Web 2.0  3 Responses »
Jul 302008
 

I recently had cause to investigate how you might use a utility/cloud computing service, like Amazon S3, to provide an efficient and modestly priced solution to serving up video-on-demand content services, as an alternative to the more traditional offerings of streaming video platform providers.

I was impressed by the level of intelligence behind not only the pricing of such services (just cheap enough so it makes more sense to outsource – Coase theorem at work), but also the dynamism reflected in the engineering of their underlying infrastructure.

Amazon, and others, provide some seriously ‘grunty’ utility/cloud infrastructure. The recent S3 outage notwithstanding, utility/cloud computing is here to stay. Its adoption by businesses is likely to be accelerated by the early successes of server virtualisation technology adoption by enterprise users, spearheaded by VMWare.

This points to an exciting new realm of opportunities for "middle men" to move this capability into the hands of consumers. Allow me to explain.

We are the last generation who will ever have to worry about launching an installation CD.

We are the last generation who will ever have to worry about disk (storage) capacity.

We are the last generation who will ever have to worry about CPU speeds.

Finally, but importantly, we are the last generation who will ever have to worry about bandwidth throughput (speed).

Imagine what you could do in a world when you’re free of these kinds of constraints.

We’re starting to see the potential indirectly, in the guise of the rapid proliferation of Facebook apps. These apps exist "out there". We don’t care where they reside. Importantly, we play no active role in their installation, configuration or management. Equally, these apps care little about the end user equipment/device or infrastructure being used to access and interact with them.

This is how software (and services-powered-by-software) will look for all users within the next decade.

The promise of utility/cloud computing infrastructure, then, is that it will finally hide the technology. And history tells us that when technology ceases being ‘technical’ – when technology shifts from the core of the experience to the periphery – immense behavioural changes follow.

Now back to the opportunity for middle men.

While utility/cloud computing infrastructure has hidden (or, at least, is starting to hide) the technology, it is still a fairly immature offering, in that – as a product offering – it is largely focused at technical users.

While it is easy to setup an Amazon S3 account, for instance, it is still quite difficult to configure and manage the services that you purchase/consume. This represents an unnecessary hurdle in the current environment, in which – thanks for ‘mashup’ services and the like – non-technical users are being increasingly encouraged to ‘develop’ software-based solutions to every day problems.

This creates a market for an intermediate layer: companies who take utility/cloud computing services and repackage them in a way that makes them accessible to non-technical users. Companies like Morph have taken a step in the right direction, but there is still plenty of scope for innovation in this new market niche.

The Entrepreneur’s Challenge – Surviving the Early Years

 entrepreneurs  No Responses »
Jun 252008
 

I’ve been invited to sit on a judging panel at a pitch session being held on Friday by the Mobile Enterprise Growth Alliance (MEGA).

Over the past 4 months, 10 teams of entrepreneurs have been mentored through the process of fine tuning their business concepts, and the pitch session is designed as a dress rehearsal before these entrepreneurs unleash their ideas on potential investors.

As I prepare for the judging process, I thought I would share some of my thoughts and experiences of the ‘startup scene’:

  • The average startup is launched by a ‘specialist’ – someone with deep skills in a specific area (be it coding, marketing, product development etc.) but shallow/no skills in other ‘must have’ areas (business planning, marketing strategy, customer orientation, financial discipline etc.).
  • Startup founders tend to play to their strengths – founders with a coding background get stuck into the code, and give little attention to defining the market, developing a robust business model etc. People with a business background do the exact opposite – they write reams of pages about the market, business opportunity, revenue potential etc., but do very little prototyping and market validation.
  • Startup founders are, by definition, optimists – they underestimate how long it will take or how much it will cost to secure their first customer, break even etc.
  • Startups have little cash, but, equally, can ill-afford not to seek assistance. The corollary is that getting advice can actually reduce time to market, which conserves cash and is thus capital positive.
  • Australia is a very ordinary market for early stage startups – the sooner you can progress your start-up through ‘Death Valley’ and gain the size/momentum needed to interest VCs, the more likely you are to survive (even if you opt not to accept VC money).
  • There is never a shortage of money. Money will always find good investments. The problem is that most investment opportunities are rarely well refined and usually poorly presented.
  • Most startups, being run by ‘specialists’, have very poorly developed investment propositions. The business plan + pitch documents tend to steer to the founder’s strengths. Tech types talk all about the technology, and don’t drill into the market + the business case for the investor. Business types talk all about the business, but don’t drill down into how the product will be developed and brought market.
  • A key contributor to some of these problems is the type of people start-up founders typically turn to for guidance – accountants and lawyers. In the main, accountants think start-up planning is all about mapping and monitoring cashflow, and lawyers think it is all about legal protection of ideas, IP and contractual rights. While undoubtedly important aspects of new businesses, there are larger issues that need to be addressed in most startups as they take their first steps to market.

