Part 1
In 1998 I and a partner started a company – initially known as Nettrain – which then expanded, metamorphosed and became Cognisco Ltd. http://www.cognisco.com/
The objective of that company – for which I was joint founder and director of design and innovation – was to produce a software product that would enable employers or examiners to distinguish between a person with a very good memory of a subject and their knowledge of the subject. This came about because after me leaving UMIST.
http://en.wikipedia.org/wiki/University_of_Manchester_Institute_of_Science_and_Technology)
Subsequently I became a trainer in various subjects mainly to do with sales and marketing, I was very surprised that some of the people who graduated from my courses in the 1990s didn’t automatically make a difference back at the workplace. After some investigation I concluded that the problem was that my method of testing – which was the traditional method of asking questions and getting answers – was in fact inadvertently slanted towards people with a very good memory and not necessarily a fundamental understanding of the subject that they were being taught and tested on. I developed a software, Cognisco Milestone to address this.
Anyway to cut a long story short I was awarded a patent on the software
http://www.boliven.com/patent/EP1256920/
and a number of banks and international blue chip companies took up the product and the company eventually became a multi-million pound organisation. I sold my controlling interest in 2006.
When Cognisco started, we had next to no money. In fact money was so tight that we couldn’t even pay our mortgages. Really. Occasionally good luck smiles on the fortunate and we were introduced by our accountant (who had called us in to visit him because we couldn’t pay the bill - £375.88), to a most interesting person – Tim Reynolds. Tim displayed the iconoclastic style and mannerisms of the then unknown Jamie Oliver and like Mr Oliver, Tim had very considerable (but not culinary) talents to offer.
Mr Reynolds was the talent scout for one or more business angels. We didn’t know it at the time but these business angels were based abroad and truthfully, at this point we were utterly unfamiliar with the term ‘business angel’. My partner and I had of course been exposed to venture capitalists over the years and had learnt enough in those days to steer well clear of them. Not for nothing were they know as ‘vulture’ capitalists.
So, to cut a long and barely believable (unless you were there) story, our tiny company was valued as a multi-million pound organisation even before it started trading or indeed had a product to sell.
This led to a cheque for a quarter of a million pounds for a tiny percentage of the equity. At this point we couldn’t believe what was happening and seriously wondered whether in some way we were engaged inadvertently in money laundering or things like that. Nevertheless the cheque didn’t bounce and at this point we were able to take my original concept and pay to have it developed into the software product known today as Cognisco Milestone. Incidentally, and here’s the benefit of having a pro-active accountant on hand (in this case, the one that formerly we couldn’t pay the £375.88 bill to), we were asked at that point how much we would sell of the company for that £0.25m. Before my co-founder and I could say ‘all of it’ our shrewd accountant told us that he would answer that question on our behalf ‘in due course.’ Theoretically then at that point my co-founder and I were multi-millionaires on paper. A strange feeling.
Anyway, the point of all this will become clear shortly in relation to my current company GoBetween Ltd (http://www.go-between.co.uk/).
In our tiny offices at Cranfield University, from time to time and certainly at least once a week for quite a while, we would be going through the mail, open an envelope to find a large cheque fall out. Invariably this was without a compliments slip or any indication as to the identity of the sender. The size of these cheques varied from a £1,000 up to about £100,000. Once again, this caused us quite some concern and initially, confusion. As a company we were obligated of course to supply share certificates to the people who’d invested in the company – but we had no contact details.
Eventually this dilemma was sorted out by the banks being cooperative, that is to say the banks from the people who has invested sent the share certificates to these anonymous (to us) individuals. These were in fact other business angels who were part of a very loose grouping of individuals. A sort of informal network. Of course we had the concern that once again we might be involved potentially in money laundering or off-shore accounts or illegal money or whatever. However, these cheques and everything associated with them were legitimate. The total amount of money that was invested was somewhere in the region of £2.8m to the best of my recollection.
The curious thing was that in many cases these business angel investors had no interest whatsoever other than a financial investment i.e. wanted no hands-on activity themselves. This is in marked contrast to the way that venture capitalists behave. Invariably they want an exit route within five years, a paid-for representative on the board and various other considerations. At this point we had completely forgotten about venture capitalists and although we were novices in the field of business angels, we were becoming remarkably successful with them. This was despite the fact that it took some while for my invention to move into profit.
