Helping entrepreneurs to overcome the challenges of scaling a business is something BOOST&Co knows all about – but so too does James Sutcliffe, who established The Founding Network to help business owners collaborate and learn from each other as their companies grow.

Founded only 18 months ago, the network has followed a similar trajectory to the innovative SMEs that constitute its membership: the organisation has grown rapidly, attracting influential individuals from the outset.

An experienced marketer, Sutcliffe noticed that there was a lack of support for business owners and founders, so he capitalised on his existing links with reputable brands and individuals to create a business network that has a genuine connection with its community and maintains a focus on learning and development.

Amid the Covid-19 pandemic, supporting SMEs is more important than ever, so we spoke to him about the challenges that founders are currently facing and the roles that our respective organisations have to play in helping their businesses to succeed.

Why did you create The Founding Network?

I was working for The Marketing Society, which brings together marketers from some of the world’s biggest brands, such as Disney, Coca-Cola and Starbucks. I loved the concept but realised that it would have even more impact if, rather than focusing on individual career development, it worked to bring together the people who truly care about their businesses and their industries as a whole – the founders of SMEs.  

Our key point of interest is the stage at which a firm goes from a start-up venture, where it has proven the need for its product or service but is still managing supply and demand, to a fully fledged commercial entity that wants to commit to funding and investment rounds.

As soon as a business decides to scale, founders who had just a few issues to deal with find themselves juggling funding, stakeholder management, team management, compliance and legal issues. The list is endless, so that creates a great opportunity for us to offer support.

What type of businesses do you work with?

We work with founders who have decided to scale their businesses. We’re not sector-specific – we have members working across FMCG, retail, finance and tech. This feeds into our mission of creating a diverse network and also helps to ensure that we have a wide range of knowledge and expertise.

We see ourselves as a circle of mentors, so no matter what challenges you face, there will be someone with the experience to give you practical advice. We realise that you can’t be an expert in everything: that’s why we have created a community that is. 

How do you maintain a high-quality membership?

It isn’t the easiest task, but we have a stringent application process. We’ve also launched a Founding Membership, inviting just 50 companies to join the network at this elite level. This ensures that every member covers an area of business that we haven’t considered before.

What happens if you lack expertise in specific areas?

This is when we work with bigger brands that have experience in-house. Kevin Brennan, the former chief executive of Quorn Foods, ran a session on leadership and Football Manager delivered a session on social media. We encourage our founders to bring along colleagues who are responsible for the relevant function, so that they benefit as well.

We have an event coming up with Snapchat, too, so we’re imparting expertise from some of the biggest players, even though we’re relatively new ourselves.

What do your masterclasses entail?

These are larger sessions that focus on specific functions, and we often hear from the founders in our network. Kuba Wieczorek, the co-founder of Eve mattresses and one of the network’s first members, has delivered sessions on how the business scaled so quickly and how branding played a significant role in that.

Each member has industry knowledge, but the community is here to support founders in regard to every aspect of running a business.

Despite the network’s diversity, do founders share similar challenges?

Many founders think their product is so niche that their problems are unique, but as soon as they attend one of our events, their eyes are opened. That’s why we launched the network – a lot of founders may be unaware that others share their struggles, until they start talking to them. 

We recently set up TFN Connects, where we ask our members to describe the challenges they are facing, so we can arrange one-to-one conversations with other members who may be able to help. By deep-diving into each other’s businesses, no matter what the industry, founders can get practical advice and personalised insights.

Has this changed since Covid-19?

If anything, it has improved. We launched these conversations because lockdown prevented us from staging physical events, but they have become a central part of the business. Before Covid-19, we were concentrated around London and Manchester, so although we called ourselves a network, it was more like two distinct groups.

Taking a digital-first approach means that we’ve been able to accept members from across the UK, as well as Dubai, Australia and the US – so when we connect founders, they’re talking to a genuine expert, rather than the most knowledgeable of our members who happens to be five miles down the road.

What trends are you seeing around funding?

We see barriers to accessing funding, whether founders have exited businesses previously or whether they are going through their first funding round. There is a widening gap between what the banks are willing to offer and what our members need, so it’s great to see more options coming to the market, whether that be peer-to-peer lending, crowdfunding or private debt. However, these new funding mechanisms bring complications.

There’s the age-old decision of whether to go down the equity investment route or the debt route, but the trouble is that there are a lot of success stories where a business has raised capital through equity investment and has grown quickly to IPO. This means that founders closing their seed rounds believe that raising more investment is what they should be doing, before they even consider taking on debt instead.

Both options will be unsuitable for different types of businesses, for different reasons. The key thing is that we’re having these conversations and encouraging business owners to look beyond what they think is their only option.

Is the current economic climate exacerbating these difficulties?

As the government’s Covid-19 grants, loans and tax breaks begin to come to an end, we are seeing more and more founders realising that they need to figure out longer-term financial solutions. The banks are not flexible enough to fulfil their needs, and even traditional investors can struggle, because they are often investing in multiple companies at the same time, limiting their capacity for a tailored approach. 

We’ve actually seen more high-net-worth individuals lending – those who would not, traditionally, have invested in various businesses. Now they’re taking a much more entrepreneurial approach and are looking at funding on a case-by-case basis, offering much more flexibility than traditional lenders. Likewise, alternative lenders who are flexible will be a real winner for founders who are beginning to consider their long-term needs.

Do the government’s recovery schemes carry negative connotations?

I think it’s the same in most industries, and with most things: people don’t like to be seen to be asking for help. It’s a massive jump to compare this with mental health, but it’s a similar concept – we all know that the support is there and that it’s OK to ask for it, but there’s a perceived stigma around doing so.

We find that when one founder makes use of a scheme and talks about how it is working for their firm, others are more likely to be receptive to it. But that works both ways: there are many business owners who have seen bigger and more qualified firms rejected by the banks for these initiatives, so they assume that they will be, too.

What are the broader challenges for business in the wake of Covid-19?

These differ for each sector. If we look at FMCG, for example, there are businesses that have worked hard to get their products into the major supermarkets, but with shoppers returning in smaller numbers and more choosing to order groceries online, there is a much lower frequency of impulse purchases. In addition, when shoppers order online, they tend to stick to the brands that they already know and trust. 

That being said, the more agile brands have switched to a direct-to-consumer model that gives them access to more customer data than they’ve ever had before, so they’re building an additional channel to engage with consumers. But the difficulty in moving online is that businesses need additional cyber-security.

Almost one-third of our founders have been hacked or have experienced some type of online scam since the start of the pandemic. If the government is going to promote digitalisation, it also needs to be responsible for developing a secure online economy, and we’re not there yet.

Finally, is there any light at the end of the tunnel?

Digitalisation poses challenges, but it also presents smaller businesses with excellent opportunities for expansion. With more transactions taking place online and physical infrastructure proving to be less important than we thought, it’s much easier for companies to expand internationally and grow their customer base, especially if they are taking advantage of a direct-to-consumer model. Brexit could pose its own threat to this growth if tariffs are changed overnight, so businesses will need to assess that risk.

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