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Public funding: R&D is not the end game

Posted on February 27 2012 | Author: John Pickard

Had I only known when I was planning my last entrepreneurial venture about the extent of public funding that was available for start-ups. God bless the federal, provincial and municipal governments that have dug deep and provided grants and loans to enable companies to clear some technology hurdles or develop a prototype to test their technology in the real world.

There is no end to the programs offered by IRAP, SR&ED, or NRC, most of which are geared toward early stages of technology. These programs seek to answer the unanswered questions about how something might work…or how it might not. All very much needed, I would say. However, the real sweat comes when the innovator knows that the technology does work and has application to solve real world problems. That is when the public funding dries up.

Acme Inc. has already spent 4 years validating their technology, developing a brand, and courting customers. Maybe they already have a production facility, are revenue positive, and are looking to expand their market. That is precisely where the dollar crunch comes. The government funds don’t apply, angel money is not enough, venture capital is non-existent, and it’s too early for private equity. Oh, and need I mention, banks are not in the risk business by the way. The company dies on the vine because no one wants to fund that emerging stage.

It’s time for government funding programs to trim their funding of “wish-list” concepts, technologies and companies and devote some of that trimming to invest in ventures that have made the grade.

A great example is Ontario’s Emerging Technology Fund (OEFT) that “matches” private investment on a dollar for dollar basis. The government enters and exits on the same terms as the private investor. Canadian business needs more of this kind of thinking… government dollars following private investors, dollars following technologies and businesses that are beyond R&D and into real business.

Promoting R&D is great, but investing in real companies with real technology and real customers is the end game.

John Pickard
Entrepreneur in Residence, Bioenterprise
 






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Novel Businesses Require Novel Funding

Posted on January 30 2012 | Author: John Pickard

Noted below is a link to an IndieGoGo site for Nicole’s Farm. IndieGoGo is a social capital and "crowdfunding" site for novel, start-up companies. Bioenterprise is currently working with Nicole Huska, founder of Nicole’s Farm, to assist her in proving the business model.

Nicole’s Farm is a pioneer in the development of Small Plot Intensive farms (SPIN) in the Sunshine Coast of BC. Nicole’s plan is to identify 1 acre plots that are currently un-used by landowners and to negotiate a lease of the land for the farming of produce. This land could be a homeowner's back yard or a hydro right-of-way, etc. Nicole's Farm would negotiate the land lease, and prepare the property (fencing, ground prep, irrigation, etc.). Furthermore, they would identify and contract farming staff to tend to the seeding, nurturing, and harvesting of the produce (this staff may be the land owner, but not necessarily). Nicole's Farm would make arrangements with local retailers, restaurants, markets, and food service agencies for the purchase of the produce. Nicole sees this as a franchise model. Each 1-acre farm is forecast to produce $100K in revenue per year through deep bed, no till, multiple crops, and sustainable agriculture practices. $50K is margin after the 1st year costs set-up are absorbed. The proceeds go to the landowner, the farming staff, and to Nicole’s Farm to recover the costs of set-up and management. This is a novel way for Canadians to grow, sell and eat local.

Beyond Nicole’s concept, I think the funding model is intriguing. Much like making charitable contributions to micro-businesses in the 3rd world aimed at getting entrepreneurs their start, IndiGoGo introduces a similar strategy….many “random” partners supporting a business concept that they identify with.

Now, for clarity……I’m not soliciting funds for Nicole. I just find her concept and the IndiGoGo model novel and worth chatting about. A new model for farming combined with grass roots Venture Capital.

I encourage you to visit the Nicole’s Farm and to educate yourself on “crowdfunding”.

John Pickard
Entrepreneur in Residence, Bioenterprise
 






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Cash Flow

Posted on November 09 2011 | Author: John Pickard

...the only thing that counts.

I learned about cash flow the hard way, as most do. The good news is that it wasn’t by writing cheques on my business account and then realizing that there wasn’t any money there. I wrote my first business plan completely and on my own using an online template. The template walked me through revenue calculations, expense calculations and forced me to research employee benefit costs and payroll taxes. When all was inputted into the template, the magic happened and out came a ream of documents including the P&L, Balance Sheet and Cash Flow statement. The beauty of the template was that it gave monthly cash flows for 3 years out based on my projections.

As a non-financial manager, I was glad to have all of this data, but I really only understood the P&L as I had created all of the inputs myself. However, biz plan in hand, I marched off to BDC to see what they thought about lending me some money for my venture. The meeting was short. The first question that I was asked was “how much money do you need”. After an awkward pause, I said that I didn’t really know. Within minutes I was back on the highway headed for home. That meeting became my wake-up call. It forced me to come to terms with my financial data. Back I went to the template and began to play with it. I soon learned that if I tweaked revenues and expenses, then my cash flow situation improved or declined with each tweak. I also realized that my biz plan showed months where cash flow was negative and I’d effectively be out of business without ready access to loans or investment at the right time. A bit more figuring helped me realize the exact month(s) that my business would need a cash injection and how much that injection needed to be for me to stay solvent. Furthermore, I was able to calculate the cost of the projected cash injections in terms of interest, etc. Low and behold this all affected the Balance Sheet. I was seeing how it all came together.

