What’s it really like to run a start-up business?
Three entrepreneurs, three stories: The founders of MyFlashTrash, Kano, and Cuckoo share their business insights, motivations and mistakes...
Some people start a business pursuing a “dream” of becoming the next Richard Branson or Mark Zuckerberg with the goal to build a $1bn ‘unicorn' company.
Yet, for many other budding entrepreneurs, this “dream” is in fact more about “changing the system” and bringing a disruptive approach to an established industry.
The latter is true for Amber Atherton, Alex Klein, and Anna Mackenzie; the founders of MyFlashTrash, Kano and Cuckoo, who recently revealed their start-up motivations and highlighted the realities of running a start-up business.
Speaking at last month's Millennial 20/20 Summit, the trio shared their stories, talked openly and honestly about what it's like to have to answer to investors, and explained why as much as you might want to, you can't always say ‘yes' to everything.
If you're thinking of starting a business, or even if you've already embarked on your start-up journey, the following discussion should help inspire you and give you an insight into what it's really like to run a fast-growing start-up…
The story behind the businesses
Amber Atherton: “MyFlashTrash is an e-commerce company and marketplace that sells charm jewellery amongst other things. I started the business when I was 16 and it has evolved ever since. I have a team of four and we're based in Shoreditch, we raised venture capital (VC) money last year and we're now looking to expand in the US. [The business is] valued at £5m.”
Anna Mackenzie: “Cuckoo makes bircher muesli which is an on-the-go breakfast pot with yoghurt, oats, and fruit mixed altogether. I co-founded the company with my best friend Lucy [Wright] about two years ago. We launched into Selfridges and we now supply some Tesco and Waitrose stores and Ocado as well. We’re all about great taste and interesting flavours- so no strawberry and banana – […] it’s about providing something for the food adventurer.”
Alex Klein: “I’m co-founder and CEO of Kano. Three years ago, I was a journalist and, at the time, the journalism industry was falling apart. I was working as a business in tech reporter in the US trying to demystify complicated subjects and I then moved over to England. I encountered a little brain, a little circuit board called The Raspberry Pi, hackers were sending it to space, under the ocean, and doing incredible things with it, and I got obsessed with it. I showed it to my cousin Mika (who was six at the time) and he said to me ‘I want to build my own computer but it has to be as fun as Lego'. I started writing a book on how you could do this , page by page and we're now a company based in London, we make computer kits for kids of all ages across 86 countries and that is us.”
That ‘lightbulb' moment
Klein: “I got the idea from my cousin, at the stage it was about making a computer that was as simple and fun to build as Lego. I was completely unqualified, I mean I wasn’t a computer scientist growing up. So me and my co-founder Yonatan started packing in all of these off the shelf cables and boards into these hand-folded cardboard boxes; it really wasn’t flashy.
“[The lightbulb moment was when] I showed up in a classroom in North London. It was quite a deprived area – for most kids there, English was their second language – and I was standing in front of all these students with 20 hand-folded boxes and I asked them three questions:
- Do you know how to make a box? All of the hands went up.
- Do you know how a computer thinks? Some hands went up.
- Do you think you could make a computer? No hands went up.
“And I thought okay there’s a need for this. Nobody of this generation can even conceptualize what goes on inside a computer but they’re so obsessed with computers, there's a gap [in the market]. I gave the prototype models to the kids and told them ‘Well guess what, in the next hour you’re going to build your own computers. You’re going to make MineCraft come to life, you’re going to make music and you’ll do it by following simple steps in a book.' Sure enough, an hour later they put the pieces of the Raspberry Pi together and brought it to life. At the end of the workshop, this kid Kaleem who was nine at the time said ‘Today we made a computer and that makes us superchildren!”
Mackenzie: “There were a number of thoughts that went into [Cuckoo]. When I went to university, I found it hard to find food that was good for you, had healthy ingredients and was convenient. The summer when I was at home my mother – who’s really creative – was making these bircher recipes that were all really exciting and were recipes that I hadn’t tried before.
“I couldn’t find anything like it on the shelves so I started hatching up a business plan. At the end of the summer, I spoke to my friend Lucy and she shared my excitement and said ‘Let’s do this’ so we literally started the next day.”
Atherton: “I had multiple moments leading up to it. When MyFlashTrash came about I was just selling jewellery at school and making a pretty great margin on it. I started to realise there was a market for it; I set up a website and started taking pictures of my friends wearing the jewellery.
“I then saw someone new buy jewellery from my blog and I realised that this could actually work. It sort of went from that to a designer asking if they could sell jewellery on the platform, and I then sort of pivoted to charging people to be on the website, like a drop-ship model.
“It was a fantastic business set-up as I had no direct costs, and I just continued from there and learnt everything along the way about how you raise money, how to hire a team etc. I’ve made mistakes but I’ve learnt from them all.”
