President’s Dream Colloquium: Entrepreneurial advice for early stage financing

Mar 06, 2014

The prize for successfully starting a business can be exceptional, and tremendously rewarding – yet 75% of startups fail within the first year, as a result of failing to think their finance requirements through. So what is the secret to raising the capital required for businesses to make it past the hazardous early stages?

Andrew Harries, co-founder of Sierra Wireless, a NASDAQ-listed wireless devices and applications vendor, and a member of the Dean’s External Advisory Board at the Beedie School of Business, continued the SFU President’s Dream Colloquium on Entrepreneurship by offering advice designed to boost the chances of success for entrepreneurs in today’s competitive markets.

With vast experience in raising capital for startups – he estimates that he has raised over $150 million through early stage investment over his career – Harries advises entrepreneurs to ask themselves three questions before even thinking about going into business: how good is my idea; am I ready to do what it takes to launch this business; and what can I do to avoid failure?

“Sometimes companies will build a machine and then discover that nobody cares,” said Harries. “The best recent example of this is the Segway, which was supposed to change the way people lived in cities. It had a much-hyped launch but it turned out nobody cared.”

The old fashioned model of launching a business involved an idea; building a business plan; raising money through investors; hiring a team to build the product; developing it in secret; and then finally employing sales people to sell it. This model, Harries explained, was flawed, in that If the product did not sell, then the entrepreneur had most likely been guilty of not thinking things through at an early stage – but by this time it would be too late to rectify the situation.

Harries therefore preached the merits of the lean startup model, a recent method that allows startups to shorten their product development cycles, instead investing time into iteratively building products or services to meet the needs of early customers. Through this, they reduce market risks and avoid the need for large amounts of initial project funding and expensive product launches that can result in failure.

Much of the lecture focused on Harries’ framework for the sources of financing at each phase of a startup’s lifecycle: ideas-hypothesis; customer validation; customer creation; and finally company building. He offered the audience advice for each stage, but cautioned that the stages differ greatly and become more sophisticated as the capital needs of the startup increase.

He also commented on the expectation that venture capitalists will ultimately become interested in providing finance for a startup, citing Whatsapp’s purchase by Facebook as a recent example of a tech startup that had little in the way of revenue generation, but had such a significant customer base that it was attractive to investors. “You have to demonstrate significant customer traction for venture capitalists to invest,” he cautioned.

Throughout the public lecture, Harries fielded questions from a captivated audience filled with aspiring entrepreneurs. Among the topics covered were whether there is any combination of investors he would advise startups avoid; whether there were any red flags in early business plans that would cause him to back away immediately; and his tactics for protecting an idea.

The President’s Dream Colloquium brings leading thinkers to SFU in a series of free public lectures that create an interdisciplinary forum for dialogue between faculty members, students and diverse community groups.

Click here for more information about the President’s Dream Colloquium on Entrepreneurship, or here to watch the full lecture.

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