Of course, simply articulating these problems doesn’t solve them. I’m currently working on a side project with several colleagues aimed at just that: helping entrepreneurs (and would-be entrepreneurs) to help themselves in overcoming these and other challenges that crop up in the first years of life in a start-up.

Hopefully I’ll be in a position to announce something more formally soon.

Is ‘Born Global’ the new normal for software start-ups?

 entrepreneurs, innovation, Strategy, VC  5 Responses »
Jun 172008
 

A scan of recent activity in the Australian start-up sector suggests that, for many Australian new ventures, launch planning is rooted in a single, dominant objective: ensuring the business is “born global.” Nowhere is this mindset more apparent than among software-based start-ups, led by organisations such as Atlassian, Tangler, Freshview, and 3eep, among many.

Australian businesses have a long history of being export motivated. Nonetheless, the traditional approach to internationalisation required that companies first establish a solid local market position before commencing offshore activities. Even then, export market development tended to be a gradual process, following a series of incremental and sequential stages, with commitment decisions made according to a range of factors, including market perceptions, offshore experience, and management capacity.

What is driving the Born Global attitude?

A ‘born global’ business is one that starts international activities right from birth, entering overseas markets immediately, often multiple countries simultaneously.

What is causing new ventures to opt for such a potentially high risk strategy? This more aggressive approach to offshore market development has emerged for a number of reasons.

Chiefly, it is as a result of Australia’s size. While Australia’s economy is in good shape – it is currently valued in excess of $750 billion, was last in recession in 1991, and has averaged 3¼% growth in GDP since then – the fact remains that we are a relatively small population. We constitute less than 1/3 of 1% of global population, our economy is the 16th largest in the world, and we account for little more than 1% of global GDP.

With over 98% of global populations and global trade outside of Australia’s borders, a compelling argument exists for adopting a globalist perspective. Undoubtedly, those start-ups who choose to ‘leapfrog’ the traditional business growth cycle, and launch directly into international markets, see the world as their marketplace from the outset.

Additionally, over the past decade, we have seen significant developments in communications technologies. The rapid penetration of fixed, wireless, and mobile broadband services are not only enabling technologies for servicing a global market, but also a key driver of market demand for innovative software services.

Finally, Australia’s growing ex pat community is playing a role. Only a few decades ago it was quite rare for Australians to gain offshore work experience. Today, it is not only increasingly common; it is relatively easy for those still firmly rooted in Australia to tap into this network of experience.

Are Software Start-ups Unique?

Several other drivers peculiar to the software sector are shaping launch strategies:

  • Export market homogenisation – Since the demise of the Berlin Wall led to the broader embrace of free market ideologies, both Western and Eastern cultures have become increasingly homogenised by entertainment technologies and the activities of modern conglomerates. This market homogenisation makes for expanding global consumer segments with readily identifiable and uniform tastes, interests, and desires.
  • Operating system monocultures – While there are usually myriad OS offerings for any given hardware or device platform, the general trend is towards monocultures, where a single operating system has the dominant share (as Microsoft Windows does, for example, in corporate, home and online environments). The presence of software monocultures significantly expands the market for complementary software products while reducing development risks.
  • Open Source – The growing availability of robust Open Source software development tools and environments such as Ruby on Rails, MySQL and PHP, and the communities of interest they attract, has dramatically reduced the costs associated with launching software products capable of scaling to meet global market needs.

