Cambridge Cluster

Yvonne loves to go to the auctions and I go along.  Learning so much not only about the amount of junk so many of us hord but also all about people.  I am not a great fan of the Apprentice and the dreaded “Lord Sugar” - not sure he could run any Cambridge Cluster company - but the TV series does have a very important point about buying and selling.  It is so easy to sit back in an auction and buy but it takes a very different mindset to rise early on a Sunday morning and queue for the honour of having a stand at the Newbury car boot sale.  The skill is of buying in the auction for the customers at the car boot sale and not buying for your taste - not that it is better but it may well be different. It takes effort and concentration.

You see it so often in Cambridge Cluster companies (and we have done the same with the graphic novel The Entrepreneurs) that it is much easier to look inwards to build the product and a very different skill (and very difficult to do simultaneously) to intereact with customers and investors.  The latter takes effort and energy and usually travelling.

The other lesson we can all learn is to build a business lean and not mean.  But what about the entrepreneur who bought two pictures from the Wellington Gallery in Birmingham for a total of £10,000.  They were knocked down at the auction for a little more than 10% of their cost.  Stay lean and buy the luxuries from the proceeds of the sale of your business.  When items are entered for auction by the agents of Liquidators or the High Sheriff there is usually no reserve so a good time to try a low bid.

But it is very sad to see dreams shattered and not to think for too long about all the human tragedy behind some of the sales.  At least the entrepreneurs can start again but some auctions reflect the unhappy lives people have lived leaving behind a house to be cleared by agents and not loving relatives.

How I love people watching at the auctions.  The highest bidders are often the least well dressed.  The auctions are being changed by the Internet with a representative of The Sale Room sitting at the front.  Often the auctioneer gets frustrated by some of the Internet bidders being slow and brings down the hammer.  But if serious money is being offered the auctioneer has plenty of time!

The auctions we have attended are Jubilee Auctions in Pewsey, Mays Auctioneers of Shipton Bellinger, Stroud Auctions, Thimbleby & Shorland of Reading (sometimes five simultaneous auctions!), Wessex Auctions.  And closer to home is Cheffins Auctions with their very knowledgeable team including George Archdale and Sarah Flynn.

To buy or not to buy is easy; to sell, how and to whom is the question!  Something we all face in the Cambridge Cluster.

Great article of an interview with Greylock’s Henry McCance on why they are moving their HQ to Silicon Valley.  And so many lessons for the Cambridge Cluster.  It is sad and depressing that some of the so called movers and shakers of the Cambridge Cluster do not think that spin-outs of companies are important to building a cluster.  It is essential to keep the Thought Leadership motivated and generating the next generation of companies and technologies.

One interesting comment is McCance makes is ““At the margin, there are small things that can be done to make the climate more attractive for startups. An example is to change the non-compete laws that are much more restrictive and enforceable in MA than in CA. ‘Hot’ engineers don’t want to worry about ending up in lawsuits and court if they leave one company to start or join a new company.”  Guess it was a shame(!) that we linked with MIT and not Silicon Valley.

Also depressing in Cambridge that great successes such as Xensource are funded outside the Cambridge Cluster and then the success hushed up in case anyone on the fringes is unhappy.  I guess that this is Britain and no one likes to see a winner especially when they are public sector employees of Cambridge University.  Where else would a great success such as Xensource be hushed under the carpet?  Are there other Xensource type successes of which we have never heard?  Time to get out the business plan resource and start building great companies in the Cambridge Cluster.

Loss making Ocado (formed by three former Goldman Sachs bankers in January 2000) is planning to share it’s IPO with customers; they will be given the chance to invest.  The £1billion flotation is expected next month (July 2010).  It takes a GS banker or three to make a profit for shareholders from a company running a £32.6million pre-tax loss last year.  Guess the GS guys really understand their business plan resource and like many VC funded technology start-ups have built a brand with value.  Unlike a technology business, it is going to be difficult to scale Ocado into a global business.  So much easier to send 0s and 1s down the global Internet.  But at least the investors are being given a chance to invest in the equity.

Cambridge Cluster company, Hotel Chocolat, have a different deliverable - loan us your money and get dividends of chocolates via the their Tasting Club.  Will the Inland Revenue want a taster of “income”?  No sweet equity here and no sweat equity for the 600 people who have helped build the wonderful business of Hotel Chocolat.  Interesting to read that co-founder Angus Thirlwell’s father founded Mr Whippy and Prontaprint.  Does bean counter and co-founder Peter Harris have similar pedigree?

