Week 9: Pitches: The Ugly

Date: 26-Jul-2014 Post in: Business , Startups By: Raj Dhonota

I have covered the ‘good’ and the ‘bad’ pitches in my previous post; now I’d like to write about the ugly side of what I have come across. If I’m honest, I had always suspected that there was an uglier (or darker) side to the start-up space, but listening and speaking to so many entrepreneurs, those suspicions have been more that proved – which is incredibly sad.

The start-up space and working within it is hugely satisfying because you come across so much creativity, enthusiasm and positivity from entrepreneurs. However, what has also become apparent is that many entrepreneurs have had bad experiences from people looking to take advantage of their relative lack of experience or they have been let down by people and organisations who have an obligation to help them succeed.

One of the ugly aspects of the start-up space inevitably relates to businesses seeking investment. Unfortunately, there are lots of people or businesses out there who offer to raise much needed finance to start ups in desperate need of it. The problem is that they, in reality, have no chance of raising the finance they promise whatsoever, but dupe desperate or inexperienced start-ups to part with money up front through pitching fees or arrangement fees. An incredibly high number of the entrepreneurs I speak to have suffered at the hands of these types of people.

Unsurprisingly, banks are also not far away from topping the list of organisations that fail entrepreneurs. Each day I hear stories of how banks, who have been tasked by the government to support businesses, have actually mistreated small businesses. The stories vary in extremity but the most ruthless example of a state owned bank failing a small business was with a lady entrepreneur who came to me for help. She had taken a loan out with her bank to start her business and given a personal guarantee. Unfortunately, along the way she, like many entrepreneurs, got her fingers burnt by people who took advantage of her inexperience to earn themselves a nice payday and this led to delays. Despite this she continued with her business and got it to a stage where she was ready to launch, albeit behind schedule. Unfortunately, in her attempt to keep her business going, she had not maintained the payments on her loan and the bank took steps to call in the loan. Despite being able to show interest from investors I introduced to secure the additional money this lady needed, and despite the fact that she settled the payment arrears, the bank decided to call in the loan “because the terms of the loan enabled them to do so”. They were not willing to consider the progress the business had made or the fact that she was in the process of raising the money she needed to take the business to the next stage. This lady now is in the devastating position of presently selling her home and moving into rented accommodation.

Other examples of the uglier side of the start-up industry include an entrepreneur on a low income being convinced he needed to pay someone £1300 to write a business plan to apply for a £7,000 loan from the government funded Start Up Loans scheme!

At times I really do find myself shaking my head in disbelief at some of the uglier stories I hear. I am just thankful that many of the entrepreneurs with these stories have been resilient enough to overcome these experiences.

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