The reason for my silence has been a kind of self-imposed personal stealth mode, as I worked on a few things.

Not that I expect the blogosphere has particularly suffered from my absence… nevertheless I would like to get back to blogging my thoughts.

To summarise, the two main events in my professional life have been:

1. I moved to Berlin, Germany to work at the HQ of Rocket Internet.
2. I raised some money through Seedrs to build the MVP for the startup idea I developed during my MBA.

I’d like to blog about aspects of both. There’s lots to say. Until I get back up to blogging speed I’m going to repost a couple of posts I published on my personal blog a few years ago that I think are still interesting/relevant.

A blog post about Munich is basically an excuse to post pictures of girls in dirindls

I’m in Munich, Germany at the moment, working on a new Internet company that is growing in leaps and bounds. We’re hiring lots and lots of people, both technical (developers) and non-technical. Something in particular about this interests me – Munich isn’t Germany’s first city, it isn’t even its second – in fact Munich is the 3rd largest city in Germany behind Hamburg and the capital, Berlin.

Why does this so fascinate me? Well, can you imagine setting up a brand new Internet company in the UK’s 3rd city? According to Wikipedia, Glasgow is the UK’s 3rd city. In fact, let’s forget Glasgae for a second, can you imagine anyone ever setting up a brand new super successful Internet company in Birmingham, the UK’s 2nd city? Nope, neither can I.

In the UK it seems that unless you’re in London, you’re nowhere. How does one city get to dominate a country so much, and is it good for the UK? According to George Zipf’s theory of rank-size for an ideal distribution of city size the 2nd city should be half the size of the largest city, and the 3rd city 1/3rd the size, and so on. Mark Jefferson described “primate cities” as those that so dominate the country that they capture most of the population and economic activity in a country. Classic Primate Cities include London and Paris, whilst the most extreme example is Bangkok, which is 40 times larger than the next city.

Compare that to Germany, where Berlin has a population of 3.3 Million, Hamburg is 1.6 Million, and Munich is about 800,000. They almost perfectly follow Zipf’s Law. So which ecomony is doing the best out of UK, France and Germany? Yeah I won’t bother answering that…

Although Berlin, where my direct employers are actually based, is itself considered a bit of a European startup hub, I never get the feeling that it dominates Germany in the same was that London dominates the UK. I don’t think many of my non-British friends in the UK would seriously consider living anywhere in the country other than London. In fact, do people even want to visit Birmingham or Glasgow? Not really. Other than a weekend trip to Edinburgh, for most people London is the UK.

Everyone had gone to Bradford for the weekend.

So for someone from a far-flung corner of the UK, that’s a bit depressing. What chance does Dundee have of becoming some kind of gaming hub, when as soon as a company gets successful it will probably up-sticks to Edinburgh, like Rockstar – developers of Lemmings and Grand Theft Auto – did (yes – Grand Theft Auto was developed in Dundee!).

The UK Government acknowledges the London dominance by trying to force some taxpayer-funded organisations to move to provincial cities. Even the BBC is getting in on the act by moving its BBC breakfast programme to Manchester – a move which is proving rather unpopular with the staff.

I doubt London will ever lose its “Primate City” status in the UK. Nevertheless, I think government is obliged to keep trying to encourage companies to invest elsewhere in the country. Which is why you will get some pretty good incentives to start a company in places like Scotland. Here’s a story in which a founder of an Internet company got a £250k grant from Scottish Enterprise. I was also pleased when my MBA classmate, Xavier, told me that one of the reasons he set up the first Better World Books overseas subsidiaries in Scotland was because he was impressed with how helpful Scottish Enterprise was.

Maybe there is hope!

So I was trying to get my own little start-up idea going, but, as I’d already blogged about, I was rapidly running out of runway. Then, seemingly out of the blue, via a classmate, LinkedIn and Skype, an opportunity came along that was too good to turn down.

If I could describe my ideal job (if I was not starting my own company), it would probably be something along the lines of “working for an investment fund, helping them start Internet companies”.

