To VC or not to VC: that is the start-up question

“To VC, or not to VC, that is the question:
Whether ’tis Nobler in the mind to suffer
The Slings and Arrows of outrageous Venture Capitalists,
Or to take Arms against a Sea of troubles on your own,
And by opposing end them: to die, to sleep”

When William Shakespeare wrote these words he was questioning whether to start a business on your own or to embed with an financial investor who will bring their own pressure and expectations. It is a question that persists today, and one I worry about when considering how to fund a new business. Shakespeare was right; it feels like a life or death decision.

It was about 8 years ago that I started on the road to develop the Wattbox technology; I had written the patent and had about 20 years experience developing advanced energy technologies and some business experience with Rolls-Royce. It was time for my own adventure, and adventure I got.

Around that time I made contact with, my now friend, Bob, in California. He had started and been part of many VC backed enterprises in Silicon Valley. He knew famous Silicon Valley individuals who had made it big, but he was still waiting for his own fortune to arrive. Certainly he is an exceptional person, but there is an uncertain weather to the fortunes of entrepreneurs, and one should not judge an innovator’s ability by the weight of their bank balance. On deeper discussion, he explained the up and downs of having VCs on board. Clearly they would pay most costs, including some salary over the early years, but they would expect innovation success to meet their timescales and be tough on lateness.

Around that time I also made contact with local advisors at Warwick Business Park and received a grumpy list of things to do better and a market report (paid for by a local government grant) which said there was nothing much in my Wattbox business proposition. The latter was useful in that it encouraged me to switch focus, which I did, and this proved more successful. However, these advisors were not going to even introduce me to a possible financial backer. The prospects for my patent and Wattbox technology were so slim that I had no choice, at that time, but to do it on my own, perchance to dream.

Eight years on I have now started three businesses (Oswald Consultancy, Wattbox Ltd and Bowzo Ltd) and I feel I have learnt a lot, and am trying to more wisely consider the two new businesses I have in mind: one producing a new small boat with extraordinary capabilities (picture below), another based on a new engine monitoring system or another new building monitoring service, OK three then.

Development boat - nearest

Moored development boat – nearest

Last weekend, my thoughts pleasantly progressed, more in favour of getting some proper VC money this time round, when I spent an engaging evening in the pub with someone I shall call John. He has a great story of rags, to rags to possible riches. Two years ago he was in rags and in hock for every worldly possession when he decided to start a new energy service business. He arranged for someone to write the proverbial business plan, and subjected to 6 months of due diligence scrutiny from a chosen backer. The deal was agreed and John was asked to come, alone, to the man’s house. By this time John’s family fortunes were worse than dire, he had small children and a young wife, and on brandishing the signing pen the backer informed John that the deal was now changed. “Half the money and double the shares, Welcome to the real world” said the VC. So what would you do at this point? Think about it, would you take the money and suffer the slings and arrows of this outrageous Venture Capitalist? You should, you have family responsibilities and can still end up a winner in your chosen venture.

When he told me this, I thought of the Japanese business culture I have had a little exposure to and their expectation of responsible business behaviour to others. For example, a London city firm, who are owned by a big Japanese house, told me that if their annual profits rise too fast their Japanese owners criticize them and tell them to give some money back to their customers and stop being so greedy. Try telling that to an American or British MBA graduate.

So: we all want John to reject his VC’s offer, and he did: he made the nobler choice. The thing I like about this story is that it makes me want to work with John, and see if we can find some shared success. I try and centre business about trust and integrity; things you can’t find in a bank balance. I may be naive, but when things go wrong and troubles emerge, you need trusted people around you, people that will not run from the slings and arrows of misfortune. New businesses do need periodic rescuing, and it is the people you trust who rescue them.

The really nice thing is that John persevered with his venture and within weeks found a VC backer, someone with suitable integrity, and has now received and built upon their ~£2M investment. Better than that, he recommended them to me, and I intend to go and present my business offerings to them and see if we get any traction, this time round. Alternatively, I could just decide I can’t bear the risk, but to not try would be to die, to sleep.

My first blog, ever.

J.Oswald



Categories: Start-ups

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