What Makes A Successful Entrepreneur?
Let’s start by going all the way back to your early career days. What did they look like?
I read Russian at university, then moved to Moscow to work as a commodity trader for eight years. I was mostly involved in the sugar trade. It seems a long way removed from online greeting cards, but in fact it was a great training in strategic thinking and in how to build teams and get the most out of people.
Have you always had an entrepreneurial spirit?
When I was at university, I started a shirt business. In the end, my studies got in the way and I dropped it, but the spirit was there from early on.
Where did the idea for Moonpig come from? Was it that ‘Eureka!’ moment people dream of?
When I left Russia, I decided I wanted to start my own business. I spent a year studying for an MBA while working on different business ideas. Moonpig seemed like the most sensible one. It was a good business model and it was well executed. We had a good team who were allowed the freedom to do their job well, but undoubtedly we benefited enormously from being in the right place at the right time.
But you still have to make the most of that luck. What helped Moonpig to do that?
Data. It is important to be decisive in business, but it is also critical to use every bit of data to get a clear picture of what is working and what isn’t. Online businesses have the benefit of a huge amount of customer data to interrogate.
Was there a pivotal moment for the business?
It was when we started advertising on TV. We knew within a couple of days that it was very cost effective and it enabled us to grow the business from £3m turnover to £45m in three years.
Was it all plain sailing?
There was a point in 2004 when we had been losing money for four years. We needed more investment, but the existing investors had lost faith. I had to find another new investor and extend my own mortgage in order to keep the company going.
Why did it take so long to turn a profit?
Sales had grown steadily since the first year, mostly through viral growth, but it took five years before the business made a profit. Our problem was in finding a scalable form of customer acquisition in order accelerate growth. Until we started advertising on TV our cost of customer acquisition on every channel was too expensive or not scaleable.
And how did your exit come about?
We decided to seek a buyer for the business in 2009 and it took two years to finish the process.
Looking back, what would you do differently?
If we had advertised on TV a couple of years earlier, we may have grown quicker than we did.
What advice would you give to an entrepreneur starting out today?
Develop a really good set of monthly accounts and KPIs, and interrogate them every month to fine-tune your business. Data is king, but only if you are looking at it and then doing something with it. Hire good people and give them the freedom to do their jobs properly.
What is key to focus on in the early days?
You need to focus on making sure you have a good product and service with healthy gross margins. Without that you have nothing.
As well as that Moonpig jingle, we know you from your time on Dragons’ Den. What can you tell us?
I had a great time making the show. It is challenging because the Dragons don’t see anything of the business before the lift doors open and there is no opportunity to google anything or even use a calculator.
What is the first thing you look for when investing?
Evidence that customers want the product. If the company is already trading, I look for evidence of repeat sales, which are far stronger evidence of a good product than first-time sales. On the show, I was looking for bright entrepreneurs with good ideas who just needed the occasional steer in the right direction. Too many people came on the show hoping the dragon would help them actually run their business.
You were a pretty tough but astute dragon. How many investments did you make?
I made 14 offers which turned into eight deals. Only about 60% of the offers on the show turn into deals – half because the entrepreneurs pulled out and half because they didn’t give an accurate picture of the business in their pitch.
And how are those deals doing?
Of the eight, I have sold two of them; two have gone out of business; two are really doing well; and two are fairly stagnant. Overall that is what you might expect for angel investments. I am still involved with all four that are still live.
What advice do you have on raising money?
Skip friends and family. Pitch to angels who don’t know you. They will give you far more honest feedback about your plan than your grandmother. Listen to the feedback and adapt your plan if necessary. If you can avoid friends and family funding, it is better – if your business fails, you don’t want to be reminded of it over Christmas lunch.
What makes a good business plan and what are you looking for?
I want to see a plan that has been written by the founders, not by consultants or advisors. I want to understand how good the team is and the plan should show me three things:
- Customers want the product and are happy to pay a price that leaves a healthy gross margin
- The market opportunity is significant
- The founders understand the competitive landscape and are the best people to make the business succeed
How much is it about the people?
It is all about the people. Good people can adapt a bad business plan, but bad people can mess up even the best idea.
Which other judges gave great advice?
Deborah Meaden and Sarah Willingham were definitely the shrewdest of the dragons I worked with.
Now, one thing: we noticed the lack of outfit changes across the shows. We hope you filmed them all back to back?
We filmed 100 pitches over 21 days of filming. In order to be able to lace them together into episodes of five pitches, with one offer in each episode, we wore the same clothes every day. We actually had two identical sets – and they did launder them each day!
Would you do it again?
Two seasons was great fun, but I was concerned about ending up with too many diverse businesses to look after.
So what does the future hold for a man who sold a very successful business in his 40s?
Selling a business gives you the freedom to do a variety of things that wouldn’t be possible when you need a full-time job to pay the bills. But we all need to be busy and to feel useful. I am busier now than I was when I was running Moonpig. I divide my time between managing a portfolio of stakes in 21 companies and a few non-profit roles. I am a governor of a multi-academy trust in south London, which takes up a fair bit of time, and I am a trustee of Operation Fistula, which is an African surgical charity. I don’t plan to retire ever. I just wish for more hours in the day to do the things I still want to do.
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