Having seen a few hundred entrepreneurs in the past 3 years, I find the component most often missing is financial awareness. If the entrepreneur is not trained as a financial manager, then the financial piece of their business plan is usually a few paragraphs of text and a basic Excel spreadsheet showing “hockey stick” revenue coming right out of the gate. As I so directly learned, this is a sign of a failure in the making.

If you need help with your financials invest in good business plan software (make sure it is relevant to the Canadian market) or check these links out:

  1. http://www.bplans.com/business_calculators/
     
  2. http://www.bdc.ca/en/advice_centre/tools/business_plan/Pages/default.aspx
     
  3. http://www.fileguru.com/downloads/cash_flow

My key learning was that nothing is more important than cash flow. I said NOTHING! Learn how your revenues and expenses relate to one another and how they drive the financial documents necessary for your business. If that task is beyond you, invest in a professional who can produce, understand and explain the financials to you. Make that person a part of your team. Treat that person well.

John Pickard
Entrepreneur in Residence, Bioenterprise






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Posted on 2011.11.24 | Author: Chynna

Gosh, I wish I would have had that information earlier!


ONE Network

Posted on October 03 2011 | Author: John Pickard

Ok….so one of my previous blogs was on the theme of “One”….the One Man Band in the business world. This post is also on the theme of “ONE”. A bit different though.

Bioenterprise is a newly minted member of ONE (The Ontario Network of Excellence). This is the Ontario Ministry of Research and Innovation’s effort to bring new technologies to the forefront faster, and with better success rates than in the past.

So what is ONE? Essentially it is a number of agencies (about 25) scattered across the province that are set up specifically to assist entrepreneurs in getting their businesses up and running. Staffed by those who have “been there, done that”, the member agencies in ONE assist entrepreneurs as they pull the pieces of the business together and get their product or service into the marketplace.

You might assume our offices are populated with knowledgeable, government employees; the employees who work here (while knowledgeable) are in fact commercialization experts. These are real, live, business people who have the battle scars to prove it. Many have been wildly successful and some have crashed and burned. All bring valuable experience to your business.

The member agencies of ONE are fairly diverse, not just geographically (from Windsor to Thunder Bay and many stops in between) but rather, in terms of their expertise. First, there are the RICs (I wouldn’t be a new program without an easy to remember acronym) otherwise known as Regional Innovation Centres. These are one-stop locations for entrepreneurs of all stripes: Hi-tech, Pharma, Medical Devices, Cleantech, Bioeconomy, Food, Social Enterprise, Media, and so on. Whatever your business passion, the RICs can assist. Most are staffed with experienced entrepreneurs and bolstered by tech nerds, researchers, academics, and business mentors from all over. They combine to help build business strategies, business plans, financial models, IP, legal, marketing, HR, operations ….all the parts of a functioning business. The entrepreneur does most of the heavy lifting, but the advisors and mentors are there to steer the project and to help the entrepreneur avoid the pitfalls of starting and ramping up a new business.

And then of course there are the SIC’s. Sector Innovation Centres. Bioenterprise is a SIC covering the Agriculture and Ag-Bio space. Others include: Ontario BioAuto Council (Bio based Materials and Manufacturing), Bloom (formerly OCETA/ a.k.a. the cleantech gurus), Green Centre Canada (Green Chemistry), Coral-CEA (Software Technology), HTX (Health Tech Exchange) and a few others that concentrate on sector specific issues.

For the most part, there is no charge to access these resources. If there are costs, they are modest - affordable for a business in start-up mode. I suggest that if you are thinking about starting a business or are already underway in an early stage venture that you look up ONE and engage. The network can speed up your progress, help you avoid mistakes, and bring a powerful bunch of resources and expertise to your endeavour. Check ONE out.

If you have any experience with ONE, let me know how it’s going. 


 






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Posted on 2011.10.19 | Author: Jalia

Stellar work there everyone. I'll keep on reading.


6 Things Every Entrepreneur Should Know

Posted on September 26 2011 | Author: John Pickard

Every once in a while an entrepreneur will ask me, “What is the most important thing I need to know?”. My stock answer is always the same. “Your rich Uncle’s phone number.” Yes, I know, I’m the Chris Rock of the business world.