…so I am now Venture Development Director at Rocket Internet, helping them start their Internet companies in the UK. I think that worked out quite well then.

Rocket Internet has a particular reputation and it’s fair to say it divides opinion. Its critics describe it as a “clone factory”. Here’s a recent article in Wired, “Inside the clone factory“, where one of the fund’s founders gives a rare interview. Make you own mind up.

All I can say is – it’s fascinating being on the inside. I cannot imagine it would be possible to get a better lesson in Internet startup execution. Even Rocket’s most vocal critics would be hard-pressed to deny Rocket are masters of execution.

So does that mean I’ve abandoned my own entrepreneurial ambitions? Of course not! Sometimes it only takes an unexpected spark of inspiration to get me thinking about it all again. What I do know, is that I ever do get back in to another startup of my own, I will be immeasurably better as an entrepreneur thanks to the Rocket experience.

Copyright PharmaVentures Ltd 2010

Another question that was asked by the incoming MBA class to the entrepreneurship panel I was sitting on the other day.

“Does Oxford University have any claim to startups that originate from the MBA class?”

The short answer is “no”.

Normally, when some Intellectual Property (IP) is developed as a part of research at a university, the university has a significant claim to the IP – afterall it has been developed whilst working there. The split can be very fair though – the scientist who originated the IP can get 1/3 to 1/2 share of IP rights with the university.

This can be very lucrative for the university and the scientists involved if the IP ends up becoming part of a successful company or product. For example Remicade, an arthritis antibody treatment, was developed at New York University School of Medicine. In 2007, Royalty Pharma paid $650 Million to buy the royalty stream from NYU. Can you imagine your university suddenly getting a $650 Million cash injection? Nice!

Of course Oxford University tries to commercialise as much technology as possible, mostly through its technology transfer arm, Isis Innovation.

I’m told that one of the biggest royalty streams to Oxford University is thanks to Ed Southern’s “Southern Blot“, a molecular biology technique. However, I’m not actually sure if the patents are still valid.

The Said Business School has an arrangement with the University that any business ideas developed by MBA students are exempt from any claim by the University. Afterall, what right-minded entrepreneur would come to a business school that would lay claim to his ideas just because he was there for a year learning about Porter’s Five Forces and the Laffer Curve?

The exception would be if your business was based on IP developed elsewhere in the University. We do some projects with Isis Innovation so that is quite possible. One of the recent Oxford MBA startups, Lab Minds, is based on technology developed by two people from one of the science departments, so I presume the University has some licensing arrangement there.

So don’t worry about coming here with your amazing startup idea. I think the University is hoping that you’ll make it big and give some money back of your own free accord.

Next post, also a question at the same panel, – should you keep your startup idea secret?

We don't just have jargon. We have frameworks baby. Yeah!

In the startup community there is this “MBAs can’t do startups” opinion, which is often quite strongly expressed. People do seem to love bashing MBAs! In fact, I was on the entrepreneurship panel for the incoming MBA class at Oxford the other day and one of the new class made a similar comment, asking for the panel’s opinion. I won’t speculate here on why this opinion is so popular, but I do suggest you read this post by the Humbled MBA.

In response to the never-ending “MBAs can’t do entrepreneurship” quips I thought I’d do a couple of blog posts about MBA entrepreneurs – one highlighting companies that had been started by MBAs and gone on to some success, and later a post about up-and-coming MBA startups, maybe with an Oxford focus. Luckily, I found that most of the work looking for successful MBA companies had been done by another blogger(*1) and in this Quora post, so I’m going to use them and highlight a few of the companies.

So here, in no particular order, are some successful companies started by MBAs(*2):

Zynga – founded by Mark Pincus (Harvard MBA 1993). Zynga was recently valued at $11.15 Billion. Zoiks!

Geocities – founded by David Bohnett (University of Michigan Ross School of Business 1980). Sorry, GeoCities has closed.

Sun Microsystems – founded by Vinod Khosla and Scott McNealy (Stanford MBA 1980). That worked out quite well.

