In 2012 another 73 booksellers shut up shop – leaving us with a meagre 1,028 shops left in the UK. Some call this the evolution of retailing and the vanguard of the digital age in action. Others say “just look at our high streets” to see that digital commerce is changing our retail landscape and social environment for the worse.

However, when we look deeper into the market we see that 39 new book shops opened in 2012 and indeed children’s bookshops are bucking the trend and seeing growth with only new stores opening last year. Brentwood’s Chicken & Frog is a prime example of a retailer understanding the markets and more importantly what it’s customers want.

Evolution, according Charles Darwin’s theory of natural selection, needs a balance of death with life to enable true growth and produce stronger, more sustainable outcomes. The key word here is “sustainable” – we can’t just stick with what has been, nor can we solely survive on new models – we need evolution but in a controlled and sustainable way. Just because the masses today are, like the lemming, heads towards the digital download cliff, we must not miss the creation of a new market being developed quietly in the shadows. New parents are marking their cards and demanding “proper” books for their off-spring – so how will today’s children attitudes to ‘real’ books be reflected when they are in adulthood ?

What is common across the economic cycles we have seen decade after decade, is that businesses who are ‘in tune’ with their customers and can adapt – they don’t have to change out of all recognition (anyone remember Dixons…bricks & mortar, to pure on-line to pure vanished !) nor do they have to wait for the inevitable Grim Reaper to arrive (the examples are endless, Comet, HMV, Jessops, etc).

The press is full of the woes hitting our well known high street brands but rarely do we get insight into the successful evolutions. Next is a brand worthy of note. A quick glance at their share price gives you an idea of their performance and their latest trading statement (January 2013) highlights that their blend of off and on-line channels (trading +1% and +11% respectively) is hitting the mark. Next worked out that customers like to buy when they want to buy. They like home delivery and they love being able to order on-line at 10pm and have goods delivered the very next day. But equally, Next recognised that in their market, its not all about ‘on-line’ – customers want to ‘try on’ and view, touch & feel garments in store but they also want the breadth of styles, sizes and colours provided by an effective on-line ‘long-tail’ offering.

So the challenge to any business in the UK today is not whether you are on-line or off-line nor if you should or shouldn’t evolve the way of you competitors – the challenge is whether you know your customers, can understand their changing needs & demands and move quickly enough to stay ahead of your competitors.

For more information on Stone Ventures, please visit our website or join our Linked In group.

How can SMEs have a viable finance team without the dedicated resources for hiring talent?

For many SMEs, the hiring of FD-level talent is a challenge and can often prove too expensive.

Not only is there the time and difficulty in searching for the right candidate, but businesses will often have to offer a highly competitive package to attract the top-level finance talent required to help deliver business success.

In addition to FD-level talent, SMEs will also require a dedicated finance department which can handle the entire spectrum of financial support services.

So, the challenge is posed for any entrepreneur…how can you have a viable finance team without the dedicated resources for hiring talent?

One option is to outsource the finance function – either in part or in full. Dependant on the nature of the business this can sometimes prove to be a more cost-effective approach.

Many SMEs structure their finance department in such a way that they have a core in-house finance team to deal with day-to-day accounting, whilst outsourcing at FD-level on a part-time or ad-hoc basis, to assist with higher level issues, commercial analysis and strategic financial planning, etc.

This can particularly work well for SMEs if the requirement for FD-level talent does not warrant a full time hire. And with a number of businesses providing hubs of highly experienced FD-level talent who can be ‘hired’ out to SMEs on day-rates, it can be a quick and easy process to pioneer.

There are, however, a number of drawbacks to outsourcing the finance function. Most notably the issue of control – business owners will be unable to manage the ‘hired’ team in the same way they would in-house employees.

Without a day-to-day physical presence in the office, there will also be challenges around communication and the ability to get matters dealt with immediately. The remote location of the ‘hired’ team will often mean that questions won’t get answered straight away, and this is likely to be compounded where the ‘hired’ team have other client commitments which need to be balanced.

In addition, your accounting records are, by nature, a sensitive subject. When providing access to an outsider, you let loose insider knowledge on one of the most valuable parts of the company.

So looking at the pros and cons of outsourcing your accounting functions, particularly at FD-level, which way do you lean? Let us know what you think…

Can You Secure Funding For Anything ?

