The third and final feature from the Tech Trailblazers panel at IP Expo. The experts have already discussed the biggest issues new startups face and the pros and cons of taking on funding.

Now they consider what entrepreneurs should look for when choosing where to base their businesses, and move on to consider how much those startups should then concentrate on growth and whether outsourcing is a good option for those looking to run lean.

On the panel:

Steve O’Donnell – veteran CEO of numerous startups and tech analyst.

Hayley Connick – UK manager of Elance, Silicon Valley firm which connects startups with freelancers.

Tim Kay – KPMG startup evangelist.

Matt Pfeil – co-founder of DataStax, helping companies like Spotify harness the power of big data.

 

TK

There is right now a technology cluster in London which the government’s working very hard to promote, I believe in 2012 there were 2,500 businesses incorporated in the EC1 postcode. So really where you have a cluster of technology and creative companies you’re going to have a lot of talent, a lot of capital, a lot of opportunities.

We saw that happen in Cambridge in the ’80s and obviously Silicon Valley has been doing this a lot longer, and the culture is a lot more ingrained there but a great thing London has going for it is a lot of people around the world want to live here. It is an exciting place to live and its access to capital is excellent. So I think London really is well-positioned.

HC

I would think about what you actually need at this time. Are there certain talents you’re more likely to get in a big city? And how important is cost to you? It’s going to be more expensive to do it here than it is in Manchester, which also has a growing tech scene although clearly not anything quite like the size [of Tech City]. It’s a couple of hours on the train so how bad would that be?

I agree that if you’re somewhere with more activity there will be more opportunity but depending on the stage you’re at that might not be the most important thing.

SD

My view is that you need to be close to your customers, so if you build something very focused on certain sectors you need to be located close to them.

You have to think about where the money’s coming from. Because VCs are notoriously lazy – they don’t like going to board meetings and travelling long distances so they will be looking for local businesses they can work with because it makes them more efficient.

What’s really important is where are you going to get your staff? Where are you going to get the people who can write your code, who can develop your hardware, who can do whatever is required?

 

On the subject of hiring the right people, what advice would you give to an entrepreneur? And is outsourcing a realistic option?

SD

Hiring people can either cause chaos or it can cause massive growth.

Being CEO of an early-stage business is great. You have a tonne of freedom, but your freedom is constrained by how much cash you’ve got and how many people you’ve got. So sometimes you can’t afford to hire a great coder and you have to outsource. Or you might need to provide 24/7 support and you haven’t got enough people to make that possible.

But generally if it’s something affecting the customer you ought to do it internally, and if it’s something where you have intellectual property you want to go internally.

MP

Our internal mentality has been there’s different types of roles and some are good to outsource if they give you specific, almost one-off advice – lawyers are a good example. On the flip side if you look at someone like a software developer, they have a certain skillset, and I don’t want them working on four different projects simultaneously because they won’t be able to go deep on anything.

TK

One key bit of advice I learned the hard way is bad hires cost a lot more money than expensive hires. A big problem you have when you’re small is that small businesses get hit very hard by holidays and sickness because you can’t afford to have two people doing the same job. So if you’re not sure about someone, get rid of them very quickly. The bad hire will cost you a lot more.

 

So when you have your team in place, how do you go about generating revenue? And is that goal more important than growing quickly?

MP

You are looking for a repeatable, scalable set of practices that generate revenue. In the early days you have no clue what that is unless you’ve done it before. The early days are all about experimentation to figure out what is repeatable, what is scalable, what sticks against the wall.

Once you start to find those patterns, that’s when you’ll find ways to make it more efficient. You need to find the pattern before you can start to finesse it.

If you want to look at a success story which didn’t generate revenue but which was hugely successful, Instagram’s a great example. They focused all of their effort on attracting users and making it very easy to take pictures, applying cool filters to those and sharing them with friends. It sold for a billion dollars and had 13 employees.

They focused on the user experience. I will say the lack of revenue trend is much more prevalent in consumer plays than it is in enterprise or B2B plays, but it’s still there and I think just for increasing end users and their experience companies will say it’s a strategic investment.

SD

Don’t go running after the easy deals. Go after deals that are actually strategic.

There’s absolutely nothing wrong in taking on capital in the early days to build something. But when we’re talking about a decent amount of cash you need to have a very clear methodology behind what you’re doing with that money because it’s purely there to accelerate the business.