It comes down to networks, even in truffle production

Monday 30th March 2009
Edinburgh's Corn Market hosts an astute Dragon

Days before the New Start exhibition in Glasgow, the last of the spring Winning through Innovation series was held at the Corn Exchange, Edinburgh. Accountant John Anderson, CEO, of the Entrepreneurial Exchange opened the proceedings, introducing Mark Hasting, director of Company Growth from Scottish Enterprise. Hastings in turn confessed his passion for entrepreneurship and wealth creation ‘at whose heart lies innovation.’ He emphasised the credo that innovation is not just about product, but ‘extends to services and marketing,’ giving Scottish examples where the best innovation came from customer focus, and driven satisfying this, how a company sells more, at better prices and reduced costs. Key speaker, entrepreneur Doug Richard, of Dragon's Den fame however in a very funny, polished, fast paced, self deprecating sometime digressive, but always though provoking performance, laid out a slightly alternate route.

Richard calmly laid out the very simple premise that the “company most likely to succeed" must be  both hardworking, but "relaxed about its business model,” and proceeded to show how by a shrewd, self-interested trader approach, he succeeded in parleying profit out of buying and selling Sun micro work stations as Sun’s 'reseller of the year’ with an aside on the value of the ‘enemy’ Hewlett Packard’s involvement.

In one of his slightly apocryphal and hilarious tales, he claims to have approached an escalating shipping cost problem, by moving from shipping actual workstations, to simply buying and selling motherboards. Selling these but without actually shipping them at one point, in effect ‘selling promises.’ When his buyer confessed to being unable to find an infamous bunch of 925 'dispatched' boards, believed to be in stock, Richard proceeded to honour his promises by getting them from a surplus stockist (that bought them from Sun) reselling them to Sun, at a profit.

Apart from being a brilliantly performer, Richard’s strength as entrepreneur lies in acute self analysis of his approach to business, which he lays at the door of ‘changing the business model.’  Others might lay it at an ability to see straight through to the cutting edge of profit in any business activity.

He claims there were only two business models originally, make/grow and sell, or buy and sell, and this only changed when Gillette sold razors cheaply but made their profit on the secondary sale of consumable blades. In IT terms, he puts it that HP makes most of its money selling ink, albeit with great attention to its development and patent protection of ‘inkjet heads.'

Now Richard says the advent of the Internet has changed the business model yet again, and his advise on the way to go is through ‘affiliation.’

He is on record: “I started my own company because I was dead broke and no one would hire me. My brother financed it, by borrowing a lot on credit cards." His progress is interesting, as he moves with the model.

 Richard founded and ran ITAL Computers, selling services that integrated CAD and manufacturing systems to the southern California aerospace industry. ITAL Computers was sold in a private transaction in 1991. Its profits were used to found Visual Software, which brought high-end 3D applications to the PC market. After five years, it was sold to Micrografx. Richard became president and CEO of publicly quoted Micrografx, selling that on after four years to Corel Corporation in 2000.

Currently executive chair of Library House  he has more than 18 years of founding, building and selling technology and software ventures both in the US and in the UK. In addition to Library House, he is co-founder and chair of Hotxt Ltd as well as co-founder and vice-chair of Cambridge Angels, a private business investor network. In Hotxt Ltd, which appear to misdeliver you to London based Truetap you too can discover the routes to networking.

One of his more illuminating Dragon Den tales is acutely self-revealing. It revolves around a scientist who had discovered how to grow the mycelium for truffles approaching the Den for £200,000 capital to invest in a French farm where truffles would be grown.  The scientist noted business was on rough and ready ‘seeding’ of saplings and their sale.
(Left: Mycelliium growth, or hidden networking)
Richard then argued growth route was to corner the sapling sales market, with scientifically seeded trees, sold with 10% profit, and perhaps a license to taking a percentage of ultimate truffle sales.

In the event, a dragon was willing to put up £220,000 for 40% stake in the business (“if it folds he’d get a French holiday home” was Richard’s aside). Richard then offered  the same money, but for a 42% stake. The scientist took the apparently better offer, but was shrewd enough to follow Richard’s sapling proposal.  "He failed," was the laconic comment, "simply because he had no monopoly on the mycelium."  One suspicions, that had Richard’s offer been accepted, the model would have undergone a seriously makeover.

Richard throw-out suggestions for developing entrepreneurs:

  • Contracts are 'made' to be broken.
  • The free meal’ base to technology lets a sales force offer say, software, as an free add on, while locking in the customer.
  • Bricks 'in store' is an example of how to concentrate on the best use of physical resources.
  • Intra-country coaching lets you bring home an idea as ‘new.’
  • Pay homage to the best of creativity - purloin the idea.
  • Experience your business elsewhere, and discover how they do it. 
  • And don’t forget the plot: keep concentrating on the financial arithmetic.”

Richard has it stitched up. In the mycelia of his offered ideas and examples, lies a real route to a successful truffle outcome.

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