Now, as private business investors we’ve seen some “interesting” business plans and don’t get me wrong – what some call bonkers others see as gaps in the market. Take Wonga as an example, upon reading the original business plan some potential investors would, no doubt, have raised an eyebrow or two…

1) build a database of millions of people

2) loan them tiny amounts of money

3) charge them 3000% APR

4) expect 50% to default on repayment

5) exit

Fast forward several years and Wonga own 90% of bank transfers on a daily basis in the UK and the public seem to just love throwing money at them.

Another great “market changing” start-up that is worthy of note has to be “Open Source Death Star“. With a seed funding goal of £20,000,000 and despite not stating if the business has been pre-approved by HMRC for SEIS, it has so far received pledges of £228,000 – probably about £227,999 more than most start up projects ! Seriously, you have to read the FAQs section – the SWOT analysis and forethought to potential investor questioning is very impressive.

This does, however, raise the question of how to get traction and eventually funding, to a business model that isn’t established, isn’t a variation or is so radical it scares 50% of the people you share it with. We see a lot of products that fit this criteria – most share some common founder/inventor observations;

– there is nothing like it on the market

– there is no competition (or at least none worthy of consideration)

– it is so mind-numbingly simple, g’zillions of people will want it

– financially, it almost completely risk free…

Whilst I write this with an element of tongue-in-cheek – this really is how 8/10 such conversations unfold. The disappointing part is that these 8/10 make investors so sceptical we have a habit of missing the real gems when they are presented. However, there is a silver lining in our death star…proof of concept. Even the wildest concept, most radical new product or business model can be developed and edged further down its path to launch. Often the pure fact an entrepreneur has sunk everything into taking their idea forward even a few steps speaks volume about their commitment and the learnings these steps can deliver are invaluable.

When presented with revolutionary businesses at seed stage, we always suggest there are some minimums any investor will expect to see;

i) founder, friends & family funding the first £50,000 to £100,000;

ii) the core drivers to the business have been identified and the business has made a start proving these – testing variations in a live market, building sample prototypes and testing market reactions, etc;

iii) limited reliance on external market influences, but a ‘something special’ to give the business the lift or traction it needs in the early days – a distributor, a first client, etc;

iv) realistic financial projections and an openness to tranched funding to allow the concept to be proved in a lower risk environment.

So if you have a Death Star or similar project – don’t despair – somewhere, far, far away, there is a Darth Vader out there just waiting to conquer the galaxy with you !

For more information on Stone Ventures, please visit our website or Linked In group.

StartUps News: NYTimes, Backstage and App gets 500 backers

New York Times to Incubate Start-Ups

The daily-printed American newspaper has begun inviting early-stage start-up companies to take part in four-month courses. These training residencies will focus mainly on mobile, social, video, analytics or e-commerce products.

The newspaper brand is joining other companies such as Google, Facebook and a number of universities who offer office-space and other valuable resources in exchange for collaboration opportunities and potential acquisition deals.

Backstage Acquires Sonicbids to Create LinkedIn for Musicians

While over 200million professionals are signed-up to networking site LinkedIn, entertainment news and advice publication, ‘Backstage’ are creating a similar website. It will allow musical creatives to get in touch, book gigs and seek advice from other industry professionals.

With this in mind, Backstage acquired Sonicbids, a website which aims to connect promoters with bands and musicians for $15m.

WalletKit Gets Backing from 500 Startups

WalletKit.com

An app has quickly acquired the backing of 500 other startup companies. ‘WalletKit’ allows businesses to create a platform similar to, but more advanced than Apple’s Passbook.

The advantage of using the WalletKit software over Passbook is that instead of just having loyalty cards and tickets, the companies will be able to make real-time changes and send out notifications like airport gate changes or newly available offers.

Stone Venture Partners is a private business investor, but we offer much more than just a cash injection. We’re interested on a practical level in helping businesses prosper. So we’ve developed our own unique style of ‘hands on’ investing. Because of the tangible input we have, the businesses we work with don’t think of us as merely an investor, remote and silent. They think of us as a business partner. Join our ‘Funding UK SME Businesses’ discussion group on LinkedIn and follow us on Twitter @StoneVPartners

US Prepares For Six-Strikes Online Piracy Program

A new program created with the music and film industries alongside some of the biggest internet firms and the US Government is soon to be unveiled.

With the aim of rooting out online piracy, the program named ‘six-strikes’ will be voluntary on the part of the Internet provider.

