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Interview with Callum Laing: The Entrepreneur Exit Alternative

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So, if you’re an entrepreneur, there’s a lot you need to know about scaling your business; especially when it comes to getting funding.

If you’re looking to grow a successful business, chances are you will need to obtain more capital. It’s an essential part of building a thriving enterprise.

But it’s not easy, is it? For many entrepreneurs, it can be quite confusing.

Any founder of a company or small business owner knows that it’s tough going out there. Small businesses are the lifeblood of economy, but entrepreneurs have many challenges facing them. This is especially true when it comes to gaining the funding needed to scale.

I spoke with Callum Laing, partner at Unity Group, about the challenges small businesses face and a unique opportunity that they can potentially benefit from. Laing is co-author of the new book “Agglomerate – Idea to IPO in 12 Months”, and is a previously published author of “Progressive Partnerships – The Future of Business.” 

Laing’s mission is to make it easier for entrepreneurs and startups to get the resources they need to achieve their objectives. As an author and businessman, he has helped many business owners realize success in their funding efforts. In this interview, you will learn why an IPO or an acquisition might not be the best funding solution for your company. You will also learn alternative methods of raising the capital you need to grow your business.

What are some of the biggest challenges small and mid-sized companies face at this time?

Small and mid-sized companies, generally referred to as SMBs (Or SME’s outside of the US), usually are companies with less than 500 employees. According to the 2012 US Census Bureau data, firms with fewer than 500 employees accounted for 99.7% of those businesses.

Access to resources is always a major challenge for SMBs. Business owners struggle every day to scale. Without capital it is difficult to attract great talent. Without great talent it is nearly impossible to compete with the big companies. If they are ‘lucky’ enough to be in a position to take on investors or a bank loan to scale, the terms are normally so onerous it ceases to be attractive.

What about achieving scale through an IPO or an acquisition?

Because of the difficulty in accessing capital, business owners often believe the only way to get investment is by going public or getting bought out. However glamorous those two options may sound, the reality is much harsher and often comes at a very high price. The public hears about the shiny new “unicorn” start-ups that end up being covered in the media all the time. These include the Ubers, the Airbnbs, and the Dropboxes. But the vast majority of businesses toil away under the radar.

IPOs, acquisitions or investors all come with strings attached. In fact, those strings are often more like chains and padlocks. Business founders have to sell their soul, their dream and their control to the investor. In small business, much of the value of that business resides with the founder and her senior team. When investors come in and take control they are removing the power from the very people that got the business to where it is today.

What are the drawbacks of these options that founders often aren’t aware of?

When companies sell or merge, you often see an exodus of talent —- sometimes with key accounts. Small businesses depend heavily on the talent of key employees. A change in management philosophy and execution often creates conflict between the buyer and the bought; many M&As fail because of this.

Post-merger, you also frequently see the removal of one of the brand names, usually by the company that was bought. This destroys a lot of the brand equity carefully cultivated over the years. Most roll ups are either debt funded or investor funded. Either route creates a huge stress on the eventual vehicle.

Then there’s going public through an Initial Public Offering (IPO), which is very time consuming and costly. Public companies also need a board to run both the business and the IPO. Some IPOs are exits in disguise. The talent is either leaving or planning to leave. This can lead to building a bad reputation. In other cases, the IPO is pushing for the highest valuation because of a planned exit, or they want to raise money and thus want to minimize dilution. While there are lots of advantages of going public, IPOs are simply not a great way to raise capital for the average business owner.

Where does that leave small businesses then?

It leaves them between a rock and a hard place. This is the exact situation that our firm, Unity Group, sought to alleviate. The solution we arrived at is what we call the “Agglomeration.” It sounds like a fancy word, but it is taking the best of mergers, reverse takeovers (RTOs), roll ups and IPOs…with none of the downside.

The best way to look at it is as a cooperative IPO where a group of businesses join forces and publicly list, growing further by acquiring more companies in the same space. The twist to the model we have introduced is that the individual founders keep full control over their own entity. They are just using the publically listed vehicle as a platform. Allowing them to swap shares for more liquid shares, yet still retain the control of their own entity.

This way they achieve scale while still being able to run the business as they see fit. All member companies share a common holding company with a consolidated income statement and balance sheet. Instant scale helps them win bids when pitching for contracts, geographic coverage, and product diversification. They can talk big when they need to, and be small and nimble when it comes to serving individual clients.

What other benefits does an Agglomeration have besides scale?

There are many unique aspects of an agglomeration that helps small business owners. In terms of liquidity, the public listing allows people to sell when they want or sell a little and keep the rest. It creates financial freedom for the founders. The fact that they are all in the same boat fosters cooperation to drive share value and the timing of share exits. Since all the entrepreneurs joining are looking to grow and not exit, it is easy to get a significant multiplier effect.