Nike – founded by Philip Knight (Stanford MBA 1962). Nike make shoes and seem to have been fairly successful. According to Forbes, he’s worth $12.7 Billion now. Not bad. He does sound like a bit of a git though.

Victoria’s Secret was started by Roy Raymond (Stanford MBA 1977?), but there’s quite a sad story to him. In his honour I interrupt this flow of MBA startups for a picture of a Victoria’s Secret model.

Adriana Lima wearing Victoria's Secret bikini. Nice finishing.

If that last company has made you feel amorous but you have no-one to be amorous with, then check out Match.com founded by Gary Kremen (Stanford MBA 1989).

If you visited the previous company, but decided that hot girls probably prefer guys with loads of money, why not make lots of money on the stockmarket with E-Trade*(3)? The company was founded by William A. Porter, who got his MBA from the MIT Sloan School of Management in 1967.

Both ProFounder and Kiva.org  were founded by  Jessica Jackley (Stanford MBA 2007). They’re both relatively young companies, but Kiva in particular seems to have got quite wide adoption in the US with its microfinance model for entrepreneurs in developing regions. I visited their offices earlier this year and was very impressed by the company. Since being founded in 2005, the company has apparently raised $249 Million in loans for the entrepreneurs it helps.

US biotech giant Genentech (now part of Roche) was founded by Robert Swanson, a VC with a MBA from MIT Sloan School of Management (1970). But it wasn’t MBAs that made Genentech big – it was the mAbs. Geddit?! If you get that I want you to know my Twitter handle is Major_Grooves and you should get that too.

Tony Hawkins is a voice artist with over 15 years of experience. He sounds a bit like a robot*(4). He does not, however, have an MBA. Trip Hawkins does though! He got his MBA in 1978 from Stanford and founded computer games company Electronic Arts.

All these companies have been US companies founded by US MBA graduates. Mostly from Stanford. So here’s a token Brit! Lonely Planet was founded by Tony Wheeler (London Business School MBA 1972) but he doesn’t mention his MBA on his profile page*(5). He probably doesn’t think it’s very cool.

I was going to start this post with Fedex as I’d heard that the Fedex “hub and spoke” model was based on the founder’s poorly rated MBA project. However founder Frederick Smith doesn’t appear to have done an MBA. Quite how he managed to start a company without an MBA is really beyond me. Despite their company founder not having an MBA, Fedex does value its MBA employees:

So next time someone tells you that “MBAs can’t do startups”, quote a few of the above companies or send them this blog post.

*(1) I think this list maybe has some mistakes, and some MBA founders that I don’t quite consider “pure” founders – i.e. they they bought in to a company or similar (like Mitt Romney and Staples). Also I’ve not mentioned any of the finance firms here because they are boring.

*(2)Note I’m only highlighting the MBA founders here. Many(most?) of these companies had non-MBA co-founders who were instrumental in the companies’ success. The point here is just to show that MBAs can be involved in successful entrepreneurship as company founders.

*(3) This WannabeVC does not give investment advice. Don’t do shares kids. If you want to try trading, you should see that startup I write about in the follow-up to this post.

*(4) Seriously, he really sounds like a robot. Is it his voice used for those instant animation movies with voice over that people have been posting on YouTube recently? What I mean is… maybe it’s the robots that sounds like him!

*(5) Back then, in the olden days, it wasn’t called an MBA – it was actually a MSc in Management that Tony received. Still doesn’t sound cool.

As cunning as a fox that's Professor of Cunning at Oxford University

There’s a paradox that comes with doing an MBA and then trying to be an entrepreneur.

I’m not talking about whether or not MBAs make good entrepreneurs, or whether anything you learn on an MBA is useful for a startup. Sure, most MBAs go off to become management consultants or work in finance, but from my school I think there’s at least 10% that go off and start companies after their degrees.

No, I’m talking about the paradox of leaving a degree with a shed-load of debt and trying to “bootstrap” a startup. You can reduce many costs to try and extend the metaphorical runway, but the massive £500-600 a month loan repayments that kicks in 3 months after you finish the course makes for quite an elephant in the room.