Two further factors can be isolated as having a disproportionate impact in fostering a globalist mindset among software entrepreneurs.

The first is lowering barriers to entry into the Australian market. Industry giants, such as Google, Yahoo!, and Microsoft, are serious competitors for any software start-up. Their existing audience reach, brand dominance, and capitalisation, together with mainstream consumers’ preference for ‘tried and tested’ companies, mean start-ups must assume offshore competitors will capture a large portion of the local market. One logical competitive response is to seek critical market mass by aggregating small pockets of customers across multiple markets.

The second is the desire by founders to position their start-ups to secure offshore investment. Australian entrepreneurs have long complained about the ‘immaturity’ of the local private equity market, pointing to the lack of money available for early-stage funding and less tolerance for risk among Australian VC firms. Attracting offshore investment is problematic, as investors prefer businesses with local market operations, the dynamics of which they are more familiar with. Positioning a start-up to enter attractive private equity markets, such as America or Europe, provides greater options for securing investment.

Raising Money 101 – Learning How to Sell

 Cash, entrepreneurs, investors, VC  No Responses »
Feb 012008
 

As an entrepreneur, you are in constant “sell mode”. Each human interaction – a lunch meeting, a formal presentation or a surprise encounter with an old school friend while wandering down the street – is a chance to ‘sell’ your idea, product or venture.

I use “sell” here in a broader sense.

When it comes to potential investors, you sell in the sense that you are trying to convince them to invest in you. With potential customers, you sell in the sense of seeking a firm expression of interest – “Yes, I would buy that product/service” etc. Occasionally, you even need to sell family members (so they can “keep the faith”).

There are millions of books on selling techniques. Common to all of them is a single pearl of wisdom: successful sales people listen more than they talk.

Sure, there are exceptions. If you’re invited to do a 20 minute pitch to a group of investors, then you’d better cram that 20 minutes with as much solid and convincing information as you can muster.

Before you can prepare an effective 20 minute presentation, however, you will have spent considerable time understanding those to whom you are presenting.

In most “selling” opportunities, you won’t have time to prepare. That’s partly why I advocate memorising succinct “elevator speeches” that you can deliver on-the-go.

Yet, even the most effective elevator speech won’t get you past “Go” if you haven’t established the right context. How do you establish the right context? Ask a few questions and listen very intently on the answers.

What is the best context-setting question? It really doesn’t matter what you ask. More important is that you show you are listening. At the end of the day, however, what you want to know is what is the biggest “pain” in their life/business (because the best way to create an opportunity is to uncover a “pain” and create an innovative solution).

So you could start with: “What drives you nuts about your business?”

Follow that with a series of open-ended questions (Why? Why not? How? etc.), and very soon you will be hearing a cry for help (figuratively speaking). If your idea, product or venture provides a solution, then you have established the right context for “selling” it.

Raising Money 101 – Overcoming Information Asymmetry

 Cash, entrepreneurs, VC  No Responses »
Jan 292008
 

I wanted to shed some light on why so many entrepreneurs find it difficult to “sell” their ideas or venture – especially in terms of obtaining funding.

Two words: information asymmetry.

Almost all business interactions involve information asymmetry: individuals on one side of the bargaining table have much better information than those on the other side.

In many instances, information asymmetry can work in your favour – if you have much better information, this can help you negotiate a better deal, get a better price etc.

When it comes to seeking funding, however, information asymmetry can be the “kiss of death”.

Information asymmetry often leads to what is known as ‘adverse selection’. If you’ve ever bought a “lemon” (i.e. a dud car) from a private seller, you’d know exactly what I mean by adverse selection.

When buying a car from a private seller, in almost all cases, the seller has the upper hand. S/he knows what is good about the car – and also what is bad. Unless you’re a skilled mechanic and have ample time to examine the car, you are largely at the mercy of the vendor to tell you all the pertinent information necessary to make an informed decision.

In a sense, when you deal with potential investors, they are in the same position as the car buyer. You, as the entrepreneur, know a lot more about your business, its future prospects and your capabilities, skills and experience, than they do.

Investors are very aware of this and, to protect themselves against being stuck with a lemon, impose high investment barriers.