This in itself is an interesting facet because unlike venture capitalists who want to see management reports seemingly every week, month or quarter, and of course annually, these business angels indicated that they were in for the long haul and didn’t require anything other than the annual accounts. Moreover, very few of the business angels ever turned up to the annual general meeting, although of course they were invited. And so we gained an intimate understanding of how business angels work in general, albeit from a distance.
They could, in our experience, be described as private individuals who worked anonymously, i.e. not part of a group, and yet from time to time demonstrated a herd instinct. By this I mean that one of the unofficial group or network of business angels would make that ‘pilot investment and then if he/she was pleased with the way the company behaved, then they would then tell others and thus the money would arrive. Based on this, one could argue that business angels are to some extent disorganised in that they are not part of a uniform group – but this should not be taken to mean that they are complacent or not caring about the nature of their investment.
Anyway, the years went by and unfortunately for me some of my colleagues and directors demonstrated what I felt was unqualified greed. This didn’t interest me. That greed was manifested by the desire (and I was outvoted on the board), to get involved with venture capitalists. My partner and co-founder at that point, had some years previously experienced unfortunate and uncomfortable experiences with venture capitalists – but nevertheless the lure of additional money in exchange for equity in the company was it seems a major motivator. And so we embarked on a series of what turned out to be entirely fruitless encounters with venture capitalists.
It’s that particular situation which was the catalyst for Gobetween Ltd.
In this period of us approaching VCs – and they wanting to see us – neither side, that is to say neither Cognisco nor the venture capitalists did their homework properly. We had 21 face-to-face meetings with venture capitalists and we had a 100% failure rate. This is in marked contrast to what would appear to be 100% success rate with business angels where indeed we rarely had meetings at all!
To cite one example that’s illustrative to greater or lesser extent of all of the 21 meetings, my partner and I would travel some considerable distance to meet a venture capitalist organisation – only to discover in the first few minutes that we shouldn’t have been there and they shouldn’t have invited us.
Neither side had done their homework!
No congruency or harmony between our mutual objectives had been established prior to that first meeting.
To give one classic example one venture capitalist organisation mentioned as we were just sitting down that we didn’t appear to be in the pharmaceutical industry and we were not a ‘start up.’ At this point we said we were in the IT business and we were looking for ‘mezzanine’ finance. http://en.wikipedia.org/wiki/Mezzanine_capital
We asked them why they asked this question and they told us that this was the particular nature and level of business that they were currently investing in. We asked them why they hadn’t told us this prior to the meeting and they asked us why we hadn’t asked them prior to the meeting! This led of course to a circular discussion which got us absolutely nowhere.
Variations on this situation occurred with each of the other 20 venture-capital encounters.
We concluded two things from this. First, highly paid executives in the venture capital organisations in those days (and it may indeed still be the case although I have no direct evidence to support this) needed to justify their positions and show that their diaries were full and that they were active. In order to do this, in order to show that the diary was full, they abandoned their historic checking criteria to establish whether there was congruency with the entrepreneur company prior to a meeting. That tried and tested (an inconvenient) congruency-testing process went completely out of the window given the imperative to appear busy and to hang on to their job at all costs.
In short any entrepreneur – other that the obviously idiotic – who expressed an interest in meeting them would be invited.
To compound this, in my view our own company sadly, some of the members being smitten by greed, would travel anywhere to any organisation that seemed potentially interested in investing the numbers of millions of pounds the company felt it wanted. It’s true to say that we did not do our homework either!
After 21 consecutive encounters and all the accompanying aggravation including due diligence and everything else besides, we concluded that we did not have what it took to establish a rapport with a venture capital organisation. And we also took the view that they were not necessarily interested in establishing a rapport with a company like ours. And that was pretty much it.
Part 2
After I resigned from Cognisco and sold my interest I looked back on this experience and realised that there was a substantial market opportunity in general and very specifically so during the economic downturn where conventional sources of finance (banks, etc.) were, and remain, nigh on impossible to obtain.
Moreover high net-worth individuals were clearly frustrated by encountering negligible interest on their capital due to the failing property values, greater than usual stock market instability and so on.
