Editor's Note: Entrepreneur Richard Branson regularly shares his business experience and advice with readers. What follows is the latest edited round of insightful responses. Ask him a question and your query might be the inspiration for a future column.
Q: How does an entrepreneur preparing to launch a business go about choosing the right partners? -- Allan Kahoya, Kenya
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A: Entrepreneurs often have a tough time finding someone to fund their venture; many fail to do so but go ahead with the launch anyway, and then they run out of cash. Finding a reliable source of start-up capital is likely to be fundamental to your business’s success. If you can fund it yourself, that’s terrific. If a partner is able to provide funding, then that can work, too.
At the start of my career, I made a conscious effort not to bring on any financial partners, as I wanted to hold all the equity in my businesses. My friends and I worked hard to keep our businesses going using only the cash they generated. For our first business, Student magazine, we did all we could to sell advertising to pay the bills. When we started Virgin Records, we handed out leaflets to promote our shops.
This meant that our expansion was slightly slower than we would have liked, but it also meant that I could reward my colleagues with equity in the company. I was free to steer the business in any direction I wanted. This gave me freedom to move on opportunities quickly and also to make tough decisions without delay or distraction.
Related: Richard Branson on Managing Experienced Workers
The adventure of our early years attracted employees and partners who were drawn by our spirit and sense of fun. Reflecting on my choices for partners in the music business, I remember they were picked for very practical reasons. One had the biggest record collection I knew of; another could add and subtract better than me; another person always seemed to be able to answer my every question.
Over the years, my partnerships and businesses have grown more sophisticated. Virgin has since joined with many different types of organizations, from large multinationals to professional investors to entrepreneurial management teams looking to wield the Virgin brand as they take on a market. Our experience has shown that while your prospective partner’s ability to fund the venture is important, it is not the essential quality that will sustain the relationship and the business in the long term.
When you are evaluating a proposed partnership, do not focus only on the capital you need to kick-start your business. Ask: Will this person or group give us the space and time we need to build a great business? Bear in mind that a dictatorial financial partner can dim the spirit and enthusiasm of a new enterprise, muffling the spark that prompted you to launch this project – the spark that is most likely to make your venture different from your competitors’.
I have found that our partnerships at Virgin turn out best when we find an investor who takes a minority stake in a venture and provides capital and support, but leaves us to run the business and hire key employees.
Related: Richard Branson on Intrapreneurs
We have created some great partnerships through Virgin’s mobile phone businesses. In most cases, we found a mobile telecom operator who wanted to tap into the Virgin brand’s strong appeal in order to reach a new section of the market. The telecom would provide the cellular network and, in some cases, some capital; we provided the expertise, branding and people needed to make the new business a reality.
When the situation has been reversed and Virgin has partnered with a small management team ready to take on a new market sector or territory, I like to think that we have held true to our principles, and given our partners the time, space and capital they needed to build their businesses.
Virgin Active, our health club business, has been built in partnership with the founding management team: Frank Read and Matthew Bucknall. Over the past 12 years, we have completed acquisitions together, expanding to six countries. Virgin Active is now a leading business in the sector, and Matthew is chief executive. Virgin supplied the brand, the reputation and sometimes the capital that the business needed; the management team provided the industry knowledge, the local expertise and, above all, the passion and commitment to make it all work.
Overall, you need to ensure that your people are inspired and have the freedom to be creative. After all, the success of your new business depends upon your most important partnership: the one with your staff.
If you get this partnership right, your chances of success are much higher. Just as you will need the freedom to build your company according to your vision, they will need the freedom to develop their own areas according to the requirements of your customers and the other employees. Whether or not they will have this independence, which is integral to the business’s future success, depends upon your choice of financial partner.
So remember, a partner with money is very useful, but a partner who will also provide you and your team with the space, time and freedom needed to build the business is a true friend – and that friendship will stand the test of time.
Related: Richard Branson on Empowering Employees
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Comments:
Mike, I have no advice for financing, but for the actual project: I stronly recommend looking into aguaculture. This way you get vegetables AND fish. The great advantage is no need for artificial fertilizer. This way, we simply copy mother nature and create our own ecosystems. True sustainable foodproduction. Search for Murray Hallam.