When you deal with potential investors, it helps to understand their questions and information requests in the context of this information asymmetry. Investors want to rectify the imbalance, in the same way as potential car buyers will often request a test drive so they can drive the car to a mechanic to have it formally inspected.

Business plans, for example, can be seen as a “pro forma” disclosure document which provides an efficient mechanism for information exchange, bringing investors up-to-speed about your business and the market/environment in which it will be operating.

Viewed in this manner, much of what investors will ask of you is quite reasonable. Investors don’t know what you know. Prudent investors – like car purchasers – won’t assume the “seller” has told them all there is to know.

To increase your chances of securing funding, ask yourself what you would want to know about you and your business if, like the car buyer, you were a little suspicious of the vendor’s intentions.

Raising Money 101 – Polishing Your Presentation

 Cash, entrepreneurs, VC  No Responses »
Jan 132008
 

One point often overlooked by entrepreneurs is the importance of a polished presentation.

First impressions count. If you can’t generate interest in your proposed venture while simultaneously demonstrating your professionalism and the degree of thought and planning that has gone into your proposal, then you are pretty well dead in the water, and almost nothing you say will turn that around. You have, literally, minutes, not hours, days or weeks to make the right impression.

Every entrepreneur seeking capital should have at least two presentations committed to memory: an “elevator pitch” and a 10-minute blitz.

An elevator pitch is a clear and concise summary of your business proposal. It is called an elevator pitch because you will often find yourself giving it on an impromptu basis within strict time constraints (as can occur when you bump into a potential investor in an elevator, riding to their floor – yes, it does happen!).

With an elevator pitch, you need to communicate in broad terms the market(s) and opportunity that you’re targeting, your sustainable competitive advantage, what you are seeking from an investor, and how an investor will benefit from becoming involved in your venture.

Importantly, you need to say all this in no more than 300-500 words and within 2-3 minutes (that is, at an unhurried speaking pace).

Getting an elevator pitch down pat can be an arduous task of drafting, re-drafting and rehearsing. However, once you have mastered your pitch, it can dramatically reduce the pressure you feel when approaching a potential investor, as you can use your elevator pitch to catch their attention and open a dialogue. As elevator pitches leave a number of issues unsaid, they can help you gauge interest by the nature of the follow-up questions you are asked.

You should time yourself while you practice delivering the pitch. It can also be beneficial to present in front of a mirror (or record it with a video camera), so you can practice/critique your “non verbal” communication – making sure you pause in the right places, use the right facial expressions, maintain eye contact etc.

The 10-minute blitz is a more formal presentation (assisted with props, such as a prototype or Powerpoint slides), in which you present your proposal in greater detail, including the opportunity, your strategy for capturing that opportunity, the marketplace, your sustainable competitive advantage, how you will handle competitors, your financial plan and – of course – the anticipated return on investment.

Preparing a good 10-minute blitz is very hard. Most people shudder at the thought of trying to fill a 10 minute presentation. Once you actually try to prepare a formal presentation, it actually requires strict discipline to limit yourself to 10 minutes, especially when you are trying to communicate each salient aspect of your business proposal.

It is very important to focus on what an investor might want to know about your proposal. This requires that you be on top of your financial forecasting. You need to be able to justify the amount of capital you seek, have a solid idea of cashflow, when you expect to become profitable and whether you anticipate having to borrow further capital in future (to fund expansion etc.).

Do not laden your presentation with platitudes. Be factual. Don’t exaggerate figures to bolster your case. Never overstate the potential market, profits etc. Most savvy investors have built-in “BS” detectors – if they suspect one of your projections is fanciful, it will likely taint the believability of anything else you might say.

A number of entrepreneurs wrongly believe they need to present a “perfect” business opportunity, one that is risk free and highly profitable. Most investors will run a mile from a “risk free” investment opportunity, because it is usually a good sign that the entrepreneur hasn’t really thought through all the issues or, worse, they are trying to hide the true risks.

If you have identified risks, be up front about them and detail how you propose to manage or avoid the risks. Investors will feel more comfortable if you can show that you have examined all facets of your venture and that you have plans or strategies for overcoming foreseeable risks, competitor reactions and other potential hazards associated with the venture.

