I look at raising money as a necessity for most fast-growing tech businesses. The truth is that generally you need to move faster in the world of technology than you do in most other industries and it is normally not possible to do this organically.

Raising money can help a business to accelerate its progress and take advantage of being early into a market. And it shouldn’t just provide an injection of cash, although this is clearly the main benefit – a good investor should also provide additional value to the business in terms of support, guidance and connections.

My advice when raising money is to raise more money than you need and also to raise it from the right people. Raising money is time consuming and financial projections are generally too optimistic and it’s for these reasons I’d try to raise more money than you think you need, assuming it’s available.

At MessageLabs we raised $30M from US based investors but only about half this amount was built into our ambitious expansion plans and associated cash projections – we didn’t know how we were going to use the rest of it but we were certainly pleased we took it when we did. We raised the money for MessageLabs in 2000, after only 18 months, but there was such momentum in the business and the   overall market for any Internet-based business that we were able to achieve a great valuation and choose from a long line of VC’s. It then turned out that it took a lot longer and cost more than we had expected to scale the business globally. One of the reasons for this was that we made our share of misteps along the way – one of which was an over-reliance on channel partners to sell the service that didn’t work so well when it comes to selling a SaaS service and another was that we needed to completely rethink the architecture of our service in the face of the huge growth in email volumes we were processing. But, most importantly, it’s just a reality of life that things generally take longer and cost more than you imagine they will.

A common subject for discussion among both governments and investors is how to create the right environment to produce more entrepreneurs.  Last month, we saw Cameron launch ‘Tech City” in London. At about the same time, we had the NESTA report suggesting that Europe is less dynamic than the US, meaning it’s more difficult for new, innovative, companies to penetrate the established order.

Everybody knows that entrepreneurs like to think of new things and set up ventures to take them to market.  These early stage, high growth businesses are the main driver of economic growth. Despite this fact, there are very few places in the world that actually make it easy for an entrepreneur to start a company and go on to build it into a true global success story. This says to me that it is clearly very difficult to get the formula right.

To my mind, there are four main ingredients to create an ideal entrepreneurial environment:

Talent + Funding + Attitude + Government

Let’s take each one at a time:

Talent

Clearly, you need to have talented people to start and grow successful companies. This includes the talent and imagination to think of new ideas and better ways of doing things and also the talent to take on risk and turn those ideas into a successful business. I think some of this you are born with and is then further developed by working with other great entrepreneurs or by going ahead setting up a business and learning from the experience.

Funding

After several requests, I’ve decided to write  down my ‘lessons learnt’ that I have talked about in various presentations over the last couple of years. After 17 years as an entrepreneur, having founded 4 businesses, there are so many things that I have learnt along the way and I have tried to distil them down to a top 10 based on feedback and what I think are the most important.

No. 1 – Instinct + conviction + luck can be a powerful thing

You have to back your instincts. People will always tell you why you shouldn’t do something often because they’re more used to the slow moving world of large companies or are just afraid of change. Plus, when you have a really ground-breaking idea there are no reference points for what you’re proposing and that can make people uncomfortable.

Most people think in terms of small, iterative steps away from the existing order of things; really good ideas often propose a radical shift that has never been seen before. I bet that when Henry Ford started to talk about the motorcar everyone would have been much more comfortable talking about how to breed horses better and most probably thought old Henry was barking mad. But his idea didn’t do too badly! I’m not saying you should ignore all the feedback you get but I certainly wouldn’t be too worried about some negative feedback – many people just can’t get their heads around radical thinking. A fear of failure can also hinder your belief in your instincts. This reminds me of a quote from Bill Wilder, the American filmmaker:

Trust your own instinct. Your mistakes might as well be your own, instead of someone else’s.

What he is saying here (I think) is to trust your instincts rather than be persuaded to do something that you don’t believe in, and that if you make mistakes they may as well be your own so you can learn from them. There it too much fear of failure, especially in the UK, but failure can be an amazing learning experience that you can take into your next venture. Sometimes the stars don’t align but that doesn’t mean you should give up on your dreams. I have lived in New York for eight years and the Americans have a much better attitude towards failure where it is seen as part of the learning experience, which I completely agree with, and makes for a much more successful entrepreneurial environment.