When it comes to wealth and value creation, this is really the “Holy Grail” of entrepreneurship. It takes away the binary sale choice, and creates smooth and growth platform. Profits and cost savings are directly multiplied in the company’s valuation creating a direct correlation between effort and reward. We also have a dividend policy so all companies in a group issue dividends, meaning the founders get income from their shares without the need to sell them.

From an investor standpoint, an Agglomeration provides a very compelling proposition. Finally you have the ability to invest in fast growth small businesses but with the liquidity that public stock provides allowing you full access to your capital at any moment. Additionally, because there is a portfolio of companies in the group, your risk of any one company struggling is minimised by the diversified nature of the agglomeration. Companies within the group can also access soft loans from the parent, or cash and expertise to help with consolidation. This significantly increases their ability to survive and scale over their competitors outside the group.

What’s the future of Agglomeration?

Unity Group currently has around a dozen Agglomerations in process from Marketing to Childcare and from Tech to Finance, plus many others. We are always looking to speak to good, debt free, profitable businesses that would like to explore whether this is the right option for them.

Because of the massive potential in this movement, we are releasing the intellectual property on the Agglomeration in our book “Agglomerate – Idea to IPO in 12 Months.” Rather than keeping it to ourselves, we feel that letting everyone have the blueprint is the best way to allow as many small businesses to benefit as possible. In so doing, we hope to unlock the massive potential that is the small business which ultimately benefits the economy and its workers as a whole.

You can download a free copy of the book here:  http://www.callumlaing.com/wbaf/

This article first appeared on Huffington Post by Jeff Charles.  https://www.huffingtonpost.com/jeff-charles/callum-laing-the-best-way_b_12077962.html

This article is part of the World Business Angel Forum media partnership with AsianEntrepreneur.org

If you would like more information about WBAF, please contact Callum Laing WBAF High Commissioner for Singapore. [email protected]

Investors

Victor Tan

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Victor Tan enjoys working in the start-up sector. His passion is to help SMEs and start-ups grow.

What’s your story?
I was born in Singapore. I moved to Australia for the majority of my life and I have now been back in Singapore for the past 6 years. Currently I am the CFO of Unity Group, which is a boutique merger and acquisition advisory firm. I have been in the big corporate world for the about two thirds of my career and for the past 5 years I have been involved in the start up and SME space.

What is your involvement with Investment?
My biggest investment is my time and positioning my career to focus on the start-up and SME sectors.

How did that come about?
A couple of reasons:

  1. I loved the big corporate world and the skills I Iearnt in that world. However I felt that I was wanting more and I wanted to really contribute and impact on the success of a business. In the SME space, every staff member is important and every contribution impacts the business in many ways. In the corporate world, sometimes you just feel like one of the many cogs in the wheel.
  2. SMEs are typically the forgotten businesses in the world. Everything is up against them even though SMEs contribute the highest % of their profits in taxes in all developed countries in the world. However, they are undervalued, lack the ability to grow and raise funds.

What are some of the key things you have learnt about Investing?
Establish your strategy and stick to it.

What mistakes do you see less experienced investors making?
Speculative trading or getting rich quick. There are no quick wins. It all comes down to believing in your objective or strategy, working hard, sticking with it and being adaptable to change.

What mistakes do you see Entrepreneurs making?
Surrounding themselves with advisors that are “yes“ people who do not add value. Typically entrepreneurs are full of passion and sometimes that passion and emotion clouds their ability to make good decisions. Advisors around entrepreneurs, whether they are the GM, CFO or legal counsel, need to assist the founder of the business to stay on the same path but at the same time give the founder room to breathe and be creative.

What’s the best piece of advice you ever received?
You have to work hard and smart.

What advice would you give to those seeking funding?
Product and data, data, data! Product or goals need to be defined, broken down and measured from the outset. That’s the only way of defining success (whether its based on revenue, profit, number of customers, etc) and it sets a performance-driven culture. The qualitative component of the product or goal is equally critical to ensure business performance and correct culture. Once these are defined and measured, it demonstrates your ability to define and measure the performance. This directly applies to seeking funding for your business. Without any quality data, investors are unable to assess the progress or viability of the product and also the future potential growth of your company.

Who inspires you?
My dad. His ability to rise to the top of his profession and give it all up for us kids.

What have you just learnt recently that blew you away?
A quote from Malcolm X, “There is nothing better than adversity. Every defeat, every heartbreak, every loss contains its own seed and its own lesson on how to improve your performance the next time.”

What business book do you recommend the most?
Unfortunately I don’t read books.

Shameless plug for your business/organisation:
The team at Unity really believes in supporting the SME sector and changing the landscape for small businesses around the world to enable small businesses to compete with the big boys, win bigger contracts and reward those that are creating the most value in the world.

How can people connect with you?
LinkedIn: http://linkedin.com/in/victor-tan-22880535

This article is part of the World Business Angel Forum media partnership with AsianEntrepreneur.org

If you would like more information about WBAF, please contact Callum Laing WBAF High Commissioner for Singapore. [email protected]

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Investors

John Sharp

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John Sharp gets a buzz from bring something new into the world!

