Book Review:
This is the second book I read about entrepreneurship (and here is the first) and I felt the author really covered many aspects of starting a business. Being successful in creating several companies, he reinforces his theory with many real-life, concrete examples. His theory is well organised and presented in a very structured manner and thus, easy to follow and remember them. I term it theory because he addresses the topic of entrepreneurship from the basic fundamentals and principles – e.g. “Three Mantras of Entrepreneurship”. Entrepreneurship is something that is very difficult to define in words, and yet, he was convincing. Entrepreneurship is like turning theory (idea, plans) into reality (business), and it seems like he did a reverse in writing this book – turning reality (entrepreneurship experiences) into theory (book)!
It is definitely a handbook for any aspiring entrepreneur – not only a book to read before you start a business, but also from time to time, in your journey of entrepreneurship!
Book Summary:
Section A – The art of entrepreneurship – the entrepreneur’s mind
Chapter 1 – What is Entrepreneurship? – A General Discussion
Entrepreneurs never consider themselves successful as they are always on a journey to achieve more. Naturally, they do not fear failure and hence, they have the courage to challenge the norm and do things differently. In the process, they create something out of nothing and brought wealth to themselves and others.
Chapter 2 – The Three Mantras of Entrepreneurship
The Three Mantras of Entrepreneurship are:
1) A winning spirit
2) Aim high be prepared for the worst
3) There is no shortcut to success
You need a wining spirit to recognise there is no problem that cannot be solved. Thus, entrepreneurs live with the ‘can do’ spirit and aim for the sky. Although ambitious, they never take blind risks. They will also have a backup plan in case they face failure. This backup plan gives them a peace of mind and allow them to have full concentration on building their venture. They understand that there is no shortcut; hard work and persistence are pre-requisites to success; even to the extent of 24/7 committment.
Chapter 3 – The Three Beliefs of Entrepreneurship
The Three Beliefs:
1) I seize opportunities where others fear failure
2) I can change the world
3) I relish challenges
The ability to discover the right formula for success during the worst of times makes all the difference and creates the best of entrepreneurs. “I can change the world” is the driving force for entrepreneurs to fight the giants, changing the rules of game and winning. As they relish challenges, they will continue to fight against all odds until they achieve their goals.
Entrepreneurs are rule breakers. They can do it as long as the law did not explicitly say it is illegal. The story of NUTS (No U-Turn Syndrome) by Creative Technology founder, Sim Wong Hoo – In Singapore, when there is no U-turn sign, drivers assume they cannot make U-turns. In many other countries, drivers cannot make U-turns unless there are explicitly no U-turn signs. Entrepreneurs should have the mindset of the latter.
Chapter 4 – The Three Realities of Entrepreneurship
Entrepreneurs must face the three realities:
1) Risks and failures are necessary
2) Creativity and innovation matter
3) Timing makes a difference
Entrepreneurs have higher threshold of risks and are more willing to carry on even when not all the risks are addressed. Creativity is needed to think of ideas while innovation is required to transform the idea into a business. A good idea and a good business plan with the best strategies and efforts will not create success unless the time element is right.
Chapter 5 – The Alignment of Your Stars
Stars are defined as the necessary ingredients and success factors for your business to succeed. Different businesses have different stars, and it is important to identify and align them to create a successful business.
In all business, there are three basic stars to be aligned:
1) The Star of Opportunity
2) The Star of the Team
3) The Star of the Investor
There must really be an opportunity for the business you want to create in the first place. Then, you will need a good integrated and diversified team to execute the business plan. Lastly, it is important to select investors that have the same frequency of thinking as the entrepreneur.
Chapter 6 – You Need the Passion
“Entrepreneurship is all about having the passion to do it. Passion drives the actions you take to create success, influences your energy level, and the intensity of your belief about your business idea.”
Chapter 7 – Thinking with Your Heart Not Your Head
Entrepreneurs can come out with solutions that are not able to be derived from logical thinking or through structured decision making processes. Call it gut feel. The best decisions are made when the Head consults with the Heart to come out with the optimal solution.
Section B – The science of entrepreneurship – The technical aspect of creating a business
Chapter 8 – Transforming an Idea into a Business
An idea does not automatically transform into a business and most start-ups fail at this stage. There need to be a process of defining a meaningful business strategy, having an executable implementation plan, followed by proper implementation of the plan.
