Branson's Next Big Bet
Richard Branson, entrepreneurial icon, shares his freshest ideas - like a Virgin superfuel that will let us jet around the world guilt-free.
(Business 2.0 Magazine) -- Business 2.0 Magazine has identified the Best business ideas in the world. This is the first in a series that will appear here throughout the next month. Check back daily for updates.
Where others see disaster, Richard Branson sees opportunity. The founder of Virgin Group has business interests on six continents, including airlines, express trains, and limousine services, so his company's contribution to global warming worries him.
But instead of wringing his hands, Branson sees a new fortune to be made in reinventing the fuel business, much the way he's made over air travel, credit cards, health care, and more.
He's investing in conventional ideas like ethanol plants and solar power, but he's also developing a formula for a new ultraclean fuel that can power his jets as well as cars and trucks.
What we love about Branson is that he's part Warren Buffett, part P.T. Barnum. Not every idea he's dreamed up has panned out: Virgin Cola bombed in the United States, and the irresistibly named Virgin Brides retail chain is down to one lonely store in Manchester, England.
Still, Branson remains an unflappable inventor and promoter. On a brief landing in the States between launching a cell-phone carrier in South Africa and promoting a rock concert in Toronto, he sat down with Business 2.0 to explain how he keeps coming up with new ideas.
What's the next big thing?
I used to be skeptical of global warming, but now I'm absolutely convinced that the world is spiraling out of control. CO2 is like a bushfire that gets bigger and bigger every year.
All of us who are in a position to do something about it must do something about it. Because Virgin is involved with planes and trains, we have even more responsibility. So we've put aside quite a lot of money to invest in alternative fuels. Over the next four years, we'll invest something like $1 billion in alternative fuels.
The money is going into a whole series of different things like building ethanol plants. We're looking into wind power. We're looking into solar. And we're also actually working on developing a new kind of fuel, which I can't say much about but which is quite exciting.
So we'll be pumping Virgin Fuel?
It will be called Virgin Fuel, yes! It's not ethanol-based as such, but it'll be a clean fuel. And if we've got it right, it could be a very important breakthrough. We think this fuel will work in cars and trucks and trains within a year. And we're hoping that it might work in commercial jet engines within five years, possibly sooner. So it will be able to work in Virgin Atlantic planes one day.
But it's not just that we thought we should do this to try to save the world and the thousands of species that could die if we don't do it. Unless you can generate cash, it's not going to be successful. With oil prices above $70 a barrel, people want to save on the cost of fuel, and so alternative fuels suddenly make business sense.
Some of your latest ventures, like an Indian comics and animation studio and the Virgin Galactic spaceship line, seem far afield of what you've done in the past. How do you decide what to invest in next?
I honestly invest in things that interest me or in things that I want. The reason I moved into the airline business was that I flew a lot of other airlines and I hated the experience. I felt we could create an airline that people wanted to fly, and that turned into Virgin Atlantic Airways.
But we made it with a difference: We straightaway started with sleeper seats. We put stand-up bars in the plane. We introduced, years before anyone else, seat-back videos for economy and business class, and we had manicurists and masseuses on the planes.
Manicurists. Where'd you get that idea?
That I got from my wife's manicurist. People come to me or e-mail me every day with great ideas. I get hundreds of them - you can send me one on www.virgin.com. I listen a lot, and eventually something sticks.
And why space travel now?
NASA has always looked at it as a government-run research program - never thinking of it as human beings, individuals wanting to go into space. We think there are millions of people who'd love to go into space, and why shouldn't they have that experience?
Ten years ago I thought, "Right, how can Virgin be the first company to send people into space commercially?" Then we went out talking to every single person in the field, so that we'd learn the ins and outs of space travel. By the time Burt Rutan had his breakthrough, we were there. We were the first on the scene.
Likewise with clean fuels; it was exactly the same. We went out and we registered Virgin Fuels, we went out and talked to every scientist developing clean fuels. And when there were breakthroughs, we were the first on the scene. So we immerse ourselves in things we are interested in and make sure that nobody gets there before us.
Having an idea is one thing. Having a successful business is another. With more than 200 startups under your belt, what advice would you give entrepreneurs on making an idea stick?
I made and learned from lots of mistakes. In the end, the key is willpower. It's just really hard work to make sure you can keep paying the bills. But I do think one can have too much respect for bank managers.
When we entered the airline business, the very first plane Boeing (Charts) sent over to us ran into a bunch of birds and lost an engine. Because it hadn't been delivered yet, the insurance didn't cover that, so we were $1.5 million down before we flew our first flight, which took the whole Virgin Group beyond its overdraft facility.
Two days later, as I returned from the inaugural flight, our bank manager was sitting on my doorstep and telling me that he's going to foreclose on the whole business if we don't get the money in by Monday - and that was a Friday.
So I had to scurry around like mad over the weekend to try to get enough money to cover what I owed, which I just managed to do. For most people, bank managers are a bit like doctors - they never leave them because they have too much respect for them.
By daring to be disrespectful, we went from having a $5 million overdraft facility to having a $40 million overdraft facility with a different bank by the end of that week. Where one bank was willing to ruin us based on the assets we had, another bank was willing to give us more credit.
There is a very, very thin dividing line between survival and failure. You've just got to fight and fight and fight and fight to survive.
What was the first business idea you came up with?
I set up this magazine called Student when I was 16, and I didn't do it to make money - I did it because I wanted to edit a magazine. There wasn't a national magazine run by students, for students. I didn't like the way I was being taught at school. I didn't like what was going on in the world, and I wanted to put it right.
Of course, a lot of businesses want to reach students, so I funded the magazine by selling advertising. I sold something like $8,000 worth of advertising for the first edition, and that was in 1966. I printed up 50,000 copies, and I didn't even have to charge for them on the newsstand because my costs were already covered.
So I became a publisher by mistake - well, not quite by mistake, because I wanted to be an editor but I had to make sure the magazine would survive. The point is this: Most businesses fail, so if you're going to succeed, it has to be about more than making money.
Are you saying entrepreneurs should go into business without the bottom line in mind?
Ideally, since 80 percent of your life is spent working, you should start your business around something that is a passion of yours. If you're into kite-surfing and you want to become an entrepreneur, do it with kite-surfing.
Look, if you can indulge in your passion, life will be far more interesting than if you're just working. You'll work harder at it, and you'll know more about it. But first you must go out and educate yourself on whatever it is that you've decided to do - know more about kite-surfing than anyone else. That's where the work comes in. But if you're doing things you're passionate about, that will come naturally.