97. Challenging investors

Dear Gerard,

Your question regarding defining entrepreneurial spirit is, in one sense, not easy. As I mentioned in my previous article, Number 95, I was involved in the start-up of a soft commodity trading company which competes with the largest trading companies in this sector. At this company, the business plan, the opportunities, and the experience and knowledge of the promoters were all at a high level. But investors have to be challenged to invest in the soft commodity sector, which involves high financing costs. Both the investors and the banks must believe in the business plan, the promoters and the success rate. One way to persuade investors is to show that you have invested your own money or the money of family and friends. The bonus for the promoters has to be linked directly to the success of the company. This means that rewards for staff, both primary and secondary, cannot be too high. Everything has to be focussed on the company’s success, including keeping costs at an acceptable low level. There cannot be any excess – first perform and then benefit from the success of the company. Within the company “roll up your sleeves” and “actions not words” must be the watchwords for the culture.

Recently, we met with some students who have developed an auction application. This year in the U.S. this product has received a prestigious award of $20,000 for innovative start-ups. These (soon to be) graduate students now pay the travel costs for pitches from companies such as Philips, Procter & Gamble and Ericsson. Given the unique product and the interest of large companies, I believe this business is likely to be a success. We will provide these young people with as much advice as possible. Investors in this product will certainly be encouraged to participate. The question is what the price will be for this special product.

I’m not sure how to define enterprise to you in one sense: every business is different. Many aspects can be important here. The elements which I consider important are: vision, distinctiveness, focus, hard work, perseverance, permanent renewal / innovation, teamwork / spirit, network to find investors, company culture and, last but not least, timing.

Sincerely,

Jan Stam