Cambridge Cluster

It is a long walk up the Tourist Path to the summit of Ben Nevis.  If you are a lucky entrepreneur with time to spare, you keep an eye on the weather, dash up to Fort William, and start walking.  You can drive, fly or take the overnight train from London and use the luggage lockers and showers at the station.  First cross the road to the supermarket for “snap”(picnic) and take a taxi to the easiest start of the walk at the Ben Nevis Hotel; try to give the bar a miss on the way up!

The path goes up, up and up.  100,000 people make the yomp each so you are never alone.  One group from Belgium changed into kilts on the top to celebrate their success!

It is a pity that you cannot “pre-pack” the walk, and start fresh half way up.  Today’s entrepreneurs who struggle on their journey call in a sherpa or guide like McTear Williams & Wood and cast off their unwanted load of unsecured creditors along the way and start afresh.

Lord Karim Bilimora of Chelsea - inspirational speaker, Entrepreneur in Residence at the Judge Business School and founder of Cobra Beer - has just taken the pre-pack route and swapped a controlling interest in Cobra Beer for a minority stake in a new company owned 50.1% by Molson Coors.  Up to £70million of creditors may have been left behind.  The pre-pack deal looks like a rights issue with the added advantage of a culling of the creditors.  Secured creditors, and I guess all the shareholders, move into the new company with a new business plan.

In Cobra’s case, the shareholders might be a little disappointed as they have been investors for ten years and last year were looking forward to a sale of Cobra for around £200million.  But back to square one with a lightened load and new management, good times could be just round the corner.  But that is one of the many joys of being an investor in an Active Equity Company - another twist in the journey.

So with business booming, the sherpas of McTear Williams & Wood are celebrating the opening of new offices in Cambridge.  If they had landed the task of liquidating the bankrupt Lehman Brothers, they would have had over 3,000 legal entities globally to sort out - just dream about the fees and never forget the 25,000 people whose lives were turned upside down - and need an even bigger office!  In MW-W’s latest newletter, Andrew McTear says “Whether you like them or not pre-packs are a feature of the modern business rescue and insolvency world.  If used inappropriately they can cause greater loss to creditors and damage reputations.  Used in the right circumstances they can be a force for good.”

As the New Cobra sets out to reach the summit and reward all the new stakeholders, the walker can look forward to a well-earned beer back at The Ben Nevis Inn.  Unless, of course, you are an unsecured creditor or ex-employee when perhaps you can only afford to look at the webcam of Ben Nevis whilst you contemplate your losses.  Anyone for a beer? A Cobra?

Related articles by Zemanta

• Molson Coors downs Cobra Beer in £14m prepack (telegraph.co.uk)
• Cobra Beer bought by Molson Coors (news.bbc.co.uk)

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Bankers have not been having a good time recently and those earning more than £150k are going to be hit by higher taxes soon.  Commentators are worried that talent will move out of the UK.  It is all a little removed from the worries of the man in the street and there are few votes for caring about bankers.

However the world of football brings the problems of high earners into everyones homes as it is in the news all the time.  Henry Winter writes in a column titled “English clubs losing out to Spain’s tax system” (DT 13 June) that the income tax rate in Spain is 27% (plus a local tax) compared to the soon to be 50% tax rate in the UK.

Andrei Ashavin of Arsenal warns players coming to the UK to also remember the unexpectedly high National Insurance.  So with the relative weakness of the pound against the Euro making it more expensive for the English clubs to buy from overseas, everyone is going to need a good business plan to attract the best talent.

Perhaps football will achieve what the bankers have not been able to achieve, remind politicians that vey good people are scarce and mobile and go to the highest bidder.  A choice not open to MPs, well, not normally!

Ben Marlow wrote an article in The Sunday Times published on 19 April 2009 on Derek Sach at RBS, Graham Rusling at Barclays and Duncan Parkes at Lloyds Bank, the three people charged with looking after their banks sick companies.

Derek Sach remembers the two very contrasting executives who ran companies in trouble; one traded his Rolls-Royce for a Cortina and the other insisting on his perks.  You can guess which person impressed the bankers.  But I wonder if one owned the business and the other was a hired hand.

Tough times require tough measures and let us hope that the Cambridge Cluster keeps it’s spending under control and a careful eye on their business plan resource.

When Ken Chrispin married the daughter of Colin Brook, founder of crisp manufacturers Seabrook’s - the ones with the red, white and blue oval on their bags - he changed his name to Brook-Chrispin.  He kept well away from the crisp business as he did not always see eye to eye with the founder, not always the easiest of people, and developed property.  I remember a friend of mine being taken out by his Father-in-law and being told that the family business he had married into was not his and to get on with his own career and let the family build or destroy their company.

