Starting a business in the tech sector may, at a glance appear, very simple; you only have to look at the number of new companies joining the sector to see how straightforward it seems.
However, my experience has taught me that while the process of setting up the business can be relatively straightforward (with the right help), actually managing to establish a business and then continue to grow it is much harder.
During this year’s London Tech Week my firm, Joelson, held an event which featured some of the UK's most successful start-up brands, including Springwise, JamJar Investments, Sustainable Ventures as well as Addison Lee’s Liam Griffin, who has been an integral part of Addison Lee’s success.
This entrepreneur-led discussion revealed some useful lessons gained from each of the panellists' own successful stories, which many new businesses could benefit from.
Intellectual property (IP) and its protection is something that all of the startups involved in our panel discussion agreed was important.
Having a good idea or a successful brand is fantastic, but not sufficiently protecting it can be a recipe for disaster. Acquiring trade marks and patents early on in a business's life can seem like a tough and somewhat costly task, but in the long run all the business owners on the panel agreed that considering this at an early stage was a good idea.
On the other hand, despite what you may think, the investors on our panel did not feel it was always essential to protect IP to secure early investment, as often investors will look at the initial success and the marketability of the product as a whole. In my opinion, if budget permits, it does no harm to protect IP in the early stages of your business and, in particular, in advance of looking for investment.
Another important point to come from our panel was to never lose sight of your customers and their needs. It goes without saying, but it can often be forgotten in amongst everything else when running your own business, your tech project is worth nothing if you don’t have a loyal and dependable customer base, so it pays to take time and research your audience before a public launch.
Once the product has been launched it is integral that there is sufficient customer support in place to avoid reputational damage. There have been too many products of late rushed to market without the needs of customers in mind.
The team also spoke about the benefits of localisation, including hiring locally and using local suppliers. Often they will have existing networks and clients, which can play an integral role in the early life of a business.
The entrepreneurs also stressed the importance of efficiency and sustainability, this included giving back to the workforce and local communities, so that the business is integrated into its environment and sector. This was certainly a key factor for the Chairman of Sustainable Ventures Andrew Wordsworth, but also an important factor for all the panellists.
All the entrepreneurs saw value in this and so will many customers and investors. Therefore it is important to explore opportunities to increase efficiencies, even early on in the life of a business where things still seem fresh.
The panel also heavily emphasised the importance of proper business management, in particular monitoring key KPIs, such as cash flow, to ensure the business is healthy and so that entrepreneurs and investors know what direction the business is taking.
As a minimum, startups should have a business plan, which considers future exit strategies, goals and plans for investment. Past this, a robust five-year plan, which is monitored and adapted to meet the needs of the business and its clients, is useful.
On the point of cash flow, many of our entrepreneurs said strong cash flow was key early on in the life of a startup. Indeed, during my work with tech entrepreneurs I have seen the impact of poor cash flow management. The panel were keen to stress how early on in a business’s life it is integral that the company has sufficient cash flow, where it doesn't need to rely on its next funding round in order to keep operating. In order to make sure this is the case, firms need to have the ability to model and forecast cash flow effectively and monitor their current KPIs.
Relying on debt and funding in order to achieve profit, probably means there are underlying issues in the business’s sustainability. This can also be very off-putting to investors, who will ultimately question your early success and your ability to run the business and create the returns they desire.
These lessons may seem obvious but in the melee of setting up a startup it is easy to sometimes neglect certain areas of your business, while focusing too much on others.
Having the right network around you makes such a difference, as does having the right professional advisers to hand.
All the successful entrepreneurs we spoke to during London Tech Week all agreed that getting the right advice at the right time, whether from another peer or their professional adviser had made a massive difference to their business.
Events sponsored by London & Partners and the success of London Tech Week demonstrate why London will continue to be a great place to set up and scale businesses.
— Phil Hails-Smith, Corporate and Commercial Partner, Joelson & Panel Chairman. Phil advises, as part of his practice, on various intellectual property and technology related matters, his expertise covers a wide-range of companies and entrepreneurs in many sectors with a strong focus on capital raisings and M&A. He has advised global technology companies on development and roll out projects as complicated multi-jurisdictional M&A projects.
Joelson was founded in 1956 and its goal then remains unchanged today – to provide first class, proactive, partner-led legal advice with a specialist and in-depth understanding of the relevant business sector.
Joelson assists corporates, entrepreneurs, management teams and senior executives with a wide range of issues from its offices in central London at 30 Portland Place and in the City.
To find out more about Joelson, please visit www.joelsonlaw.com