Pulling it all together

Entrepreneurship for mathematicians

Summary of today’s lecture

  • Part 1:
    • Legal structures
    • IP protection
    • Accounting
    • Hiring, firing, leading, managing
    • Disputes
  • Part 2:
    • Guest Lecture (The Cambridge Ecosystem)
    • Dr Nathalie Muller – Commercialisation and Academic Relations Manager with Cambridge Enterprise
  • Part 3:
    • Wrap up.

The boring but important Stuff

Things go wrong

  • There are lots and lots of ways that things go wrong during your entrepreneurial “journey”
  • In fact, being an entrepreneur is mostly things going wrong or threatening to go wrong
    • Tech failures: your cool idea isn’t quite as good as you’d hoped
    • Fund raising failures: you can’t raise as much money as you’d hoped
    • Marketing failures: you can’t sell as well as you’d hoped (this is the big one normally)
  • We’ve talked a lot about these three in previous lectures
  • But…
  • There’s a lot of things that can go wrong that are a lot easier to avoid

Avoidable problems

  • Well, maybe not avoidable but certainly “mitigatable” (this isn’t a word)
  • When these things go wrong, it can be terminal for your business
  • In the heat and excitement of building your product, selling to customers, raising money, it is easy to forget the basic things
  • If you get these things right then 
    •   things will *still* go wrong
    •   but it might not be an existential crisis

Get a lawyer

  • Lots of lawyers in Cambridge can do this
  • They’ll talk you through the documents
  • Most of the discussion (and thought) should be about
    • How much equity each of the founder has
    • Who has control
    • Equity reserved for employees (employee share schemes)
  • Founder disagreements are where a lot of businesses go off the rails

When founders attack!

  • In this example there are three founders and they’re all lovely people
    • Alice and Bob have been friends since Part 1 Maths
    • Alice’s research has uncovered a potentially profitable SaaS business based on group theory…
    • Bob met Eve (an MBA student) at an entrepreneur club party and after a few informal meetings she’s done some great work analysing the market
    • Bob is a reasonable programmer and builds some prototype software
    • They decide to start a company to build the software properly
    • Alice, Bob and Eve all have 33% of the equity
  • What can go wrong here?

True examples

  • Alice had the idea so she thinks she should own more
  • Bob feels like he’s doing a lot more of the work and should own more
  • Eve feels like she’s taking a science project and turning it into a real business and should own more
  • Alice and Eve want to hire a better programmer than Bob because his prototype is badly written, slow and buggy
  • Bob and Eve end up in a romantic relationship
  • Alice decides she wants to go back to academia but still retain her 33%
  • Eve knows that Bob has had a new idea which he wants to pursue but still wants to retain his 33%
  • Bob knows that Eve is just working for the company to get some experience before she joins McKinsey but still wants to retain her 33%

It’s like this

How to avoid?

  • This sort of thing blows up a lot of promising businesses
  • Other examples include taking external investment, hiring, customer selection, tradeoff between speed and reliability…the list is endless
  • One way to avoid it is to always have one shareholder who holds 51%
    • Might be hard to get people to join you if you’re the 51% person
    • Benign dictators have a tendency to go wildly off the rails
  • Founder share vesting over time is not a bad way either
  • As with so many things, up front communication is key
    • Think through possible scenarios (getting bored and moving on, disagreements, romantic involvements)
    • Discuss what approach you’ll take
  • When money and prestige are involved, nice people sometimes turn very bad

IP Protection

  • How do you stop people stealing your idea?
    • You can keep your idea secret
    • You can patent your idea
  • If you’ve already published your idea both approaches are going to be hard
  • This is a really complex and technical area
  • People like Cambridge Enterprise can help a lot with this
  • Getting a patent can be an expensive, long and drawn out affair (particularly if you want worldwide protection)
  • But there are some rules of thumb

To be patentable, an “invention” must be

  • Novel
    • An invention must be new in relation to what was public knowldge before the date of filing. If it is public then it is “prior-art”
  • Involve an “inventive step”
    • Your invention must involve an inventive step to be judged substantially different from all that was public knowledge before the filing date of the application. The difference is not allowed to be so trivial that the invention is obvious to a person skilled in the art.
  • Be industrially applicable
    • Patentable inventions must be technological in nature, and they must solve a technical problem. The subject matter may be a process, method, device, product, or a new way to use existing ones. Consequently, an idea or a theory alone cannot be patented.

What are not inventions?