I am new to Linked-in and am comming into this topic quite late. I have spent the past 18months researching and studying fish farming in Africa, so as to help with the food and protein shortage on the continent. I beleive that if I can teach people to grow fish it will help with the over fishing and shortage of fish, whilst at the same time creating employment. My problem to which I need Richards advice, is who do I get to help me with the funding of Hatcheries and R&D. I have spoken to many People including Government, but the industry is fairly new in Africa as well as South Africa and that is where it stops. People are scared of new.
When starting a business, take the time to do your market research. We researched our market, science education, and thought we had it all figured out. We did not figure out how to reach it and to establish our brand. We have a patent and a registered trademark, Smart Science®. We're closing sales readily but have to sell into a poverty market one school at a time. In NYC, we've grown exponentially to more than 10% of the schools as customers. We absolutely must have a financial partner in order to spend money to attain brand awareness. I really like the article but don't see how we can follow its precepts. If we don't expand now, we're likely to lose our edge as a unique and powerful cloud-based service providing authentic science lab investigations online.
I wish I could get your contact/support so I could present my business concept that I know with a 'breath of life' will definitely make waves... Please, if in case you get accross and consider it worthwhile to respond, I am residing in Scandinavia. Looking forward for a story that will one day make headline, that I dropped a note for you on enterpreneur.com and the rest become headlines.;)
I think Richard is one cool special kind of mega man, I can hardly believe someone like him in this crazy world of 'selfish capitalism' could take time to give others such an insight and advice without asking for money for such consultancy. Yeah some may say he's got enough, but that is where the problem is, because those ones with money always want to get more from those with little or nothing, that is called capitalism! Or is it?
It's good advice, but I think he would have a very different outlook if he had tried creating a startup in the current economy. -JK http://www.longest.com/coupons/godaddy-coupons-and-promo-codes/
Great article! I started my venture solo, well partnered with my wife. We wanted to keep control of our companies and brand so we self-funded our ventures however it wasn't always easy. There were times where we were short on cash so I had to fall back on another skill-set to raise capital. I think that's one aspect of being an entrepreneur is that you need to be resourceful. This also led us to a new venture in teaching business and creating a platform that would allow others to learn from. The biz room dot com was born out of lessons that we learned from our experiences and the plethora of people asking for advice about business. If you can self-fund try that first but if you need Capital there are a lot on private investors out there looking for funding opportunities. ~Tim Town
Thank you for taking time to share this, you are my hero!
I love reading these articles about finding and selecting investors they give me hope but has a dreampreneur does this really apply to someone like me who has many concepts and drawing of logos in my note pad but really dont have an audience to pitch my ideas to.Enterpreneur is there anyway the magazine could have a contest of americas next concept please and have your readers vote.
man that was an amazing article im in this stage rite now to help further my business :)
Hi Richard Following my flight on Virgin airways last week from Kenya to U.K, i was impressed at how you are engaging with African communities with an aim of improving their lives that i have ideas and thoughts to share with you. How could i contact you please? Best regards Duduzile Moyo Chic Exotik interiors UK
As usual, very good advice
very good advice!
business partners, where are they? I've sent over 300 email to VC, BA, etc. to find funds for my projects, having only 1% of reply email and ZERO funds!
Great advice. And it's so true. I've been in business partnerships in the past and if you don't have the mix of all required elements. It just won't work long term.
I have put my business somewhat on hold because I no longer have the personal cash to fund it. I'm not giving up, but a business is just not a business if it is not generating revenue or not having repeat customers to help generate revenue. A business must have revenue or some type of steady cash flow.
Hi Richard I´ll like to share some ideas and projects with you, please let me know how can I contact you regards Carlos Rincon Gallardo Miami, Fl
As always, thanks for the great advice. Also, once you've decided on taking investor capital, there are several things to consider beyond how much to take; such as the VC's experience and what mentor/advice/connections they can bring to your business, beyond just the capital. Rob C. MileHighBusinessPlans.com
Dear mr Branson thank you for your insights. I understand that your advise on 'Finding and Selecting Investors for Your Startup' is that you shouldnt when you dont have to. And when you have to,go look for partners who bring more to the table then money alone. And make sure that you stay in control. My experience is that people who bring more to the table then money alone can delay thing because they have very specific upinons on issues and are harder to convince. What are your thought on the number of investors youw want in your startup. The more the better or is it better to deal with one dominant investor?