The problem is that when you explain to investors what your personal bootstrapping cash burn-rate is you have to inflate it from a fairly reasonable £21k to around £30k (gross salary equivalents before tax), which doesn’t sound much like bootstrapping to an investor.

Put bluntly, the MBA loan repayments make it damn difficult to live cheaply after your course finishes. Of course not everyone has to take such a big loan to do the MBA, but I think I’m far from the minority (Note: my running out of runway problem doesn’t even include my loan repayments as I’ll have run out of money before they even start. Ha!).

Fear not though, I have a cunning plan that might cure this paradox!

Problem: Business schools want to encourage entrepreneurship. MBAs are expensive and most students have to take chuffing huge loans to pay for them, which impedes entrepreneurship.

Solution: business schools refund the MBA loan to the bank and converts it to convertible debt based on the startup the student has started during the course. The loan would convert to equity in the startup at the first qualifying financing round. If they don’t raise any finance within a certain time-period, then the loan reverts to a normal personal debt, with interest accrued.

There would of course have to be some safe-guards to prevent wide-scale abuse and people setting up fake companies after the degree, but I’m sure with some more thought it could be possible.

Of course it will never happen. The amount of money the school would “lose” in the short-term would be massive. Perhaps a benefactor could finance the scheme?

I know it sounds like a fairly hare-brained scheme, but put it this way – if a business school really believes its MBA programme is compatible with entrepreneurship and it really believes in the students it recruits, then it should have confidence in the businesses they start. If they got one or two home runs, then they could make a good return.

Potentially true

I was considering titling this post, “would anybody like to pay off my student loan for me?”, but that seemed a bit too blunt.

This is what happens if your runway is too short

It’s the start of September and I have approximately 1 week of my MBA left with our Capstone Course next week. Technically I think I remain an Oxford University student till the end of September.

I also, by my calculations, have enough cash left in the bank to last me until the end of November (based on my current burn rate, which is pretty low). Oh, and come January, repayments for my rather massive MBA loan kick in. None of this would be a problem if I was being sensible and trying to look for a regular job like most of my class (quite successfully it seems recently), but oh no, I’m trying to become an entrepreneur.

So over the Summer I’ve been working on a Strategic Consulting Project (SCP) with a couple of classmates, looking at my original startup idea in more detail and as a result you might say the original concept has evolved, or “pivoted”, to something a bit different, but still with the original idea at its core.

The question now is – how do I pursue the idea? I want to, but in many ways the SCP has left me with more questions than answers. Still, I’m convinced there is a real opportunity there, but the rather practical problem of paying my rent and bills is getting in the way.

So there the advice falls in to two distinct camps – the “you need to just go for it and commit 100%” camp, and the “get some part-time consulting gigs to support you while you develop the business” camp. Which is right?

I know I prefer the “100%” camp, but it doesn’t really answer the “pay my rent” question. I unfortunately don’t have any rich benefactors to support me for those extra 3 months I need to give this a decent shot beyond November, and when you factor the loan repayments in the amount of “salary” I need is a bit above what you might call “bootstrapping”. Such is the MBA/entrepreneurship paradox.

I know what the recently published Startup Genome Report says – people who do a startup part-time raise 24x less funding that those that commit full-time.

“Temporary moonlighting is permissible but significantly curbs performance and potential.”

Another entrepreneur did say to me the other day that if I can’t convince someone to give me money to live for a few months then maybe the idea is not good enough. I’m not sure about that. Rich people tend to be rich because they don’t part easily with their money. I think maybe my problem is that, despite a year of study, I am still at the idea stage – and people don’t tend to get investment at the idea stage. Ideas are easy.

In the meantime, what do you think I should do – is part-time entrepreneurship possible? Is the “100%” camp biased by the Silicon Valley echo-chamber? Leave a comment below!

This startup malarkey is a bit of an emotional rollercoaster, and I’ve barely even got started! I have to admit it is beginning to stress me out a bit.

