BVCA

Collaboration of digital businesses challenges the future of the firm

Digital businesses are increasingly setting up shop in tech hubs or shared workspaces – the merits of the Sharp Project, Pie Factory and Media:City were all discussed at length at the recent BVCA Digital Age event held in Manchester.

Much of these initiatives are aimed at providing cost effective office premises for those fledging businesses which might not otherwise be able to afford a ‘normal’ office space plus they often have access to state-of-the-art technology and superspeed broadband access.

The merits of such initiatives have been well publicised but less so is the potential importance of housing these businesses under one roof and, more importantly, what the potential for collaboration might mean for future business structures?

What if small businesses seize the opportunity to network and co-create on projects? What if micro digital businesses pull together as deep specialists to provide best of breed combined solutions to beat off the competition provided by larger established agencies? If digital businesses really can collaborate seamlessly to beat the bigger boys then might this mean that the importance of separate firms or company structures becomes less important to the point that the concept of the firm starts to dissolve?

If so, would this be a step forward?  What do you think? Could digital businesses lead us into a new era for the way we do business in the 21st Century?

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7 tips for start-ups seeking VC funding

I’ve been reflecting on the key business learning points emerging from the BVCA’s excellent recent event Financing & funding the digital age held in Manchester on 16 September 2010.

It was a full day of fast moving panel discussions and keynote speeches that kept coming at a relentless pace until almost 6pm – plenty to chew over hence the delay in penning this summary.

There were so many ideas and tips to unpack that I’ve decided to run a series of posts covering different topics. First up is the comments made on VC funding.

BVCA Digital Age 1: 7 tips for start-ups seeking VC funding

  1. Start building relationships with VCs who specialise and invest in your chosen sector NOW – don’t leave it until you need a cash investment.
  2. Better communication is needed between both the VC and entrepreneurial community. There was much talk from tech entrepreneurs of the incredibly frustrating “long….slow…..No” from VCs (which was tacitly admitted by the VC panelists), however, there was sound advice in ensuring that you invest some time upfront to pick the right VC – this means studying each VC’s objectives for investment (does this fit with your business?), timeline for investment or where they are in the fund cycle (have they made any investments yet, and if so, any in businesses like yours?). This should save much time and frustration on both sides.
  3. Business plans are largely a work of fiction (as things rarely pan out the way you planned them) so don’t go crazy building huge singing-all-dancing plans, however, you still need one to set out the investable opportunity for VCs to get an initial idea. The point was made (and reinforced by an excellent post and VC panellist Nic Brisbourne) that the act of sitting down and preparing a business plan helps entrepreneurs hunker down and concentrate on the business model – how is this great idea actually going to make me and my investors money? Sometimes reality strikes home when it comes to calculating the sales v costs etc. See points 6 & 7.
  4. Concentrate on clearly defining the market need that your product or service will solve rather than how sexy your technology is.
  5. Dawning of microfunding? Lower costs of entry for building new tech businesses brings into question how much cash investment entrepreneurs might need and when? Put another way, entrepreneurs might now be able to reach a much more advanced milestone in proving the business concept using just “family, friends and fools’ money” than would have been possible a few years ago – the point of inflexion has shifted along the timescale – so does this represent the dawning of microfunding and a move away from traditional VC seed funding and the timing of subsequent rounds of investment?
  6. Merits of writing a business plan for startups seeking funding is best summed up by the comment: “Execution focuses the mind”.
  7. Best of all, when you do approach VCs, present your business as “strategic opportunity” rather than a request for cash.
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