In short, that there would be numerous companies such as ours, plus numerous investors – be they business angels or venture capitalists – who would like to make an investment but who inadvertently or deliberately would end up wasting each other’s time were they to meet. What was needed was some form of online filtering service whereby the two parties could establish a degree of congruency between themselves prior to them actually meeting face to face.
Now of course, online questionnaires have been around for many years and as some of us know, in the social world, computer dating has been around for nearly four decades. But what was required I felt was something that was somewhat more sophisticated than the standard question and answer situation.
Thus over a period of months I spent considerable time with venture capitalists and business angels to determine the sort of questions that they would like answered before they even decided to meet an entrepreneur.
This in turn defines what Gobetween Ltd is all about.
Gobetween Ltd is not a decision making tool to enable the investor to determine who they should invest in.
It is more subtle than this.
Instead, it focuses on the primary difficulty and most time consuming aspects of this sort of activity:
1. Who is it that you want to meet, and . . .
2. Based on what criteria?
This is in marked contrast to what actually happens once the face-to-face initial meeting takes place.
Gobetween Ltd does not seek to usurp the intuition and instinct of the investor.
The reason for this is predominantly because once investors are face to face with an entrepreneur they can generally steer the conversation and do the analysis themselves far more effectively than any online system could hope to. The focus of Gobetween Ltd is on the time-consuming aspect when there are ‘n’ opportunities which have yet to be prioritised.
You could describe it as the investor looking for the needle (viable entrepreneur) in the haystack of the well-intentioned but inept, the dreamers, the no-hopers and the charlatans.
You can judge from this that in fact the core of the Gobetween Ltd system is a meeting maker, or meeting rejection engine of quite some sophistication and that one application for many is the putting together of entrepreneurs and investors. An alternative application of the core engine might well be, let’s say, for a SME business manager in a bank in a branch in the high street determining remotely who they should visit and who they should invite to the branch from the large amount of people who want to meet them – which is more than they can accomplish in any one working week.
As I understand it currently, the ability to get to meet a bank manager is to some extent a lottery. Once a person is in front of the bank manager the filtering systems that the bank has in place are very sophisticated indeed. I’ve seen some, first hand. Curiously though they do not appear to have a methodology determining who should invite to a first meeting!
Thus is you take the view that perhaps only 25% of the applicants get to meet that bank manager, then 75% at random go to, or apply to visit, another bank manager. From the bank’s perspective they have no idea whether the 25% of that 100% represent all of the good opportunities or none of them. This is quite clearly a serious issue. As a consequence of having no filter, adding to the inelasticity of their principle asset – the number of hours in the working month, it’s quite likely that a sizeable proportion of the more commercial attractive prospects are lost to a rival.
How to assertively but un-aggressively reject someone who wants to meet you.
Another application of the engine would be that a line manager in a company who is confronted by applications from ‘n’ subordinates beneath that line manager where that manager does not want to offend any of the subordinates who may feel that they have a valid reason for taking that line manager’s time. On the other hand the hard pressed line manager just doesn’t have enough hours in the day to meet everyone and yet still do his or her work. So once again, the ability to get in front of that manager may indeed merely be a lottery, or some form of random selection.
Thus as the director of one extremely large UK insurance broker (Towergate; ‘Europe's largest independently owned insurance intermediary turning over more than £2 billion of gross written premium across our companies.’) has said to me, that the GoBetween engine would enable the line manager to make rational, carefully considered decisions as to who they should meet and who they shouldn’t – and that this would be invaluable. Or looked at from a different perspective, the subordinate is going to have to ‘sell’ to the manager – online – why that manager should allocate some of their time to meet them.
I mentioned earlier that a simple question and answer facility really is insufficient for the task and therefore a number of unique facets are being engineered into the Gobetween Ltd engine.
A few USPs of the Gobetween Ltd engine
One unique aspect, although I’ve no doubt it will be copied in the not too distant future is the facility for the potential investor to ask subsidiary questions or new question sets of the entrepreneur. The difficulty of course for an existing investor who is investing in a market sector that they are unfamiliar with is one of ego. By this I mean they don’t wish to reveal to the entrepreneur that they don’t understand much about the market the entrepreneur operates in.
