Alison has been asked to contribute a weekly diary of her experiences of starting a new business for newspaper Business 7.
Diary of a start-up - Week 1: An introduction to Safetray
By Alison Grieve on Mar 16, 10 09:16 AM
I have often wondered, when reading articles about such occurrences as housewives inventing devices for monitoring domestic energy consumption, how it is that somebody with absolutely no background in design or engineering can simply come up with an idea, have it manufactured and then bring it to market with lucrative rewards to follow.
Over the next few months I will be writing this diary to explain the ways in which I became that 'somebody' and to outline some of the pains and gains I experience along the way.Perhaps at this point I should introduce myself. My name is Alison Grieve, a 32 year old single mother of twin boys living in Edinburgh.
After ten years of clocking up sales and marketing experience in Manchester, Australia and London, working for companies such as the QS Network and Lexis Nexis, I returned home to have my boys in 2004.
I set up my events business, Sine Events, in 2006, fitting in what work I could (often working well into the night) whilst enjoying life with my boys.
In the summer of 2009, at an event I was managing for a network of international law firms, I watched in horror as a waitress lost control of a tray laden with champagne, spilling the contents all over the delegation's table of carefully placed name badges, smashed glass strewn across the venue just moments before the managing partner of the host firm was due to arrive.
Not a good look. But, as it transpired, an inspiring one.
Fast-forward a few months - I was sitting, munching my lunch in an office in Edinburgh when the idea struck me.
Why was there no support for service staff on the underside of trays?
An item used extensively throughout the hospitality industry, carrying not only glass items but also sometimes piping hot liquids, was completely unsafe.
And so it was, a few moments of silent brainstorming over such things as how a flip-flop attaches itself to a foot (daydreaming - I knew it would serve me well one day) and the Safetray concept was born.
The first thing I did was to call Fearsomengine.
I had seen them referred to in a number of articles about successful commercial products, such as Bladerunner, Uloop and Puffersphere, and had subsequently introduced myself at a networking event.
I was aware of a few product design companies at that time but Fearsomengine had the edge for me. They were young, dynamic, creating punchy intelligent designs and helping their clients to achieve considerable commercial success.
The meeting with Alan Suttie, founding director of Fearsomengine, was positive.
An old boss of mine used to say that the most important rule to be aware of when building business relationships was that 'people buy people'. That day, with non-disclosure agreements signed and witnessing Alan's eyes widen at the potential goldmine I'd outlined before him, I bought Alan.
He offered me three options: I could pay for their consultancy and retain all of the intellectual property; I could give them a percentage share of profits or I could enter into a joint venture agreement with them and hand over a percentage share of the company in its entirely.
I knew instinctively that a joint venture company was the right decision for me both financially and strategically but I would never, ever encourage anybody to hand over a chunk of their business -particularly one with such strong commercial potential - without giving considerable thought to what they are getting themselves into.
After phoning Jonathon Harris, editor of Young Company Finance, to ask him to recommend an appropriate law firm he pointed me in the direction of MBM Commercial. And so it began - a painful six months of legal negotiations to reach a deal that was both motivating for Fearsomengine but that left me with the level control appropriate to drive the company forward.
Although the percentage split was quickly established, the real difficultly lay in what our expectations were for what each party would bring to the table. It felt a bit like signing a pre-nuptial agreement - you have to continually focus on all the negatives rather the positives before you've even left the starting block.
Running in parallel to the legal negotiations was the work I put into being placed on Scottish Enterprise's High Growth Pipeline - a scheme established to provide advice, support and (for the lucky ones) funding opportunities.
I had originally thought that the process would be fairly straightforward. I was wrong. To get onto the pipeline you need to prove that you have export potential, that you won't be putting anyone out of a job in Scotland and that you have significant financial growth forecast.
The documents required to be compiled in order to enter the pipeline are extensive. I had to complete a full three-year forecast, a detailed business plan and had to be interviewed in a Dragons' Den style dissection of the business plan and our figures.
The challenge of detailing figures based entirely on an imagined future was not one that I had experienced before.
The research team at Scottish Enterprise were helpful in locating appropriate industry reports from sources such as Datamonitor and Mintel and provided a good foundation upon which to base my projections without sticking my hand in the air and plucking figures from the sky.
Although the process may have been a painful one, it did help me to gain a very clear idea of costs and timelines and highlighted the stages at which we would be most financially stretched.
Researching methods of easing early stage financial burdens, such as invoice financing through Bibby Financial, helped me to plan a realistic route through the gaping gaps we had forecast for the first six months of Safetray Products trading.
Finally, in December 2009, we were accepted onto the Growth Pipeline. The next stage was to gain the ever-allusive Innovation Support Grant - a grant available to high growth companies who develop some form of innovative product, process or service. Various forms, emails and stalker-esque behaviour later and we had our grant approved.
I am aware of the criticism that Scottish Enterprise have received regarding the allocation of such grants. I have given it some thought after going through the application process myself.
As a start-up in the current economic climate, there was absolutely no way that Safetray Products was going to receive any financial support from the bank.
Opening our bank account in the first place took a considerable amount of time and, even once opened, we were provided with no sensible way of accessing the £10,000 pot of money we immediately transferred into our account.
In fact, at the time of writing this we still haven't received the details of our digital or telephone banking which means that our only method of payment is to physically go into our branch to do a CHAPS transfer - with a charge of £24 for the privilege - or write a check. Anyway, I digress...
High-growth start-ups usually go hand-in-hand with high levels of risks. These are not risks the banks can immediately underwrite. Angels and venture capitalists might take those risks but not without taking a chunk of your business, sometimes with pretty aggressive terms attached, in return.
Scottish Enterprise can fill that gap in funding, making the difference between an innovation rocketing or nose-diving, but have got to justify every penny to the tax payer.
Innovation may be a risky area in which to invest, and it's well-documented whenever Scottish Enterprise make a boo-boo, but without them taking that (all-be-it bureaucratically) calculated risk many start-ups, including our own, could perish like seeds without water.
Now that I've bored you with a little of the legal and financial background I'll leave you for today but I'll return next time with details of the product itself, the initial stages of marketing and of how to keep a secret for six months while you wait for a patent to be registered.