A startups WIKI?

(Andy Wootton) #1

As ‘someone who used to be technical’, in large companies for the last few decades, mixing with ‘you lot’ has made me feel very ignorant about business startups. If I had a great idea I wouldn’t have a clue how to take it forward.

I suspect I’m not the only techie who feels that way. Would it be useful to have one of @LimeBlast’s new WIki pages in this group that explained angels, feeder funding and venture capital? I’d also be keen to know about the various ownership structures: share capital splits etc. and how someone with an idea for a business can share the rewards of success with those who help it grow, without completely losing control or rights to their original idea. Is that even realistic?

Let’s face it: based on the ideas I’ve heard pitched at Silicon Canal against those thrown away free in the technical streams here, the best ideas are likely to come from the geeks.
[This a joke. I have no idea how normal people think or what they will like. I thought Periscope was a stupid idea. It’s one-way video-conferencing.]

(Daniel Hollands) #2

I like the idea of thing, but I’m not sure that using a Discourse wiki post is the way forward. There are lots of things which make it less than awesome, so I can’t help but think another approach to the content needs to be taken.

First off, is setting up a wiki the best approach? Who’s likely to be the authors of the content? Is this something that people are going to willingly contribute themselves, in a collaborative fashion, or is it something which will be written by individual authors?

(Andy Wootton) #3

The trouble with things like this is that the experts don’t know which jargon other people don’t understand and I suspect it will keep changing quite fast so it’s useful if many people can update. My experience of WIKIs suggests they don’t grow well from seed though. They need an initial structure so people know where to hang things. I know I’ve mixed metaphors. It’s my hobby. Imagine we were growing a Christmas tree from a fir cone if it helps. Your rules about decorations don’t need to be as strict as Mrs. Woo’s though.

(Daniel Hollands) #4

I’ve got no problem setting up a wiki post for the purposes of getting this started, if you wanted to give that a try, but I’m not sure that it’s the best location for its long term life. Maybe start it here, get some useful content, then put it somewhere more suitable.

If you start a post, and set it to whatever content is relevant to get this thing started, I’ll turn it into a wiki for you (heck, you might even be able to do that yourself, I’m not sure).

(Andy Wootton) #5

I’ve pretty much written my entire knowledge of start-up funding above. If I write it then it will be a list of questions demonstrating my ignorance but I’m fine with that. Would anyone else be interested in any answers we get or am I unusually uninformed in these matters?

Do the people who know the answers have enough of their time wasted by people like me asking them to explain basic concepts to think it is worth writing a guide to reduce the number of times it happens. I’m wondering now how hyper-linked the information would need to be, so whether it is a good idea to have to move it, but I’d like it to be connected to this community.

Is there value in having a register of local people who want to know about good ideas or who can help. This is potentially difficult because there is sure to be competition but I’m sure people have specialisms. Is who provided funding to local successful start-ups commercially sensitive? I don’t know.

(Daniel Thompson) #6

That’s such a huge subject area, and it’s not specific to Birmingham in any way. I’m not sure it’s worth trying to re-create a knowledge base on this site to cover all that.

Instead, to get you started, I would suggest:

  1. How to Start a Startup
  2. Talks from the Business of Software Conference
  3. Startups Stack Exchange
  4. The writings of Patrick Mckenzie
  5. Talks from the Microconf conference

Note: YCombinator (the people behind the ‘How to start a startup’ course) would argue that the word ‘startup’ only refers to high growth companies. So, an individual writing and selling software in their spare time would definitely NOT constitute a startup. However, Microconf and Patrick Mckenzie are much more inclusive. That’s just something to be aware of when you’re reading stuff online. There are situations where raising investment and growing fast is definitely the right thing to do, but whenever someone seems to specify a formulaic way of “how you do a startup” take it with a pinch of salt. There are myriad ways to run a tech a business.