Chasing the start-up reality instead of the ‘unicorn' dream
Atherton: “I think there’s a whole fascination with becoming a $1bn company, I didn’t think about [that when I started], I think that if you start a business thinking ‘Oh I’m going to be a unicorn’ it won’t have any authenticity. I think you should look to change the market and disrupt it with a new approach.”
Klein: “I echo that, I think the fascination with unicorns has been of great detriment to many entrepreneurs who want to start businesses today. I also think that many of the companies now that are valued at over $1bn are quite inflated and I think we’re very likely to see a correction. I think smart capital is going to be more interested in companies becoming ‘cockroaches’ and surviving the apocalypse in the market, rather than unicorns. At least for me, changing the system is what’s interesting. I think we’re about to go through another VC revolution.”
Mackenzie: “Do I want to be a unicorn? That’s so incomprehensible to me – I want to change the system.”
Disrupting established markets
Atherton: “In the jewellery industry, there are a lot of old players who have dominated the market for a long time. I think there’s so much potential, whether it’s a marketplace or another platform, to shake things up. I don’t think [that because we're disruptive] we’re the villains, we’re great acquisition targets!”
Mackenzie: “We’re a premium brand and any successful everyday food brand has stood where we are today. I don’t think any of the massive companies are going to be worried about us at this stage but we’re going to be building up our brand to get there.”
Klein: “We’re positioning ourselves now as the first computer for the young, creative, rising generation -for the nine year-old that wants to make music, art, or an app. We hope to be disruptive – creatively disruptive.”
Getting in bed with investors
Atherton: “The moment you take on shareholders, you have a responsibility to scale a company, make profit, to exit or do an IPO. You have a lot of pressure to do something that maybe you hadn’t planned.
“The challenge I’ve faced is thinking that my investors are my mentors. So I thought ‘Wow I’ve got this epic investor on board and now he’s my mentor and it’s going to change my business'. Whereas in reality, his portfolio is billion-dollar companies and in comparison I’m minute so he doesn’t give me the time I thought I’d have. Your investors are there to get a return.”
Mackenzie: “We’re currently looking for investors and I’m not worried about losing reign as we wouldn’t be looking for investment if we didn’t require it. I would rather grow and be a smaller part of a bigger thing. I think investors are good because they do hold you accountable for things, you can see this future of where you want to be but [having investors] forces you to sit down every quarter and look at the reality of what's going on and do some planning.”
Klein: “I’ve been very lucky with all of my investors [Facebook investor Jim Brier is Kano's lead investor]. Good investors hopefully invest in you as a person as much as your project as a dream. They want to see the dream evolve, they don't want it to be some sort of 10 commandments. I think, if anything, the minute you hire people and bring a team around you, particularly a leadership team, that's when you have to be very careful about being too precious about ‘your dream’. You have to not be like ‘This is what I think and this is what I am doing and I am right’, it's more like ‘Let’s find the common threads and the idiosyncrasies between the common ideas and let the snowball roll'. Hopefully the investor doesn’t stand in the way of it – the snowball.”
Learning to say ‘no'
Mackenzie: “We say ‘no' constantly, there are companies that get in touch for marketing or people that want samples because they want to blog about us. At first you think ‘Wow this is amazing, word must be getting out there, people are approaching us about opportunities'. But as a start-up you can't take these things for granted, you can't say ‘yes' to everyone and every single opportunity. We have a director on our board that we [don't always agree with], there are always times when he's coming up with suggestions and [me and Lucy] look at each other whilst we're on speakerphone thinking ‘no'.”
Atherton: “I said ‘yes' to everything when I started and actually ended up in a position where we weren't an e-commerce company, we were doing white label for a PR agency and we were sending B2B data, I kept thinking ‘oh that's great opportunity, more revenue streams'. Our investors were like ‘This is great, you're diversitfying' and it is great but that sort of led to me burning out so I now understand the value of many ‘no's. I just think you have to stay so focused on your vision and that is very difficult when you have an entrepreneurial personality.”
Klein: “I have trouble saying ‘no' personally. In America, they do this thing called improv comedy/theatre and they teach you this thing called ‘Yes and', so everytime someone comes in to the scene you say ‘yes and' and you have to add to it.
“The thing for me that has been quite tough is that we publish a magazine called Kano Club, which is like cool stories and projects you can do with computer kits, and we're cutting it. It's sad because I love magazine and print media, it's just not selling as well as we would like but I want to keep it in some form – I'm still going to say ‘yes' to it in some form!”
And finally, knowing when to move on
Klein: “I'll know [that it's time to move on to a new venture] when I'm no longer invested in the present mode.”
Mackenzie: “We're coming up with lots of new products and ideas so once we've finally ran out of ideas, and we're only coming up with bad ones, I guess that will be the time to call it day. We're a long way off that.”
Atherton: “It' so important to know when to pivot and when to persevere, you have to have a gut feeling. We had an acquisition offer about six months ago and I was excited about it but it just didn't feel right, so I just think you've got to trust your gut.”