Moreover the enlightened investor probably takes the view that ideally, a meeting should be about making decisions rather than exchanging information because – in the digital age – the core information can be requested and received without the tedium and time consuming nature of a face-to-face meeting.
Therefore, ideally they would like to be able to build dynamically an online fresh and supplementary questionnaire comprising of questions specific to that market sector.
For illustration let’s consider the pharmaceuticals industry. This ‘industry-ignorance’ problem is solved quite simply. At random, an industry-specific expert and potential investor in a specific market sector will generate their own questions without the need of assistance from us or indeed anyone else. Those questions become the copyright property of GoBetween. Those questions then enter a user library segmented and searchable by market sector. Thus over a period of time a number of questions having been raised by experts in the pharmaceutical industry which will be accessible by the industry-ignorant investor. Thus they construct their own customised questionnaire, without revealing any ignorance on their part.
At this particular point of course, the two parties have not met each other because the investor is looking to establish a minimum level of congruency before they allocate some of their precious time to the meeting.
The next level of sophistication overcomes the particular difficulty involved with general questions where the value or weight given to any question and answer is equal – when it shouldn’t be!
If you stop to think about it some questions and answers are more important in the overall scheme of things than others – and yet curiously with most online questionnaires in most situations, equal weight is given to every question being asked. To give you an example, let’s assume with a different application of a Gobetween Ltd engine, recruitment.
A logical solution to a common judgement error
Consider a franchised car dealership looking to recruit an additional car salesman.
There’s an online questionnaire with numerous questions and one of those questions asked the applicant whether they had five years of continuous UK driving experience without a conviction. Quite a reasonable question you’d think. And indeed it is a reasonable question – but it is the response that can be problematic.
Envisage for a moment that our applicant is utterly honest. He answers honestly re all the questions and pauses at the one regarding the five years experience. He only has 4 yrs and 11 months of driving experience. By telling the truth on this question, he eliminates himself from being considered for an interview. If he answers non-truthfully, that is to say he ticks the box for 5 years, then he has already demonstrated to himself, let alone anyone else, his ability to compromise on the truth. And indeed he may be found out.
The elegant way of overcoming this difficulty is to have a sliding scale of the value of this question in relation to the other questions, of if you like the value (or to use the semi-technical term, utility (http://en.wikipedia.org/wiki/Utility#Expected_utility) of this answer, compared to other answers. Thus to return to the employment aspect, that I mentioned earlier, the way to solve this is for all of the questions to have a sliding scale of importance as seen by the employer. We’ll say for the sake of argument that it’s three levels:
1. ‘very important’
2. ‘marginally important’
3. ‘not very important’
Or it could be numerically ‘1 – 5’ with 5 being the most important.
So in the Gobetween Ltd engine the importance of each question and answer is given a variable. So in this context maybe the five years is ranked as ‘marginally important’ whereas of course, any question regarding whether the applicant did or didn’t have a drink driving conviction would be given a ‘very important’ rating. Thus by answering truthfully, that he didn’t yet have five years, but only had four years and 11 months, and as the sliding scale rated this as only being of marginal importance, our truthful applicant gains his rightful place interview list. Voila!
And then . . .
It becomes possible for the investor to apply a series of ‘what ifs’ and this facility I believe is unique regarding all of the matching services which are online between venture capitalists and entrepreneurs and business angels and entrepreneurs. It’s a level of sophistication and usefulness that I don’t think is currently available elsewhere. A full discussion of this is beyond the scope of this document.
There are other tools embedded in the system which have yet to be revealed and are also beyond the scope of this document.
Free for entrepreneurs
It’s worth pointing out that unlike many other marriage brokers of this type, we do not charge the entrepreneur for registering their investment.
Our process is transparently not a method of generating work for consultants who, as one goes further and further into the other investment-marriage sites will find that it has become bait in order to help unemployed consultants to work with entrepreneurs who can’t afford to employ them. This is achieved through the implication that the consultant will be able to polish up a business plan or advise on face-to-face meetings and so on.
We completely avoid this rather, we feel, immoral approach.
To go direct to GoBetween, click here: http://www.go-between.co.uk/
