"The research and technology expertise is world class, and some of the innovation that we heard about during the day was phenomenal."
It was a pleasure to return to Cambridge earlier this month for the latest entrepreneur events in our annual calendar. Fresh from the London Demo Day of the impressive businesses taking part in the Barclays Accelerator programme, I travelled to East Anglia with my colleague Greg B Davies, to discuss some of the key themes which affect the region’s entrepreneurs.
Cambridge is of course steeped in academic history – both Greg and I had the pleasure of attending the city’s university in our younger years – and it also fosters a vibrant and growing entrepreneur community. Although we have discussed in previous blog posts how entrepreneurs and academia don’t actually go hand-in-hand – there is no reason why anyone with a degree will be a better entrepreneur than someone who leaves school early – Cambridge does undoubtedly benefit from its university heritage. The research and technology expertise is world class, and some of the innovation that we heard about during the day was phenomenal.
I started the day at Downing College where I took part in a very enjoyable and informative panel, discussing the topic of ‘are British entrepreneurs selling out too soon?’. We know from experience of working closely with entrepreneurs around the UK that they enjoy uniquely close and emotional ties to their businesses – if you have put considerable time and effort into building a venture, it is entirely understandable that the idea of selling it may be too difficult to contemplate. My fellow panellists included: Stew McTavish, ideaSpace Director at the University of Cambridge; Roger Gorman, CEO of Profinda; David Porter, owner of the creative design agency David Porter & Associates Limited and Peter Cowley, Cambridge based technology entrepreneur and UK Angel Investor of the Year 2014/15. The broad range of experiences across the group caused for an interesting discussion, which was chaired by Jenny Chapman, Business Editor of Cambridge News.
As our own Entrepreneurs Index showed, entrepreneurial activity in the UK is on the rise, playing a major role in stimulating UK economic growth. Certainly today’s economic conditions are more favourable for a sale than in comparison with recent years, but that’s not the only factor you need to consider.
We always encourage our clients to consider the long term, so in the context of exiting your business, we would ask if you have considered whether you want to retain some involvement in a director role? Or how any windfall from a sale can be used to fund your future lifestyle? These are just some of the questions that we suggest our clients might want to consider, and clearly it is a bigger topic than I can give justice to here.
In the evening, we moved to the very beautiful Varsity Hotel across town. I was delighted to meet a number of our regional entrepreneur clients from a range of fields including consultancy, retail, technology and research. We enjoyed a wonderful dinner and Greg gave a fascinating insight into his work as our Head of Behavioural Finance.
He focussed on the mindset of an entrepreneur and the impact it plays on decision making. Entrepreneurs typically have a higher appetite for risk than most people, and research shows that they have a greater reserve of resilience too. It is not uncommon for a successful entrepreneur to fail at some stage but their characteristics will enable them to recover and try again, where most people might give up. Greg’s team have extensive research into this field, and have found that when entrepreneurs were asked ‘what are the characteristics that make you successful?’, they listed the following traits at the top of their list: 1) Perseverance, 2) Willingness to take risks, and 3) Creativity. Interestingly, the 3 traits at the bottom of their list were: 1) Leadership skills, 2) Strong financial acumen, and 3) Strong desire to make money. Now, this doesn’t mean that they don’t find these traits important, but merely that they are less important than others. This reflects a point made during the morning discussion by fellow panellist Roger Gorman, CEO of Profinda, whereby he made it clear that he didn’t start his business with the direct aim of making a lot of money. He had an idea that he believed in, and wanted to cause a social change by better connecting others. This was an interesting point, which is the case with many entrepreneurs I have met.
Greg then went on to discuss whether being a good entrepreneur can make you a good investor. The obvious difficulty with investing is that it is not an exact science and an entrepreneurial background doesn’t necessarily equate to investor success. Market behaviour is out of our control and you should never make decisions beyond your risk comfort zone, but as Greg explained, we can train our minds to be more suitable to investing. If you appreciate that risk is inevitable, and if you learn to overcome some of the mental biases that make you take knee-jerk reactions at times of stress, we think you’ll become a better investor. Entrepreneurs certainly carry some traits that make successful investors, such as having a willingness to take measured risks, and the ability to stick with it through hard times. However, they can also find it difficult to diversify, as often they will have an idea and want to put all of their efforts into it. They also like to be in control, and can find it difficult to take a step back. There is, of course, no easy answer – but Greg provided a fascinating insight into the mind of an entrepreneur, and how it may impact their investment decisions.
I was sad to leave Cambridge after such an enjoyable day, and it was great to meet so many enthusiastic entrepreneurs from the area. If you would like more information about any of our entrepreneurial activity, or about any of Greg’s team’s fascinating work in behavioural finance, please don’t hesitate to get in touch with us.
Richard Phelps, Head of Corporate & Employer Solutions