As you work on refining your presentations, you must read Guy Kawasaki’s thoughts on the optimal presentation structure when presenting to investors – the 10/20/30 Rule of PowerPoint.

Give your business a tune-up in 2008

 entrepreneurs  No Responses »
Jan 122008
 

For many businesses, January and February are quiet times, as work slows while key clients are on vacation.

It is an opportune time, then, to reflect back on the highs and lows of the previous year, divine any lessons to be learnt and devise strategies for the year ahead.

In addition to doing the “big picture” thinking – detecting business and market trends and the opportunities they create – it is also a great opportunity to look internally and assess whether there are any aspects of your business that you could be doing better.

(Ideally, we’d have the time to do this on an on-going basis, but alas…)

A simple phrase – IT BECAME FASTEST – offers a handy mental “cheat sheet” for doing internal reviews:

(I)mprove basic efficiency – all the time.
(T)hink as simply and directly as possible about what you’re doing and why.

(B)ehave towards others as you wish them to behave towards you.
(E)valuate each business and business opportunity with all the objective facts and logic you can muster.
(C)oncentrate on what you do well.
(A)sk questions ceaselessly about your performance, your markets, your objectives.
(M)ake money; if you don’t, you don’t do anything else.
(E)conomise, because doing the most with the least is the name of the game.

(F)latten the company, so authority is spread over many people.
(A)dmit to your failings and shortcomings, because only then will you be able to improve on them.
(S)hare the benefits of success widely amongst those who helped you to achieve it.
(T)ighten up the organisation whenever you can – because success tends to breed slackness.
(E)nable everybody in the business to use their individual powers to the fullest possible extent.
(S)erve your customers with all their requirements and desires to standards of perceived excellence in quality.
(T)ransform performance by constantly innovating in products and processes – including the ways in which the business is managed.

(Source: Goldfinger: How Entrepreneurs Grow Rich by Starting Small, R. Heller)

Some entrepreneurs eschew such “cutesy” lists, figuring that if the process of creating wealth can be reduced to a handful of simple rules, then there’d be a lot more wealthy individuals than there currently is today.

They’re wrong. Running a successful business is not “rocket science”. Most of the time it requires little more than common sense. As I’ve mentioned in past posts, however, common sense is somewhat uncommon!

Making your business more successful in 2008 requires that you focus on three simple objectives:

1. Increase sales.
2. Decrease overheads (by reducing costs and improving efficiency).
3. Increase profit margins.

Forget fads. Ignore the utterings of charismatic CEOs and I-Will-Make-You-Rich evangelists. Before each and every decision you make, or action you carry out, ask yourself which of these three objectives it meets. If it doesn’t meet any of them, don’t waste your time – do something that does.

Watch Out For the Bus!

 entrepreneurs  No Responses »
Jan 102008
 

Entrepreneurs like to get into the thick of things.

They jump into an opportunity, build an appropriate business structure, roll their sleeves up and get to work.

The cut-n-thrust of the “coalface” is often what drives them. This can be a serious mistake.

Business success is about “owning” a business, not running it.

All businesses go through a reasonably consistent lifecycle. Take your average entrepreneurial startup. Often it is a “one man band” (excuse the sexism implicit in that phrase): the owner/founder IS the business – s/he does all the work.

As the business matures and grows, s/he may hire additional staff, but they perform mainly administrative duties, allowing the owner/founder to concentrate on the income generating work.

As the business grows further, the owner/founder may bring on more staff, some of whom may perform income generating tasks, but the owner/founder is still the driving force, performing the lion’s share of the income generating work.

The company grows, and more employees are hired.

Eventually, a business will encounter a cross-road, or, as I call it, an inflection point.

At this stage, the owner/founder will start to back away from the coal face, and start delegating tasks, adding infrastructure (in the form of processes, procedures and specialist employees) that allow the owner/founder to stand back a bit from the day-to-day running of the business.

This maturation process continues, until the owner has little or no day-to-day involvement in the running of the business – s/he merely draws income/profits/dividends from the business.

This is an important lifecycle, though not in the Michael Gerber e-myth sense of “working on the business, not in the business”, nor the Robert Kiyosaki Rich Dad, Poor Dad sense of leveraging your business acumen to generate passive income.

