Entrepreneurs and advisers including Moo.com's Richard Moross share advice on securing investment, attracting a company's first 100 customers and knowing when to give up the day job with some of Hackney's most promising start-ups at the latest Start-up Kitchen.
Richard Moross has been running business card printing company Moo.com for a decade, but he confesses that he still struggles to come up with a compelling "elevator pitch" for his venture. That comes as a relief to the handful of fledgling companies at the latest Start-Up Kitchen, an initiative which is passing on invaluable business guidance from seasoned entrepreneurs, advisers and investors to those at the very earliest stages.
Founders behind six start-ups ranging from an online halal restaurant guide to an emerging urban clothing label have gathered in Hackney's BL-NK venue for a lively roundtable discussion about their challenges as well as more discreet one-to-one advice. Moross is joined by Raphael Grunschlag, head of European Technology Banking at investment bank William Blair, and Jason Goodman, founder of marketing agency Albion - which also founded Start-Up Kitchen - in providing hands-on guidance to the ambitious start-ups.
Moo now has annual revenues in the tens of millions of pounds, 300 staff and offices all over the world. The fact that even an entrepreneur as experienced as Moross sometimes has trouble distilling his business model into a punchy line or two is comforting to the founders, many of whom are trying to do the same for their own companies.
Moross tells the start-ups - who have been selected from around 200 applicants to attend this growth-themed leg of the regular event - that however they describe their business, they will need to be nimble enough to change their approach as they grow. "I've made bad mistakes multiple times so I know what it's like to change direction."
Zohra Khaku, founder of Halalgems, a halal food website aimed at Britain's 2.8m Muslims, wants advice on raising early stage finance from equity investors. How should she go about preparing a business plan and financial forecasts to potential backers?
One of the few racing certainties in business is that whatever you put in your plan now will probably look laughably wide of the mark in five years' time, Moross says.
"The only thing you can be sure of is that your plan will be wrong - you won't hit [your projections]. In my case, the plan [I showed to investors] was worthless, the numbers were nonsense. Almost 100pc of [early stage] investments are based on the individual. It's a journey of trust because there's little else to go on."
Grunschlag, who has recently helped European companies float in the US and raise venture capital rounds in the UK, says securing capital is "an art not a science" in the early days.
"Consider not even showing a plan in the first meeting," he says. "I've seen that work. Investors back the man, not the plan."
Counter-intuitively, demonstrating that you can make the business work without outside investment can also be attractive to financial backers, he adds. "Show how far you can get under your own steam, that you'll make a success of it come what may. Then the discussion for the investor becomes, 'I want to be a part of this', rather than having them watch you beg for money."
Moross says there was "very little science" in setting a valuation and deciding how much investment Moo should raise in the early days.
According to Grunschlag, this is not uncommon among early stage companies, but it's best to try and secure more than you think you need. "Some people are not ambitious enough. It's easier to raise...$50m than $5m and so on."
However, securing investment is not a success milestone in itself. Moross likens it to "putting on the armour, not fighting the battle".
Adam Idzhar, founder of I've Read That, a "social network for readers" which allows users to discuss, share and review books, is eager for advice to get him fighting fit - including on how to get his first customers, and on when to quit the day job and go full time.
Goodman says commitment is a classic challenge faced by almost every successful entrepreneur. "People fall into two camps on this one; they're either in denial about it or address it in detail and have a clear idea of the targets to reach that will allow them to focus all their attention on their business."
He says he lived off his wife's salary for the first two years of Albion. Those that can call on similar support shouldn't be afraid to do so, he adds, but he notes that there are plenty of talented founders who don't have a family member or partner to fall back on. That needn't puncture anyone's ambitions, Goodman says - but a healthy dose of realism could help prevent financial disaster.
"Don't be one of the entrepreneurs who's in denial. Your plan might be getting a seed investor or securing a bank loan. There are many ways around it, but you must accept the reality of not having a regular income for what can be a long period of time. Anyone who starts a company has got to find a way to survive while they're busy making their business work."
"There's no hard and fast rule," says Moross. "I asked my dad to pay my rent for six months. I would have regretted it for the rest of my life if I hadn't tried [to launch Moo]." He says the "leap into the unknown" was made before he had financial backing, but that sometimes the "pressure of a ticking clock" helps banish procrastination.
He advises Idzhar, and the other start-ups around the table, to focus on their first 100 customers. "Who are they? Where do they live? What do they wear? You need to understand everything you can about them. When you've done that, work out who your first 1,000 customers are, and go up in orders of magnitude. Doing that has been very helpful for us."
Access to a regular source of guidance is also crucial, he adds. "Starting a successful business meant listening to smart people we'd taken money from in the early days - they had the muscle memory of what's good and what's bad."
How can those without an established network make the right connections, however?
Goodman says good advice may be closer than you realise.
"My business was me in my bedroom - the first person I thought of [for advice] was my best mate's dad, who was clearly a successful guy. I'd only ever washed his car but I managed to reach him just by saying I wanted to ask him a few questions. He ended up investing in Albion and became a non-executive director on our board for years."
Occasionally ignoring wise counsel in favour of following your gut is an invaluable knack, too, Moross says: "Listen, but don't always follow. If I'd have listened to my friends' advice, I would never have started the business in the first place."
The next Start-Up Kitchen takes place on Tuesday July 1 and focuses on hiring and retaining the perfect team. To apply see www.albionstartupkitchen.com.Suggest a correction