What’s your story?
I started my professional career as an orchestral arranger and composer in Adelaide, Australia. Software rendered my chosen profession obsolete within a few years and pushed me down the path of networking and software. I built a Chinese language TV network, ran the Asian market for the world’s biggest ever startup, US-based WorldSpace, (where we raised 1.8 billion in our seed round) and then I built and sold a US-based cybersecurity company, when Google was telling you it’s scanning your email for viruses. We built that! In 2010, I moved back to Singapore from Florida, which is just like Singapore, with less cobras and more alligators!

What is your involvement with Investment?
I co-founded Hatcher along with seven other investors in 2013. Since then me and my fellow investors have made 21 investments in 13 companies – one of which I now work for, Hatcher+. Hatcher+ is a new AI and machine based learning platform for venture investment that has plans to make 2,000 investments over the next 3 years.

How did that come about?
I have been building and selling companies all my life. My first investment was an Asian digital sample library that returned 50 times, and my second investment was a satellite TV channel that returned 5 times. My third investment was a failure. Once you have the startup investment bug, it becomes impossible to get off the train. Nothing else is as exciting or rewarding as bringing something new into the world. It’s addictive!

What are some of the key things you have learnt about Investing?
The most important thing about investing is the valuation you come in at. Our research at Hatcher+ uncovered an interesting fact recently; most angels accept valuations that are far too high. So with this in mind, angel investing is like buying and selling a house, you need to focus on buying at the right price. The second key thing is you need to invest in honest, hardworking, intelligent, positive people. You can always put up more money, but you cannot inject optimism that is not already there.

What mistakes do you see less experienced investors making?
Experienced investors, including myself, all make the same mistake; we invest in one or two companies, or small, non-diversified portfolios, in the belief that we can grow unicorns in hamster cages. However, sometimes this is possible. Our first investment company had a TYPI of 0.40 within 3 years, which currently puts it in the top 10% of funds worldwide. However, this kind of result requires a lot of luck and hard work.

What mistakes do you see Entrepreneurs making?
Entrepreneurs need to share the good and the bad with investors. Investors are great at helping with both. One time, when I was a much younger entrepreneur and CEO of a startup that had just raised $22USD million, I was in a board meeting, waving my arms around, painting a bright picture of the future and one of my new investors put his hand up and said “Stop! You have our money. You can take off the cheerleader skirt now. What problems are you facing with the business?” I’ve never forgotten that moment. You need to be real with your investors, and tell them what is going on. Don’t wait until it’s too late to ask for their help.

What’s the best piece of advice you ever received?
The best piece of advice I ever received was from an investor from Malaysia. At my very first board meeting he asked me if I knew what CEO meant? I said, “of course I do, I’m not that naive. It stands for Chief Executive Officer. He smiled and then shook his head. “You’re wrong,” he said. “CEO stands for Customers, Employees, Owners, in that order of importance.” His point being, if you look after your customers, and treat your employees well, the owners will benefit automatically. Great advice.

What advice would you give to those seeking funding?
When you seek funding, you need to be aware that investors care mostly about three things: How much, how long do you need it for and how much will I get back?

Who inspires you?
My wife inspires me. She is the most balanced, level-headed person I’ve ever met. She’s an amazing mother, a no-bullshit friend, and has a great outlook on life. I wish I could be more like her.

What have you just learnt recently that blew you away?
I recently learnt, first-hand, from my partner at Hatcher+, Dan Hoogterp (possibly the smartest man I’ve ever met), how unbelievably powerful AI can really be. It’s one thing to read about the capabilities, it’s another thing to input data and watch a machine output smart decisions that are hundreds of times more powerful and informed than human-based decisions. What I learnt is that AI is far more powerful than 99% of us know and, it’s growing in power exponentially.

What business book do you recommend the most?
The best business book for entrepreneurs to read is the Innovator’s Dilemma. It explains with great clarity, how to succeed as a small fish in an ocean full of predators. It is one of the very few books that fundamentally changed my outlook on being an entrepreneur and made me believe that a small company is capable of any level of success it aspires to.

Shameless plug for your business/organisation:
Hatcher+ is on a mission to revolutionize venture investing. We believe AI and machine learning, used in partnership with leading accelerators, can revolutionize deal sourcing and selection, and we believe that adopting portfolio theory through the use of massively scalable portfolios is the future. Finally, we think that 15 year venture funds are done. The future will consist of ETF-like venture funds traded on blockchain enabled exchanges. That’s what Hatcher+ is enabling.

How can people connect with you?
People are welcome to connect with me via Hatcher.com or LinkedIn.

Social Media profiles?
Twitter: https://twitter.com/gohatcher
Linkedin: https://linkedin.com/company/hatcher
Blog: https://hq.hatcher.com/blog.php

This article is part of the World Business Angel Forum media partnership with AsianEntrepreneur.org

If you would like more information about WBAF, please contact Callum Laing WBAF High Commissioner for Singapore. [email protected]rg

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