Chapter 9 – The Process of Starting a Company
There are 12 steps to transform an idea into a business, followed by raising funds for the company:
Starting
1. Getting the idea and writing a conceptual plan
2. Getting the team together for buy-in
3. Writing an initial business plan
Taking off
4. Putting in your money and starting
5. Engaging the broker for fund raising
6. The (real) business plan
Fund Raising
7. The teaser: How many and whom should be targeted to get smart money
8. The non-disclosure agreement (NDA)
9. The presentation
10. The term sheet
11. The deal negotiations
12. Closing the sale and purchase or investment agreement
Chapter 10 – The Three Rules of Thumb for Fund Raising
1) Create value first before finding new funds – focus on creating value first and expand later
2) Bring in just enough funds plus a small buffer each time – under raised = lack of funds; over raised = dilute ownership; buffer should be as much as what you intend to raise
3) Raise the funds when you do not need the money – raise funds when situation or economy is good and not wait till desperation
Chapter 11 – The Business Plan
The business plan is the most important document the essence of your business, plans, strategies, goals, and the people behind the company. It should be a ‘living document’ such that ammendments are made according to changing circumstances as the business progresses.
1) Executive summary – concise and succinct, capturing the gist of the whole company
2) Company’s background – how it got started; who are the founders; what drove the founders to start the company
3) Company’s goals, objectives, mission and vision
4) The management team – details of team background and qualifications are described
5) Product or Service
6) Marketing strategy and plan – illustrate your differentiation
7) Operational strategy and plan – includes the technology roadmap, resource utilisation, capacity planning, and beta testing
Short-term and long-term financial plan – income statement, balance sheet, and cash flow statement
9) Risk factors and contingency plans – provide a risk management strategy
10) Exit strategy – potential investors will be interested to learn when liquidity will be achieved
11) Appendices, annexes, attachments
Chapter 12 – What Do Investors Look For?
Investors generally look for
1) a strong integrated team that has the ability to execute the plan
2) quality business plan, assessing your thoroughness and depth of understanding
3) ability to transform the idea into a business
4) how the raised funds are utilised
5) marketing plan and how you globalise the business
6) committment 24/7
Chapter 13 – What Should Investors Look For?
There are 8 criteria:
1) A strong and diversified team
2) Alignment of the three stars
3) Domain knowledge
4) Long-term objectives and short-term goals – to be set and must be measurable
5) Start with a globalisation mindset
6) Be prepared to fail – plan for contingencies
7) Assemble a good board
Prepare for due diligence assessment – due diligence is the process of investors assessing the start-up and the team behind it.
Section C – Useful Lessons you should know before starting
Chapter 14 – Lessons Learnt During the Dot Com Days
5 key lessons:
1) A business is a business whether in old economy or new economy – revenue models and profitability need to be addressed
2) An idea alone does not make a business
3) Any business requires hard work and there is no shortcut to success
4) Any business must have the right type of money backing it – too much easy money spoils the entrepreneur
5) Good domain knowledge and not just technology, is required to run a successful business
Chapter 15 – Three Ingredients to Create An Entrepreneurial Environment
1) A conducive rules and regulatory environment – pro-enterprise and eliminate/reduce obstacles to entrepreneurs
2) A vibrant financing environment
3) Nurturing the people – entrepreneurship can be nurtured and should be started from young. Develop their innovative mindsets from their early stages of education.
Chapter 16 – The VC (Venture Capitalists) Trap
Select a few VCs and choose carefully. Study their valuation proposal and do not be too optimistic over their high valuation. It means that you have to meet their high expectations and also bearing the consequences if you fail to achieve them. Guard against conditions that may cut down the company’s valuation at a future date and be clear about issues in the investment agreement betwen both parties. Choose a VC who can bring in money and add value to the company through their experience or knowledge. Remember that indivuals in a VC are out to make money for themselves. In future fund raising rounds, take control and do not allow VCs to be in command.
Chapter 17 – How to Survive the Challenging Times?
1) Survival mentality must be instilled in all stakeholders of the company, to allow them to rally together to tide through good and bad times.
2) Always go back to the basics – fundamental purpose of business is to make money. Thus, stay focused on gross margin and cash flow.
3) Embrace a start-up mentality – You created something from nothing initially, and it is necessary to continue to be creative and innovative, so as to adapt to changing busines conditions.
4) Look at crisis in a positive light – see opportunities rather than adversities
5) Understand what risk taking is and what is not – take risks, but calculated risks
6) Plan for failure – lessen the chances of faliing by employing counter measures
Chapter 18 – Deal Fatique, Team Disagreement, and Backup Plans
Deal negotiations are lengthy and demanding; be prepared and also be a little flexible. Ultimately, get a win-win outcome for everyone. Learn to exercise give and take to minimise team disagreements. There should be a few contingency plans to offer a peace of mind for all team members.
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