It is creating a business that, while infused with a culture that reflects your specific views and personality, exists independently of you.

Where is your business today?

I use a (somewhat morbid) “bus test” – if you were hit by a bus today, what would happen to your business tomorrow?

On one side of the inflection point, it would sound the death knell – your business would collapse in your absence. On the other side of the inflection point, your business could survive, if not flourish, depending on how far you had progressed it.

Smart entrepreneurs don’t make themselves the “centre of gravity” in their business. They realise that the world is full of opportunities, and they may want to jump at short notice at the next opportunity. To give themselves this flexibility, they design their businesses from the ground up to thrive without them.

I am thinking of getting a poster printed to hang in my office. It will read: “Watch out for the bus!”.

Raising Money 101

 entrepreneurs, VC  1 Response »
Jan 102008
 

I’ve been quiet for a few weeks (working on a new business venture – more on that soon), so I thought I’d touch on a topic close to all entrepreneur’s hearts: raising money.

Few entrepreneurs are in a position to self-fund their idea, either at the startup or growth phases. Seeking money to get your business off the ground is probably the hardest part of being an entrepreneur (unless you happen to have a lot of rich, trusting friends). Coming up with the idea and developing a bullet-proof business plan is a walk in the park by comparison.

Many people have “issues” when it comes to money. They don’t like talking about money. They certainly don’t like asking for it. But that is something you simply must overcome – not merely because it acts as an insurmountable hurdle for entrepreneurship, but also because it will work against you during negotiations.

If you find the act of asking for money uncomfortable, then chances are that, when you find someone prepared to lend or invest money, you will rush through the negotiations just to get the whole, sordid process finished and, in doing so, may compromise your own interests. Negotiating the best terms for the loan/investment is often the “make or break” part of the entire process.

Key to fundraising is commitment. You must be 100% committed to the fundraising process. Anything less, and you will likely find the process very harrowing. Expect to hear “No” often – in fact, a lot!

You may have to pitch your proposal to upwards of 100 potential investors before you get a “Yes”.

Don’t take it personally. In many instances, especially with private investors, you will be pitching “blind”. You won’t get too many clues as to the potential investor’s risk tolerance, areas of interest and level of commitment to other projects, all of which heavily influence whether you will get a positive response.

As the fundraising process unfolds, you will need to draw upon all the drive and confidence you have to persist. Initially, you’ll be optimistic. “Who could say no? It is such a great venture”, you’ll wonder. But as the process draws out – first days, then weeks, then possibly months – you may become disillusioned.

You will also have to contend with other issues along the way, such as co-founders getting cold feet and the stress of stretching whatever funding you do have as far as you can. Seeing other ventures get funding ahead of yours can be particularly depressing.

But you have to stick with it.

Learn something from every “No”. What questions did the potential investor ask? What concerns did they have (sometimes you have to read between the lines here). Did the investor appear to understand the opportunity you were presenting?

It helps to maintain flexibility, so you can subtly tweak your proposal (or, if necessary, perform wholesale revisions) to deal with issues and feedback you elicit from each funding pitch.

Be professional. Create business cards. Get voicemail or a messaging service (this is quite essential, as you will be on the move a lot, and in meetings etc.). Create a prototype if possible, or some other form of tangible, visual demonstration of your concept (a lot of people are visual thinkers and this kind of prop can really help them get their minds around your idea).

Join any local entrepreneur forum or networks where you can liaise with like-minded people. Listen to advice, but run it through your own “reality check” before following it. Keep your eyes open and ear to the ground. It is often the case that the best potential source of funds is one you haven’t thought (or heard) of yet.

Finally, it always pays to have a “Plan B”. Don’t invest all of your personal savings at the outset. You will probably need a reserve of funds to draw upon at a later stage. If possible, don’t quit your job – take a leave of absence or use your holidays/long service entitlements.

Some advocate that would-be entrepreneurs should cast off any safety nets, as this ensures the “do or die” mentality and toughness needed to succeed. That may work for some people, but entrepreneurs come in all shapes and sizes, and such an approach may not suit you – especially if you have dependents.

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