Over the years, I’ve assembled a bit of a list of “The Most Important Things” you need to know to succeed with your business. The entire Wikipedia of my learning. Usually the hard way. Here goes:

  1. Business Plan. This is boring, I know. But it’s essential to take the time to write one. My first one took me about 3 months. I used a software template and this worked great because every page of it spawned a new question that I hadn’t really thought about in the context of my business. The Plan gets ideas out of our head. It lets you share your vision with the rest of your team. Investors will want demand to see it. Write it yourself.
     
  2. Bankroll. At Bioenterprise we see about 100 entrepreneurs each year. A good percentage of them are broke. They may have lost their job and decide that starting a business is the way out. This is not the time to start a business. It costs money to do a start up. Many entrepreneurs think that the government will fund their start-up. Not so. Government funding can help with certain aspects (usually the R&D), but they won’t pay for your equipment, rent and other assets. Banks are not in the risk business. They loan money against some hard assets that you are willing to put up…like your house. They don’t lend unsecured money to a business with no revenue. Set a limit as to how much of your own money you can put into a business. Once it’s gone, you should re-evaluate your plan.
     
  3. Cash Flow is the lifeblood of your company. If you are a non-financial manager, find someone who can teach you about cash flow and how to recognize when your company needs more cash (loan or investment). Projecting your cash flow as a start up will tell you how much money you will need to get your company to profitability, and when you will need it.
     
  4. Find a first customer. You can do this early in your planning stages. Talking to a potential First Customer can help you see what is important to them. It teaches you how to serve them. It focuses your business…FAST. A customer forces you to complete all the parts of your business. You need to figure out customer service, accounting, legal, and distribution in order to write and ship that first order. Oh, and by the way, the best way to finance your start up is through revenue from sales. A customer is the key trigger for investors.
     
  5. Find a critic. No, I don’t mean your spouse. I mean someone who’s been there. Successfully. Someone who is independent. A good critic (aka Mentor) will network you to partners, help you avoid the potholes and tell you when to quit or not to quit.
     
  6. Don’t do it alone. This is a lesson I noted in my One Man Band blog of a while back. Build a team. Add the expertise you don’t bring. Find Strategic Partners who might be customers, suppliers, or distributors. Somebody with interests that parallel yours. Lastly, a financial partner is the best partner to bring along for the ride.

So there you have it. The contents of the best seller I was going to write…all in one page. Consider yourself advised.
 






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Why There Are No Successful One Man Bands

Posted on September 20 2011 | Author: John Pickard

As a child, I can remember watching the Ed Sullivan Show on Sunday night. It was what you did on Sunday night back in the day. About once a month they would have a One Man Band take the stage and play some contraption consisting of a large drum, cymbals, a harmonica, and a xylophone…..all at once. The “musician” would play the drum using a series of levers attached to a drum stick that he controlled with his foot. The cymbals would be strapped between his knees and he “clapped” his knees together to….well…. make a noise. All the while his right hand flailed at the xylophone. Of course his mouth was busy with the harmonica. It was more comedy than music and that was the intention. A novelty act.

I sometimes wonder what happened to the One Man Bands. Well, they died. And to be blunt, they died because they sucked. One person couldn’t do what four or five accomplished musicians could do… each a master of his or her own instrument.

I learned the lesson of the One Man Band during my first adventure as an entrepreneur in the telecom world. Having had a successful experience as the #2 guy in a very similar business, I thought that I had all of the parts to reproduce the start-up, early stage and exit surrounding my proposed venture. I wrote the business plan, cobbled all of the pieces of my technology together, arranged production of prototypes and sample product, secured telecom network access, worked on package design, and started the search for real money to take the venture forward.

However, I had no team around me. Despite the fact that I had most of the pieces assembled, no investor was going to take a chance on a “One Man Band”. Experienced investors realize that no individual can play all of the instruments (at the same time) well enough to be successful. What happens if the One Man Band falls off the stage and breaks a leg? …No more cymbals and no more drums. And in business? …Well, no more business.

The logic applies to having a management team around you. They might not be full-time, or even on the payroll. However, they are people that can play a role in Marketing or Finance or Operations once the company “takes the stage”. Get professionals who you trust, and work well with, involved in your venture. This support team will play the roles that you can’t, or shouldn’t. You will get better ideas and better quality of execution with specialists on the team.

The “team” might also consist of strategic partners as well. Customers, suppliers or distributors that know something about a piece of your business and are willing to support you (likely because they can see what’s in it for them down the road). They bring stability, experience and resources to the enterprise and will re-assure everyone that you are serious and that someone other than you believes in the success of your endeavour.

Once you have a strong team, take them with you to those investor meetings or sales calls to assure those who you are selling to that you are not a One Man Band, in fact, you have an entourage.

Got your own One Man Band comment? Let’s hear it.
 






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Posted on 2011.10.19 | Author: Diandra

Free info like this is an apple from the tree of knowledge. Sinful?


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