Tim Minshall organises great talks. This time a double-header of academic, Professor David Storey of Warwick Business School and a Senior Economist at Barclays, Julian Frankish. Like the Equity Fingerprint NESTA project, they were seeking a quantitative analysis. They decided to ask the question “Do Entrepreneurs Learn?”. They analysed the information recorded by Barclays on 6,800 new businesses customers started in three months of 2004 with three questions; previous experience, volatility of debit sales, exceeding bank overdraft limits. There is a lot of work behind the scenes to collect and analyse the data. The answer was a resounding “Not much”.
Afterwards I asked about clusters and had a very helpful discussion. Very few of the sample companies had more than five shareholders after two years. Perhaps we have a definition of a high-growth or Bonanza company as one which has more than five shareholders after one or at most two years. Funds such as VCs, VCTs and angel groups could be ranked as each being equivalent to five shareholders. If all shareholders were equal then it would be classified as a co-operative.
There are many different types of clusters but we are interested in a specific type of cluster which has the characteristic of sustainability. I suggest two types; clusters based on banking such as the City of London and those based on knowledge such as the Cambridge Cluster and Silicon Valley.
Bonanza companies in knowledge clusters are a rare breed and merit careful study. But now I understand why people do not study them. They are very specialised and the information is difficult and time consuming to collect. Perhaps we can attract the interest of a new arrival to WBS, Professor Stephen Roper.
All this helps to explain why programmes such as Dragon’s Den are fascinating to so many entrepreneurs. They break the golden rule of sharing the equity; something taken for granted in knowledge clusters such as Cambridge Cluster.
Then there is the question of luck. People are only lucky when they do well in an area which is not their vocation. So I would be lucky if I became a professor but I do not see success in business as luck. Academics who become professors are not lucky – just following their vocations – but when they cross over into the business world and do well they are lucky. But to do well, they need to form a cluster company and join the very small number of companies with more than five shareholders! Can a company become a professor? I am sure I can put a good team together!
Perhaps the next question for the WBS/Barclays team to ask – Do companies with >5 shareholders do better and grow faster than the average? We know that mentors increase the success of Prince’s Trust start-ups, but do grown up companies need people bound to a common purpose by equity to survive and grow? Because that appears to be the lesson from Silicon Valley and the Cambridge Cluster.
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