Tell us about your experience here in Macedonia as a LEADER Project instructor. What do you think the participants learned from the program?

The biggest thing they learned is critical thinking and ways to structure their thoughts.  They were guided to look at the way they currently do business, or the way they intend to do business, in ways they have never really thought of before, but upon reflection make sense.  And it allows them – more than allows – it demands of them, to put numbers on things that before were just nebulous ideas.

What else can they learn or what should they look for to improve on their path to success?

They’ve learned that in order to raise money for their enterprises they need to tell a good story.  Many of them, when we had our first communication seminar, did not tell a good story, but through subsequent practice they got better and some of them became outstanding.  So the number one thing that I think that they can do is practice their story with their friends, with their family, until they have a chance to practice it with people who are in a position to actually give them money.

The second thing they learned is to look at their business currently, whether it’s a service or a product that they are offering, and really dig into their contribution margins. There are a number of people who have showed us spreadsheets of their products and services and they have started to think in the following way: this is my revenue, this my variable cost, this is my contribution margin, this is my break-even.  Many of them will have other products and services that they will add in the future and they should probably apply that model for those as well.

Do you think the participants are ready to compete, to enter a contest with another company?

One of the parts of the course had to do with sizing up the market and your competitors so they recognized there is competition.  I think they got a little bit more realistic about what their competition really looks like.  There can be competition not only for someone that has an identical product to yourself, but also competition from substitutes, meaning you don’t necessarily have to take an airplane someplace – you can go by train or by car.

Do they have what it takes to compete? The reality of new startups is that over 90 per cent of them will fail and that’s just the nature of new startups.  If you fear failure then people will be risk averse, they won’t take chances and you cut down on the amount of ingenuity, the amount of product development in this world.  So, they are as on a level of playing field as anybody else at this point who has got a thought, an inspiration, a goal and now a business plan.

You said in your lecture that capitalism is based on failure. Can this piece of wisdom be discouraging to people?

Yes, it can, especially when you know ahead of time that 90 per cent of new entrants are going to fail. No one goes into it saying, I am going to be one of those 90 per cent. They go into it saying, I am going to be one of the 10 per cent. But the fact of the matter is there is 90 per cent chance you will be one of those 90 per cent.  It can be discouraging and that can be a good thing if you have something that is not feasible.  If it’s discouraging and you haven’t even given it a start then it’s probable that you were not cut out to be an entrepreneur.  And that is not necessarily a bad thing.

What is the difference between the North American entrepreneur and the SE Europe or Macedonian entrepreneur? What can we learn from Canada about doing business and driving your idea forward?

I think that there are maybe two distinguishing features.  The first would be access to capital. If you take a look at the North American market, there really are many different sources to access capital and we’ve gone through one dot-com boom in the late 90’s/early 2000’s that demonstrated how easy it was to get access to capital for many companies and it almost seems like we are going to go through it again.  That access to easy capital actually spurs optimism and it spurs risk taking, and you don’t really find that anywhere else in the world to that degree.  Macedonia does not have that type of infrastructure in place nor that history. So that’s number one.

The second difference is, you have people in Macedonia that might be coming from a background that isn’t necessarily wealth but they may have an idea for a company and they are going to give it a shot.  In North American you also have a number of people from backgrounds with financial means where they start with substantial amounts of capital behind them and then they say they are going to give it a shot. The difference between those is that if you don’t have sufficient means you don’t have long staying power.  You might have a great idea, but your cash could run out early.  A large initial cash cushion can sustain you for a longer period of time. The market is more forgiving for somebody who has more means behind them.

You could probably say that you will get more out of ideas that have a larger initial cash pile behind them, or you could argue that because people don’t have cash behind them they will know rather quickly if their idea is a success and this allows them to turn over ideas faster.  I think the jury is out right now about which type of environment is better.  One may be seen as a colossal waste of resources and the other may be seen as a more efficient use of resources.

Regarding the financial infrastructure of Macedonia, there are the banks and some financial services. What sort of financial tools and expertise is needed to increase the likelihood that entrepreneurs have better access to capital?

I’ve heard it said that nowhere is it easier for somebody to become a millionaire now than at any other point in history.  The reason being is you don’t have to sell a million dollar product to somebody to make it rich, you just have to sell a million products at a dollar each and the Internet allows people to do that. Whether your company is based here or in the US or anywhere else in the world, the Internet makes it a level playing ground and now it just comes down to having a service or a product that appeals to mass-market audiences.

It could be as simple as a kid who sold advertizing on a web page of his for one dollar per pixel and his page size was a thousand times a thousand pixels and so he made a million dollars immediately.  That really was quite impressive. That was just a fad that caught on.  It could also be as simple as somebody selling on the equivalent of eBay a piece of toast that looks like it has the likeness of Jesus Christ and that went for I think several thousand dollars and somebody ended up wanting to buy that.

So there is no shortage of global capital, it is just a question of how do you get your idea out to people so you have some type of tsunami of crowd interest.  That could just be a blog, a tweet, a Facebook post, a news item – something that catches and just goes viral.  But this type of viral marketing for the Internet anyone can tap.

Any advice you would like to give to entrepreneurs in Macedonia?

I think regardless of the product or the service that you have there are two things that are very important. The first is the crafting of your story.  If you do not have a 30 second elevator pitch that captivates someone’s attention then you will be hard pressed to garner interest in your business.  That’s extremely important as you embark upon fundraising and that story is only going to get more and more important in additional fundraising rounds.

The second is to have a really good understanding of what it is that your product or service does for your end customer.  If this customer benefit is evident and you fully grasp your contribution margins, then you are actually playing in a game in which you understand two of the biggest impediments to the progress of any new business.

Would you encourage people in Macedonia who believe they have a product or service that can go global, to reach out to investors from abroad.

Any type of capital nowadays is fully fungible into pretty much any type of currency.  The challenge is this:  If you reach out blindly to somebody and say, “Hey do you want to invest in my company?” that’s the equivalent of begging.  There has to be some type of tie-in, or some hook or a rationale as to why the investor really would want to invest with you.  Most people say they have a great idea without any thought as to whether the investor would think it is a great idea.

I think if there are synergies to be had between your company and the provider of capital then you dramatically increase the probability of getting funding.  Let me give you an example:  In our class we had a gentleman who had a business plan to plant a certain berry tree in Macedonia.  Now I don’t know what the market is for those berries around the world, but I have bought chocolate covered berries.  To the extent that there is a chocolate company that is looking to diversify their product line, perhaps the berry plant entrepreneur should approach them with a proposal where he supplies the berries for them to wrap in chocolate.  The chocolate maker and he could work together to make sure that he can plant sufficient amounts of trees for them.  That seems like a very natural flow of capital from the chocolate company to the berry plant entrepreneur.  It’s definitely more targeted than, “Oh I heard you have money, can I have some?”

John Lazarou graduated from The University of Toronto in Electrical Engineering and The University of Western Ontario with a Master’s in Business Administration. He has more than twenty years experience in money market marketing, credit derivative marketing, and equity derivative structuring. John provided advice and risk hedging solutions to hedge funds, Governments, and global banks.

John Lazarou has Macedonian heritage and he voluteered to come to Macedonia for the first time as a LEADER Project Instructor and was delighted with his stay here and for the chance to interact through education with entrepreneurs and young professionals.