Now, what a forum like this would be excellent for is asking specific questions. There are many people in the city who’ve done each sort of startup, and there’s a lot of knowledge here about what works and what doesn’t. You could do an Ask HN for sure, but by asking people locally, I think people might be more willing to help out, and there’s a chance that your question might lead to an introduction to someone local who’s been there and done it and is happy to meet for a coffee.

(Andy Wootton) #7

@d4nt That’s great. I’m absolutely against duplicating information that already exists so links would be fine.

You see, I’m SO ignorant that I don’t know the accepted definition of a startup or if there is a Brum-specific take on this. I assumed there would be because of the kind of ‘accelerator’ meetings I see advertised and the co-location spaces springing up around town but I have no problem with people telling me I’m wrong. It’s a key part of my communication style.

I know that I’ve stood in the corner with a techie and we’ve said,
“Do YOU know what they’re talking about?”
"Not a clue."
Most people avoid exposing weaknesses and people are afraid to share their ideas with people who they don’t know or understand, so I see conversations not happening.

(Richard Cunningham) #8

I’d agree @d4nt that startups are a massive topic, though I think this could be made Birmingham specific by listing incubators, advisors and workspaces in Birmingham.

If you are interested in startups, some things I’d suggest reading:

  1. Paul Graham’s essays
  2. The Lean starup book
  3. Traction book

Often if funding sources are made public they can be found on Angellist or Crunchbase.

Paul Graham actually has a post on what he considers a startup.

Mostly startups at least have some basic product before even getting seed funding. Y Combinator for example like you have something to show them when you apply.

(Andy Wootton) #9

Thanks @rythie It isn’t for any pressing reason. I simply don’t like not knowing what people are talking about and I thought it might be a wider problem. My normal role in life is bridging the gap between business-bluff and L33t, so I’m trying to do that while I learn about an area of business I’m not familiar with.

(Daniel Thompson) #10

@woo I’m not sure there is a generally accepted definition of ‘startup’. Paul Graham (Founder of YCombinator) has his view, I happen to find his view a little (dear I say it) snobbish. There are a lot of profitable tech businesses that bootstrapped their way into existence and do quite nicely without participating in the whole funding process. I think investors have a vested interest in portraying accelerators, angels and venture funds as the ‘One True Way’ of starting a company though. So I like to point out that it’s not the only way of doing things as much as possible.

(Andy Wootton) #11

Thanks @d4nt. I’m immediately suspicious of anyone running courses or writing books on ‘how to make a million’ because I know it isn’t by running training courses or writing books. Are they doing it as a charitable enterprise? Similarly, I think ‘we techies’ are mildly suspicious of ‘suits’ who ‘want to help’ us. We need to know what the rules are before we play the game because in any game of ‘negotiation after the fact’ we’ve played previously, we tend to have come at least second.

I ‘Lean’ towards organic growth and have a limited appetite for it. Obviously this is not the entrepreneurial way but I would want to build a great company and any ‘excess wealth’ that accrued would be a fortunate side-effect. I would never want to work for an organisation where the people who get the benefits are not the people who care about the business.

(Andy Wootton) #12

Here’s a nice bit of startup tech from the West Coast, fresh from LinkedIn. Wow.

(Andy Wootton) #13

I just noticed that Planet includes the Oxygen Accelerator, which in 2015 was offering
"€21,000 per team in exchange for 8% equity".

Is this putting a default value on a startup of €262,500?

An interns salary for 8% of possibly nothing. I’m not sure who is getting the best deal.

I found this:

What puzzles me is that I see every idea as having a different value and the scheme seems to make the same investment in each of them. Am I missing something?

(Philip Wattis) #14

Businesses that were able to secure a place on Oxygen Accelerator, like many very early stage startups had very little intrinsic value, but were highlighted as having much potential. Oxygen gave those businesses cash, support and a 13 week intensive bootcamp to make them investment ready in exchange for a small equity stake.

Any valuation upon starting the programme was essentially meaningless, and Oxygen was not paying their salaries. The money was intended to be used by the business to help it through the 13 week period. This likely constituted some token payments to cover living costs, legal costs, promotion, and all the usual things an early stage startup would usually have to fund out of their own pockets.

