Like a Virgin: Secrets They Won't Teach You at Business School

Q: If you were twenty-four today and were given a budget of $3,000 to start a business, what kind of business would you choose? What if the budget were around $25,000?

—Alex Bodislav, Romania

A: That’s an easy one. It would definitely be some kind of web-based business, and I’m not sure it would make a difference if I had $3,000 or $25,000 to start out. You can build a very decent website for very little money and the thought and creativity that you yourself put into it is free.

As I have said before, my career began in the late sixties with my first business venture, Student magazine. I started by selling it one issue at a time, and selling the advertising from my school phone booth. Then I moved on to music. The publishing and music industries are struggling today due to the changes brought about by the Internet-but where there’s upheaval there’s opportunity.

Look at how Apple has revolutionised the music industry with iTunes, its online music store, and the iPod.

I may have indirectly been responsible for iTunes and the iPod, which, ironically, ended up killing our music stores. Back one April Fool’s Day, I pulled the music industry’s leg. I pretended that I’d set up a giant computer in the UK, where I had stored every music track on every label and that I was about to launch a device called a ‘Music Box’ that music lovers could use to download any track, wherever they were. The headline in Music Week was ‘Branson’s Bombshell: The End of the Industry’. I had music moguls-including Chris Blackwell of Island Records-ringing me, begging me not to do it. At lunchtime, I announced that it was an April Fools. Interestingly, Warner Brothers didn’t realise this and spent six months trying (and failing to) catch up. Steve Jobs told me he too read the story and some years later thought, ‘why not give it a go?’ The moral of the story is, if you’re going to do an April Fool’s joke, follow up on it yourself. Anyway, such is the genius of Apple’s designs and their hold on the consumer that the company has taken the mobile phone market by storm with its ‘you gotta get one of these’ iPhones. Then it tackled the publishing world with the iPad.

A whole industry is growing up around designing apps-games, magazines and booking engines-for these devices. Successful app designers and publishers are already making a fortune, the way publishing and music moguls did in the sixties and seventies.

I have always been fascinated by all these forms of content-music, books, television and film. Virgin has invested in all of these industries, with mixed success. If I were reborn as a 24-year-old, I would look at this area for an ‘app-gap’-a gap in the market or an opportunity to shake up the leading players.

And today I would also think big: these days an entrepreneur faces few geographical boundaries to success. When I started Virgin, our projects were limited to the UK but the development of the Internet has shrunk the world to a more cosmopolitan, connected and accessible marketplace.

Q: What are the top three ways to find funding for a new business?

—Pavlina Stoyanova, Canada

A: The first, and probably most obvious, is to borrow from your family and friends. This is high-risk, for if things go wrong you can lose not only a business but also a friend or the friendship of a family member. However, for many entrepreneurs this is the fastest and only way to raise start-up funding.

Over the years I have been lucky in that my family has been able on a few occasions to help me in a small way. In 1966 I was living in my friend Jonny Gems’ parents’ basement off Edgware Road in London. We were broke and struggling to get Student magazine off the ground.

But one day my mum, Eve, brought us £100 in cash. She had found a necklace on the roadside and taken it to the police. When nobody had claimed it after three months, the police told her she could have it. She knew we were out of funds, so she sold the necklace and gave us the money. That £100 paid our bills and kept us going for months. That necklace saved our necks!

The second option is to apply for a bank loan. From the beginning I tried to build my businesses by relying on my own resources and some bank debt. This allowed me to control the lion’s share of the equity until I felt we had the stable platform we needed to attract outside investors. In Virgin’s early expansion days we often lurched close to collapse because I was so reluctant to bring in outside equity. I felt our limited capital kept us focused on finding the next great act, and ultimately this was a real contributing factor to our success.

Lastly, if the bank won’t lend you the money on the strength of your idea alone, you have to have the faith and conviction to borrow against whatever assets you have, such as a flat-or, if you are lucky as I was, a friend’s or relative’s assets.

In the early seventies, I was looking to purchase The Manor, the Oxfordshire country house that would become our first recording studio: the asking price was £30,000 and I had put up £2,500, which represented every penny I had in the world. Much to my amazement I had also managed to persuade the bank to lend me £20,000, which still left me £7,500 short. That is, until my dear old Aunt Joyce stepped in.

It was an amazingly generous and risky gesture, and one that I may not have accepted had I known that she had mortgaged her own house to provide the capital. I did, however, gratefully accept it and bought The Manor, which soon became home to our first hit, Mike Oldfield’s brilliant instrumental, Tubular Bells. Virgin grew quickly from those shaky beginnings to become a successful business, and I made sure I paid back Aunt Joyce her £7,500-with interest-as soon as I could!

There is, of course, another risk in accepting favours from family and friends, which, as any fan of The Godfather will know, is just what they might ask for in return. In my case, had she really wanted to push it, people might today be flying on ‘Aunty Joyce Airways’…