  • discoveries, scientific theories and mathematical methods
  • aesthetic creations
  • schemes, rules and methods for performing mental acts, playing games or doing business
  • programs for computers, or presentations of information
  • methods for surgical or therapeutic treatment or diagnostic methods, practiced on humans or animals.
  • None of these can be directly patented but something related can be if it’s technological
  • Investors like patents although I am personally a little skeptical…

Accounting

  • Doing accounts is boring
  • So get a professional to do them for you
    • Bookkeeping (invoices, payments etc)
    • Preparing statutory annual accounts (legal requirement)
    • Preparing management accounts
  • Lots of external firms do all of the above. Don’t try and do it all yourself
  • Management accounts is how you understand your present and your future so you should build this yourself
  • Not having a clear idea of what your future looks like destroys businesses (“Wait, we’ve run out of cash??”)

Human resources

  • Hiring
  • Employing
  • Leading
  • Managing
  • Firing

HR Hiring

  • Early on, hiring is a huge deal – maybe all the time
  • If you’re Marks and Spencer and you hire a dud, not a big problem but if you’re a 3 person startup and the person you hire is a dud then that’s a huge problem
  • Interview a lot of people
  • Ask open questions
  • Try to interact with them informally as well as formally
  • Ask for references and take them up
  • Try to hire people not like you (EDI)
  • Be very careful hiring people with skills you don’t understand (salespeople!)

HR Employing

  • Standard employment contracts
  • Don’t offer the job until you know the person will say yes
  • Make sure you’ve got a probationary period
  • Any equity you might give early employees should vest over time
  • Make it very clear to the employee what they are expected to do
  • Pensions, healthcare, gym membership, holiday entitlement, bringing pets to work, sick leave, how to claim expenses, the list is endless…
  • Eventually you’ll need an employee handbook
  • You can outsource this and probably should until you’re sufficiently large
  • Remember, they might not have the same passion for your firm as you do

HR Managing

  • Managing is about making sure people know what they’re supposed to do and by when
  • In the early stages you should expect people to be fairly self-starting and self-managing
  • But you’ll still need to have regular planning and tasking sessions
  • Lots of good kanban style tools for this
  • Regular informal sessions for feedback both from them to you and from you to them
  • You never want to hear the phrase “but I didn’t know I was supposed to do that”
  • One formal review session a year

HR Leading

  • Leading is not the same as managing
  • Honest
  • Approachable
  • Empathic
  • Transparent
  • Consistent
  • Inspiring
  • The “Vision Thing™️”

HR Firing

  • The hardest job you’ll do as a leader
  • Remember, if you have to fire somebody, it’s your fault
  • If somebody has done something illegal, unethical etc you can just fire them
  • Within a probationary period you can also just fire them
  • You can’t do that with people who just aren’t performing well
  • And you definitely can’t make things so difficult for the employee that they feel they have to resign!
  • There are many laws pertaining to this. Consult a lawyer
  • Verbal warnings, written warnings, development of remedial plans etc
  • Try hard to avoid all this by hiring well

Summary of the boring stuff

  • The main point of all of the above
  • There are professionals who do the boring stuff for a living
  • Either outsource to firms who do this
  • Or hire in experts to do it
  • Don’t try and be your own lawyer, accountant, HR manager

Short break

The Cambridge Ecosystem™️

  • Cambridge is probably the best place in the UK to be an entrepreneur
    • Huge pool of highly educated and driven people
    • Lots of people who have “done it before”
    • Early stage support from the university to spin out ideas
    • A strong (in the UK sense) Angel, Seed and Series A investment infrastructure
    • Service companies (accountants, lawyers, bookkeepers) who have “done it before”
  • For university undergraduates, postgraduates and faculty, your first point of contact is likely to be Cambridge Enterprise
  • So…over to Nathalie

Wrap up

Intro

  • We’ve spent about 8 hours talking about various aspects of entrepreneurship
  • A little of it has been specific to mathematicians but it’s mostly been generic “how to start a tech business” stuff
  • So what have we learned?
  • And where do we go from here?

What have we learned?

  • Ideas come from lots of places
  • Work out very roughly whether or not your idea is any good early on
  • Write a simple business plan to make your ideas more concrete
  • Think about the customers very early. Who, where, how much?
  • It always takes twice as long and twice as much money as you expect
  • A good presentation and a good presentation style really helps
  • Get help
    • Talk with people who have done it before
    • Get a mentor
    • Ignore half of what they say because it’ll be rubbish

Where do you go from here?

  • Join an entrepreneurs club to meet other entrepreneurs
  • Try thinking about the three fake businesses we talked about in Lecture 1
  • I’m very happy to “mark” any presentations or business plans you might come up with
  • If you’ve got an idea, come and talk to me

The End

…or maybe the beginning

http://www.cms.cam.ac.uk/