Oxygen was a very valuable programme for many of those fortunate enough to have secured a place on it. It was a pity for Birmingham that the programme appeared to work better in London, I suspect as there was a larger pool of talent and resources to draw upon.

I know that a number of the teams that completed the programme went on to secure 6 figure investments.

(Andy Wootton) #15

Thanks @Philw. So where did the money come from? Was it provided by government, as a scheme to encourage economic growth? I saw that Oxygen was also looking for investors but from what you say, it doesn’t sound a very reliable investment opportunity.

I went on to read about social enterprises, another structure I don’t feel I understand. That said profit goes to a ‘community’ rather than to shareholders but I know from running a Limited Company that what becomes ‘profit’ is a choice, based on salaries, so that seems easy to adjust and WikiP says there can be external shareholders too.

(Philip Wattis) #16

To the best of my knowledge, all the actual cash was private money. I suspect there may have been some sort of ‘free rent’ arrangement with the Birmingham Innovation Centre which I think benefits from public funds.

(Kath Preston) #17

The money was from private investors. The idea was that all of the startups on the programme are high risk of course as they are very early stage but had high growth potential (that was a criteria to be accepted) - so an investor would have a very small share of 10 businesses, with the possibility of 1 or 2 of those providing a return. There were also (and still are) some very good tax benefits to investing in this way, which really mitigates the risk. Investors were also motivated by a desire to understand more about how investing works, get into the technology space from other more traditional areas, a genuine desire to mentor/help younger entrepreneurs, networking with other investors etc etc!

(Andy Wootton) #18

Thanks @kathpreston. If the money comes from the government by way of tax breaks, is that why the banks are getting involved too or are they attracting new investors so they can risk other people’s money? At the birmingham.io birthday party, I think we were hosted by an accelerator, or a similar ‘vehicle’, and a spokesperson said that they were hosting companies this way and taking nothing in return. Frankly, I didn’t believe the pitch. The 8%, while seeming arbitrary and more attractive to smaller companies with less confidence in their ideas does at least answer the “what’s in it for them?” question. I don’t think banks are charitable organisations so it made me suspicious. I think working in tech makes you question all non-transparent business models. The electricity companies get bad press but they don’t want customers who can’t pay their bills, so they can take their house.

When making a business decision we have to decide the value of a product or service. You can’t do that if either the costs or the benefits are obscured. I’ve walked out of a car sales office because the salesman wouldn’t move past his question of how much I wanted to pay each week to answer my question of how much each model cost. I’m suspicious of any deal that appears to depend on the naivety of a potential business partner. I’ve also had a credit card taken off me because I didn’t get into debt often enough. I’d like to trust banks but I don’t because of evidence about how they behave.

(Philip Wattis) #19

It is a small but important point - A tax break does not involve the Government giving you money, it is the Government taking less of your hard-earned money off you.

In terms of the banks, I don’t know of any that invest in something as risky as a startup, but a few do run startup programmes and take nothing from the startups (such as e-Spark). Only they could explain why they do this although I suspect it’s a PR exercise with a relatively low opportunity cost.

Edited: For more information on the specific tax breaks lookup EIS and SEIS.

(Andy Wootton) #20

“It is a small but important point - A tax break does not involve the Government giving you money, it is the Government taking less of your hard-earned money off you.”

Except we’re talking about banks and people with, was it “more than £100,000 to invest”?, and the money is taken off you by the government ‘to invest in others’, possibly the arms industry, possibly a disabled single parent but ‘we’ are choosing to invest in a bundle of start-ups instead, with a chance of making more profit for us.

In my experience, money given to me looks a lot like money not taken away, in almost all circumstances. Here, it’s money being taken from me anyway being put at risk in the hope of money being given to me later. It’s a bit like being a minor Lloyds Member at zero personal risk.

I’m fine with the government using state resources taken from the comfortably off, to invest in startup companies but here it seems to be doing that as a side-effect of a tax dodge for the wealthy. It’s the government that bothers me, not those benefiting from it.