The first and second ‘strikes’ for shares of pirated content would be send warnings. The third and fourth would force the user to go to a specific webpage to acknowledge the threat. For the fifth and sixth offences, your internet provider will be able to reduce your download speed to just above that of a dial-up connection and will cost $35 to review.

The new initiative has received a mixed feedback, but even activists on the side of Internet freedom are supportive. They say it’s not as bad as the Stop Online Piracy Act (SOPA) which failed governmental approval.

The six-strike program looks to be more of a soft-handed deterrent to discourage illegal sharing, and if it gets a wide acceptance, it could be the way forward.

What do you think? Are you in favour of this new rule or would you prefer a total block on all sharing of pirated material? Let us know what you think via the comments below or by mentioning @StoneVPartners on Twitter.

US Venture Capital Funding Down in 2012

According to a report by PricewaterhouseCoopers and the National Venture Capital Association, start-up companies in America found it harder to secure funding last year.

Internet companies, which account for around a quarter of all VC backing, received $6.7 billion, which is a reduction of 5% from the previous year.

This isn’t all bad, of course. 2011 was a record year and 2012 had the second highest annual investment in Internet companies since 2001.

These reductions could have been a result of the economic uncertainty, including the fiscal cliff negotiations, which went right up to the deadline, as well as the US elections causing unrest and concern over pretty much every major issue in the country. Will the new super-fast internet enables Google Fiber communities in Kansas City (trial locations) bring a new generation of start-ups who can now use the new tech to boost their projects?

Have you seen a difference here in the UK? If you’re an investor, did you see any difference from last year and will it affect your projects in 2013? Let us know in the comments below

Adapt or Die. Why Retail Icons Go Broke

Did you know that Kodak invented the first digital camera in 1975 but didn’t release it for fears of damaging the film industry?

During the 1980s and 90s, physical stores were doing well, full of music-lovers and people just going there to listen to the latest releases. I remember when you could hand a CD to the sales assistant and they’d direct you to a pair of headphones.

That all changed with online streaming, Amazon, iTunes, LoveFilm and illegal downloads.

Shops like Blockbuster and HMV, who have both called in the administrators, failed to adapt to changing demands. Even Amazon are trying to compete with downloadable music stores by offering free mp3 formats when a physical CD is purchased.

In a report to the BBC, Paul Smernicki, Director of Digital at Universal UK, said “The CD is definitely not dead. We’ll see that format decline in terms of its value to the overall business but I certainly don’t expect it to completely vanish, certainly not in my lifetime.” One of his biggest focuses will now be online streaming.

Blockbuster failed to adopt online film renting until it was too late and the competition was already saturating the market. LoveFilm, one of the most successful online TV and film services, gained a rapidly growing customer base by offering their online service via a number of devices including, Xbox, PlayStation 3, iPad, Wii U, laptops, PCs and Macs across UK, Germany, Denmark, Sweden and Norway. In 2011, Amazon, who owned 32% of the service took full control and have pushed the service out on their products, including their own tablet, the Kindle Fire.

The ‘adapt or die’ mantra applies to all companies. If you’re not online, sort out your website today. If your brand isn’t using social media, then sign up and get Tweeting.

The competition is hoping you don’t keep up with the industry developments and new technology. They’re quite happy for you to miss out on what the people want. Your customers are more than eager to tell you what they want. You just have to listen.

Join us on LinkedIn to discuss start-ups, venture capitalist opportunities and start-up industries.

Could Kansas City Be The Next Silicon Valley?

Since Google Fiber installed super-fast internet as a trial for the rest of the country, tech-lovers and start-up companies have been flocking to the nicknamed ‘Silicon Prairie’.

The new fibre-optic network boasts speeds of up to a gigabyte-per-second, which is a huge step forward on the average speed of around 10mbps.

These advanced capabilities are enabling the start-up companies to handle large files, remove buffering issues and allow high quality live conferencing, all of which can be used in working on projects remotely and crowd-sourcing video and information.

One such project using the high-capacity network is SightDeck, which provides a high definition telepresence along with the use of a drop screen and infrared technology, which allows up to four people, all in different locations to appear in the same room and operate background graphics by touch.

Would a faster internet help your start-up? What are the main technological issues you face? Let us know your opinion via the comments below or in our LinkedIn discussion group.

Stone Venture Partners – The Blog

We are a private business investor, but we offer much more than just a cash injection.

The two strangers who decided to go into business together

The End of Books ? The Burning Truth