You

A classmate, Stephanie Getson, has been trying to raise £8000 on the crowd-sourcing website Buzzbnk.org to start her social venture, Sahara Botanicals, in Chad, Africa. She has 3 days left to hit her target otherwise the money gets returned to contributors. To date (AFAIK) the money raised has been from people that Stephanie knows personally. Buzzbnk.org is quite new and what it lacks (imho) is the name, and therefore traffic, that the poster-children of the crowd-sourced social venture funding websites Kiva and Kickstarter have, meaning projects have very little chance of “strangers” contributing money to a project just because they like the sound of it.

Stephanie has had great support from her class, but I wondered if I could help her get some broader support with a social media campaign. We had all been posting about her on our Facebook walls and re-tweeting the link to her Buzzbnk page, but none of it was really generating outside support as far as I could tell, so I wondered if I might be able to generate some more buzz via reddit.com.

So, what is this reddit place?

reddit, if you don’t know it, is a kind of social media website where users submit web links and other users upvote the content they like, or down-vote the content they dislike as well as leaving comments (which can also be up/downvoted) on the links*. Content ranges from political news stories, to amusing or interesting images. I’ve been on reddit for a few years – it’s a procrastinator’s paradise – I’m quite a fan of the “F7U11” comics (note any links on reddit that say “NSFW” = Not Safe for Work (also applies to business school libraries!)).

reddit is a hugely popular website – its servers regularly struggle under the visitor load – and content that gets enough upvotes to get on to the main front page can receive tens of thousands of visitors via the website. Whether or not a link gets on to the front page is algorithmically determined with a bias towards fresh content, and with early upvotes having more weight than subsequent ones. Most stories on the front page have net +1000 votes, but some can get there with as few as net +60 votes.

I figured that all you need is a good core of early fans to upvote you then you have a chance of getting widespread support. So I thought I’d submit Stephanie’s Buzzbnk page to reddit then try to mobilise my class to give it a quick upvote.

End result

It wasn’t a massive success, but we did get about another 6 or so donations, raising around £300. We certainly didn’t get on to the front page! I presume most of the donations came from the class (thanks!). Below I’ll outline the “strategy” and what I think I could have done better.

Strategy 101

I set up a Facebook Event to try and time the submission and upvoting for about 10pm GMT, hoping that lots of classmates would be online but also catching good online time in the US. I invited all classmates I have on Facebook – about 200 people – and allowed others to invite friends, but did not make the event public. In the end about 30 people accepted the invite.

At 10pm I submitted the link to reddit and posted the reddit link to Facebook. I also immediately posted a comment to the link which explained what the project was all about. My hope was that this comment would get upvoted to the top to explain to redditors why I had posted the link.

I also emailed the entire class mailing list – about 240 students – asking them, if they were online now, to give the story a quick vote.

Upboats?

The first comment quickly came in – “No“. Hmmm…

Then the first votes started coming in. It was quite level pegging for a while – equal upvotes and downvotes.

Then, amazingly, Stephanie messages me on Skype to say a £5o donation had come in… then another, then £30, then £30 again.

In the meantime we were getting lots of positive comments – all from classmates – but the votes were hovering around net 0. At one point I think we had net +10, but by the time I checked this morning we were back to net 0, with approximately +60/-60. Not bad – at least we got 60 people to upvote!

So what could have gone better?

Click on the red arrow to upboat.

I probably needed to explain reddit a bit better. I’ve been on it for years, but most people had never seen it before so I wasn’t sure if people understood that they had to click the upvote button, rather than just comment.

I submitted the link at 10pm to try and get US users’ attention, but with hindsight I probably should have aimed more for the UK users and submitted earlier.

I should have encouraged people to exercise restraint with posting comments. Whilst everyone’s enthusiasm was appreciated, it looked a bit like astro-turfing to have lots of 0 days old reddit accounts leaving wildly supportive comments. Just to be clear – everyone I asked to support is a genuine Sahara Botanicals fan – no-one was paid to vote!