The father-in-law looked ran the business in a benevolent way and provided jobs for friends and family.  When he died, Seabrook’s had lost it’s way and KB-C was brought in to “advise”.  To keep it in the family, he persuaded the shareholders (presumably family and friends) to sell it to him rather than the “circling venture capitalists.  The Bentley Speed lets everyone know how astute he was to buy the business and introduce new management.  “In six months, Barry (Higgins, operations manager) has got us up from 12,000 boxes a day to 20,000,without investment”.

It would be interesting to hear the views of the family members who sold out.  I wonder if they feel so happy and whether family gatherings are a little “crispy”?  It certainly is a different slant for the business plan resource.  But will Seabrook’s stay as a Passive Equity Company and will some of the new management be keen to share in the capital value they are helping to create?  How will KB-C handle passing the ownership to the next generation?  Is it harder to hand down a vibrant, valuable business and walk into retirement?

The moral must be to start an Active Equity Company, sell or float, and spend, spend, spend and not leave it to the third generation to return the family to clogs!

Hat tip:  Enterprising Britain FT 6 May 2009 Crisp judgement builds a brand

Back on Twitter and replacing Yomper with my name and following friends, as well as stephenfry, scobleizer, fredwilson and NESTA.  The latter tweeted about it’s latest paper, Connected Universities, and the launch event.  The videos of the launch event are great quality (not Flip?) but are not on YouTube, very slow to load, no controls and there is no embedded URL; also no place for comments so no participation for those not at the launch event.

On the 30th anniversary of the first day in office of Margaret Thatcher, it grates to read a report on clusters that promotes a centralist theme and in which the words “equity” and “entrepreneur`” are hardly mentioned.  We read that the key to the success of making money from universities’ knowledge is better central control.  The early success of the Cambridge Cluster is dismissed as “serendipitious”.  Does the same apply to Silicon Valley?  But then successful entrepreneurs are always classified as “lucky”!

I wonder which body of people has contributed more to university funds in recent years in Cambridge - entrepreneurs such as Gates, Hauser, Edwards, Janeway, Judge, Sainsbury, Taylor and many more, or the transfer office, Cambridge Enterprise.  How many of the entrepreneurs would be stamped with the derogatory term, “sneak-outs”?

The one appearance of the word equity in the report appears on page 16 on the notes on Light Blue Equity; “As a spin-out the university (Cambridge) holds a small equity stake”.  Why small? Why no mention of the “small” equity stake by NESTA?  In the video, Herman Hauser lists the number of outstanding research institutes of companies which failed to turn ideas into products and have now been closed.  Xerox Palo Alto and Bell Laboratories are two well known examples.

Herman Hauser (interesting that he is now very involved in stem cells businesses) states that Amadeus Capital follow the 1,000 companies which are VC funded in the UK of which 750 are not profitable and need to raise further funds every one or two years.  These companies are Active Equity Companies (AEC) requiring new equity funds each year and make them very different from the mass of companies which are Passive Equity Companies(PEC) where growth is constrained by such classic terms as sales, margins and cash flow.  They have been extensively studied.

I think that recent research puts the Entrepreneur if not at the centre of the growth of clusters at least a key part of the process.

However if entrepreneurs are “lucky” how do transfer offices deal with these temperamental but crucial beings?  Which business plan resource should they use?  Use the Y Combinator model?  Should transfer offices have a separate section encouraging entrepreneurs in their cluster on the basis that the university, with or without an equity stake, can be confident that entrepreneurs are like elephants, and will never forget the help received in the early days, and will become generous donors in the future. We should promote the active, Connecting Universities, providing crucial services to entrepreneurs.  When the universities lose the plot and become the story clusters will wither.

One last point: in the video on the discussion the Vice-Chancellor of Bristol University states that he runs a business in the West Country with a turnover of some £400million.  But does he run a business?  In one of the videos Michael Kitson, Senior Lecturer, Judge Business School, a co-author of the report states that universities are fundamentally very different from companies for a number or reasons such as they cannot be relocated.  I always worry when people emphasise the good things about business (such as higher pay) but do not recognise the downside of being in business.  Some of the skills learnt by business can be useful in running a university or hospital (people are a common thread) but it is very important to separate their functions and cultures.

30 years has been a long time and the world has changed with privatisation winning the day in much of the world - long may it be at the heart of knowledge based clusters with “call me lucky” entrepreneurs blazing the trails of new industries.  And good luck to any who try to hold them back!

PS: The CEN on 5 May 2009 announces the appointment of three new senior members of staff to Cambridge Enterprise, turnover of £10million, more than 450 active agreements, 1,100 individual patents and with more than 120 new inventions reviewed each year.