STARTING a business is not for the faint-hearted. You need to be an optimist. While many of us see the metaphorical glass as either half full or half empty, for entrepreneurs it’s overflowing.
This exuberance is rational. Before you can convince others that your idea will change the world, you must first convince yourself. For many, the startup dream stops here. But for those who can do it, the next stage is getting the people around them – their mentors, co-founders, seed funders, and employees – to believe in their vision as they do. Finally, the rest of the world must be persuaded that this new product or service, which they have never used before, is in fact something they need. Each stage is daunting and, for each, entrepreneurs will need a healthy dose of confidence.
For all the talk of the upcoming election hitting confidence, however, I’ve found that entrepreneurs are a lot less interested in it than many assume. I have not heard of one client pondering whether to delay launching, pushing forward or expanding their business until after the result of the election is known.
The same goes for the state of the economy. For most entrepreneurs, keeping a tight rein on finances, driving sales, building up reserves, and controlling credit all trump news of the latest economic indicator. Many of my clients were lucky or prescient enough to sell their company before the last financial crisis. They didn’t wait for the crisis to end to launch again. Rather, many saw it as an opportunity to bring efficiencies previously unheard of to the business world. This has been especially evident in the fintech sector, where the costs of transacting, particularly where banks have traditionally been involved, are being cut.
In my experience, entrepreneurs adapt remarkably pragmatically to an economic crisis, and are not afraid to rewrite their business plan and refocus. Where one door closes, they will find another to open. More than once, I’ve introduced two differently-talented entrepreneurs who have together, using their complementary skills, enabled previously embattled businesses to flourish.
Because banks have been refusing to lend to many businesses, entrepreneurs have themselves begun to find innovative ways of filling the void. This has led to the expansion of the provision of private capital to entrepreneurial businesses to include peer-to-peer lending and crowdfunding. As part of the UK’s astonishing fintech revolution, new funding options are transforming the landscape. For the banks, it is likely that the toothpaste is out of the tube. A new industry has been born and, even as the economic climate looks sunnier, one can’t imagine that things will ever go back to the way they were. The Seed Enterprise Investment Scheme and the Enterprise Investment Scheme have also helped to make equity funding more attractive.
To be successful, entrepreneurs must be driven, optimistic and committed to their business. Even downturns present opportunities, as established businesses retrench. So whenever the next crisis hits, you can be sure that entrepreneurs will be there again to pick up the pieces.
Jonathan Berman is a partner in the corporate department at Mishcon de Reya.