Something went wrong with my explanatory comment – it didn’t seem to get any upboats and when I sent a bit.ly link directly to it people told me they couldn’t see my comment at all. Subsequently, nobody clicked on my link to Stephanie’s blog explaining how she’d actually spend the money.

I wouldn’t be surprised if reddit down-weights votes from newly registered accounts. Virtually everyone in the class was using a new account.

Nobody other than a couple of classmates retweeted my tweet about the reddit page. I have about 500 followers but the bit.ly statistics suggest that virtually no-one from Twitter clicked the link, which is a shame.

I was disappointed that Buzzbnk didn’t get behind this. Stephanie had told them I was planning this, and I thought they were going to give us a retweet last night, but they didn’t retweet till the morning, which is virtually worthless. I did actually voice my annoyance, and found Buzzbnk’s reply frustratingly weak. This was their chance to get big traffic – a retweet would have taken 2 seconds. Shame.

Why the downvotes?

Downvotes make me sad.

Quite a few of my friends who are new to reddit were asking me why anyone would ever downvote the link. As I explained to them, you could post the cure to cancer on reddit and it would still get hundreds of downvotes. reddit is a naturally quite cynical audience and I knew that basically going on there and asking for money had the potential to generate a backlash. That said, if you hang around reddit long enough there are loads of examples of spontaneous acts of kindness and generosity from reddit users. I personally think they are a great community, but in this case “if you ask, you don’t get”.

/edit – now that I think about it, a lot of the downvotes almost certainly came from reddit itself. I believe it has a vote to automatically downvote stories that suddenly get a lot of upvotes. No idea how that works in practice, but it is there to stop people gaming the system.

* If this sounds familiar, you might have heard of Digg.com. Once a social media favourite and reddit’s much bigger competitor, it is now a sad shadow of its former self after a botched update to its model.

A business plan from some LBS students

Today I submitted my team’s Entrepreneurship Project (EP), which counts as one elective towards our MBA. The EP is basically a term-long project where you develop a business plan – it doesn’t have to be a startup, but inevitably that’s what most of them are. I came in to the course really looking forward to doing the EP, as I knew I wanted to base it on my start-up so I could test the idea with four clever classmates.

I’ve been very fortunate to recruit a great team – Khalida, Alex, Amita and Jonathan – that really believe in my startup. I’m very grateful to them for the hard work that they’ve put in to developing what is, essentially, “my baby”. In effect, I’ve received the equivalent of quite a few thousand pounds worth of free consultancy and research!

We also had to do a presentation of our business to a panel consisting of local entrepreneurs and business angels. Whilst our presentation was a bit… light, it did pique the interest of one of the judges, who is now helping me as an advisor (and maybe as an investor in the future), which is a great result.

Although the EP has been a useful experience for me, it’s probably fair to question the value of “MBA business plans”. Silicon Valley legend, Steve Blank*, is not a fan of business plan competitions, which are fairly analogous to the EP. I can see his point – with many startups, you’d be better off just developing your Minimum Viable Product (MVP) as soon as possible, and getting your product in to peoples’ hands to test your ideas.

For the vast majority of people on our course, the EP is just an academic exercise. The real point of the EP, from an academic point of view, is just to apply some of the things you have learnt over the previous two terms. For that reason we are pretty much obliged to shoehorn in references to various frameworks such as Porter’s Five Forces at every opportunity.

I think most of the students are in agreement that if we were to pass our EPs on to real investors for investment, the first thing we would do is strip them of most of the “MBA talk”. It would certainly shorten them substantially!

I think the real reason business plan competitions are so popular is that it’s something tangible that a group of students can do together in a relatively short period of time. For many ideas, it’s simply not feasible to build something beyond the reasoning behind the idea, as is mentioned in this blog post about someone who has started a couple of biotech companies after business plan competition.

So what am I doing now the EP is over? Well, I’m stripping out all the MBA talk from my EP as I am in the semi-final of my school’s business plan competition! Huzzah!

*the same Steve Blank we had hoped to meet in Silicon Valley but did not. I would have loved to have discussed this with him in person.