Two great companies, but both with problems with scaling their businesses globally.  But still I am sure that Andrew and Peter never regret leaving the technology world after meeting at Torch Computers in the early ’80s.  Those were the days.  How did we build and sell Baddeley Associates in five years after Torch showed great faith in us by becoming our first customer?  You never, never, ever forget your first customer - the people not the company.

Hat tip:  Daily Telegraph business section 8 June 2010.

Some people think that break outs from companies - people with cash from options/shares and the experience of working in a start-up - are not important.Guess this post on TechCrunch says it all - Yelp is “another company founded in 2004 by two former PayPal employees…..”.Guess we need to include some history of the founders - adding in both cash and experience of a start-up to show how the initial valuation is increased to reduce dilution in the first round - in the business plan resource.

Yelp

Another company founded in 2004 by two former PayPal employees, Yelp is a local reviews website covering almost 40 states. Yelp also launched in the UK in January 2009. Users write and read reviews about… Learn More

These are notes from watching TechCrunch, New York City 24-26 May 2010.  Too many to attribute so go watch the videos!

Music.  The big money has always been made from the tours.  Always was and always will be.  Stars now found on YouTube who already have traction, say 70,000 downloads.  Point that VCs made later - looking for data on traction with the market and YouTube gives you the stats.  Once you have watched a star it is a race to sign up and then market the star to the world.  YouTube videos for Lady Gaga cost around $1million.  It is now a worldwide audience and the stars have to want to and enjoy Facebook, Twitter and social media.  MySpace is history.  You are dealing with digital kids who have grown up with the digital world.  A star can quickly be number 1 in 17 countries which would have taken many months a few years ago.

One of the founders of Twitter, Jack Dorsey, has launched Squareup.com  which allows mobiles phones to read credit cards and take payment and keep all sort of records on customers.  Small cafes do not know how many different sort of drinks they have sold each day.  Square lets small retailers have access to all this detail.   When Square had a beta, they visited 25 VCs in Silicon Valley and New York City as the other founder had never raised VC funds before and Dorsey thought he should meet them all.  The Square team enjoyed aggressive questioning by VCs - people who would care about their business.  Expressing value of ideas with questions.  Looking for VCs who liked Square and not the reflected glory of Twitter.

Susan Lyne, CEO of Gilt Groupe and the panel gave fascinating insight into how shopping is changing as site know so much more about customers.  Biggest problem is encouraging the customer to pay for the full trolley.   One way of doing this is to offer small numbers of products and if not paid for within ten minutes they are put back on the shelf.  Make the experience one of a game and not dull shopping like Amazon.  I guess a touch of eBay.  People “win” something, not “buy” something.  Build a community.  Problem: how to scale good service?  Concentrate on the bits vital to the shopper.  But to be successful you need to work so hard.

Speakers love the iPad and it will be a paradigm shift with everyone wanting to touch a screen and lots of iPad devices will arrive.  This is old and for mice.  The iPad is transformative.

A VC panel said you must arrive with some data from a beta product.  Everyone can get some data from customers.  If it is web, like music, we need tens of thousand.  Sometime a few hundreds will suffice.  No data, no deal.  Looking for scope of vision and ability to execute.

New York City panel say things are moving to NYC.  Investors adopting cluster approach of investing in syndicates.  VCs looking for people who are passionate about a problem not people who have looked at a large market, segmented it and then looked for a problem.

Often great companies are started by rookies so catch them young and help them grow.  Interesting comments about Facebook where Mark Zuckerberg got great advice and controls three votes on a board of five so he can keep building the business not be forced to sell.

Great conference and hope this help someone.  Great three days watching in the comfort of my home in Cambridge, UK.  No need to worry about the ash cloud.

Amazing group of people working incredibly hard behind the scenes making it all happen both moving the furniture and solving the gremlins with the sound and technology.  Not much clear talk about a business plan resource.

These are not CUTEC start-ups.  These are funded VC companies with teams, in the case of Saluto, of twenty people working together for two years.

More than 75,000 people have watched TechCrunch Disrupt on-line over the three days - wish I could have talked to them…….