Category Archives for entrepreneur

Veridian Solar wins national award

It was good to hear from Martin Davies that his latest start-up, Veridian Solar, is doing well. Viridian Solar was named the Building Entrepreneur of the Year at the biggest construction industry award event – Building 2008. Veridian has designed solar panels which are easy to install as part of a new build in a house.

It is good to see successful entrepreneurs going for a second deal. Although not as hungry as the first time they are not as raw. Will they be raising VCs funds this time or, as with last time, grow from cash generated? I guess it all depends as their first business was high margin technology whereas this second time round, it will be a lower margin business. Let us hope that the building industry pays promptly and allows them to fund growth internally. Will the major builders be willing to rely on a young company for such an important component of a house as part of the roof?

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This is what Equity Fingerprint is all about

20071206-DSC_0238Image by Eric Hamilton via FlickrFred Wilson of A VC blog gives a very simple explanation of what Equity Fingerprint, the business plan resource, is all about. I copy his post below to save you pressing on any more keys. Active Equity Companies rely on an unwritten rule between the founders and the investors (people and cash) that they will keep building value and work together. The real bummer happens when eveyone is working hard and the market just moves in a different direction leading to a down round. It is tough but if you understand Equity Fingerprint and keep building value, the market will swing round and it will soon be your day around.

People ask me if a recession is a good time to start a business – of course it is as there are plenty of resources available. And you are forced to concentrate on the customers or market need. Her is Fred’s post to save you clicking again:

Taking Risk and Mitigating Risk

When I think about the venture capital business, I think about risk. It’s one of the riskiest investment types there is. But as they teach you in business school, risk and return are highly correlated over the long haul.

What we want to do in the venture capital business is take a lot of risk (which should be rewarded with a low entry valuation) and then actively mitigate the risk we took as much as we can (thereby reducing the risk for future investors and increasing the valuation).

It’s the same thing that entrepreneurs want to do. When they leave their safe job and go out on their own, they are taking a lot of risk. Their entry valuation should be zero, meaning they (collectively if they have partners) own 100% of the business for whatever startup capital they invest.

By the time they offer equity to new investors, they should have reduced some of the risk. By developing a product, or by developing a technical and operating plan, by attracting other talented people to the team, or by getting customers and revenues (and sometimes even profits).

However markets are not rational. Investors will price risk (and therefore value a business) differently at different times.

I think a good example is comScore, a company I helped provide the first venture capital to in 1999. Along with Bruce Golden of Accel Partners, we invested something like $6mm into comScore in August 1999. It was a typical early stage venture round where the investors purchased approximately 1/3 of the business for the invested capital.

A year late, in the summer of 2000, investors valued comScore at something like $140mm. The company had mitigated a lot of risk in the year that had passed. The technology was built, the service was launching, the team was hired, and the future was bright. But investors missed the fact that the Internet market (ie the customers), at least version 1.0 of the Internet market, was a mess and getting worse. And the next twelve months were ugly, really ugly.

The next round was completed at a fraction of that $140mm valuation and it took something like five or six years for the company to get back to that $140mm valuation. Today, comScore is a public company with a market cap of $670mm.

comScore’s founders Magid Abraham and Gian Fulgoni did a great job of mitigating the risk in the deal year after year and they and their shareholders, including me, have been rewarded. But it wasn’t a straight line up. Partially because markets are irrational and partly because new risks showed up that we had no idea were coming.

Both of those things are always going to be true. Markets are never rational in the short term. And almost always rational in the long run. So my approach to that fact is to keep a lot of “dry powder” and invest in every round at our pro-rata share or less if the price seems truly irrational. Early stage venture capital is often less susceptible to market gyrations because we get our ownership at a low valuation and keep it but generally don’t increase it much as the valuations increase. And you have to be patient and ride the gyrations out, as long as the company is doing its job of mitigating risk.

And new risks will always show up. No investment plays out the way you think it is going to play out when you make the investment. So you can never price the risks you are taking correctly. My approach to that is to two fold. Don’t freak out too badly when the risks you never saw show up. And have a lot of “dry powder” to insure that you and the company can face the risks, deal with them, and mitigate them as well.

Risk and return are correlated in the long run. Taking risks is the key to making big returns. But you must learn to live with risk, mitigate risk, and price risk as best you can.”

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Prelude Trust has no place to hide

Prelude Trust has failed to back the winners and cannot raise further funds. You think it is tough being an entrepreneur, try being a VC. So Prelude follows Gateway, TTP Ventures and Avlar leaving Amadeus as the sole survivor in Cambridge now that 3i has closed down their local office. The new technology business is the toughest of the tough and even some angels are cutting back.

You have to admire the style of the VCs who are taking over the management contract. Important things first – let’s get the carry percent worked out:

"certain members of the New Manager will indirectly make
capital commitments equal to 1 per cent. of the total capital committed to the
Purchaser, and, in addition to their pro rata share of the proceeds received by
the Purchaser on realisation of the Portfolio, will receive a carried interest"
calculated by reference to the Purchaser's total profit.

Xensource goes missing with $500million!

View over Trinity College, Gonville and Caius, Trinity Hall and Clare College towards King’s College Chapel, seen from St John’s College chapel. On the left, just in front of Kings College chapel, is the University Senate HouseImage via WikipediaOn 22 October 2007 Centrix announced the $500million acquisition of Xensource for $500million payable in a mixture of cash and Citrix stock. Xen appears to have started in the University of Cambridge Computer Laboratories where one of the founders, Ian Pratt, works. Ian Pratt is named as the founder of Xensource in this bio of Simon Crosby and it states that “Simon was a tenured faculty member at the University of Cambridge, UK, where he led research on network performance and control, and multimedia operating systems”. The press release 15 august 2007 states “for approximately $500 million in a combination of cash and stock, which includes the assumption of approximately $107 million in unvested stock options.”.

Tech Confidential spills some of the beans ” You don’t hear as much about Kleiner Perkins Caufield & Byers and Sevin Rosen as you used to. Kleiner Perkins is busy investing in anything but consumer Internet companies while Sevin Rosen decided against raising another fund last year. But, they are still cashing checks. The pair invested $6 million in a first round investment in January 2005 into XenSource, an open source virtualization startup that agreed to be purchased by Citrix Systems for $500 million.That’s a big hit for the duo. Other beneficiaries include Accel Partners, Ignition Partners and New Enterprise Associates“.

Silicon Beats mentioned the investment round and commented “Silicon Valley’s best-known venture firm, Kleiner Perkins Caufield & Byers, has teamed up with Sevin Rosen Funds to invest $6 million in XenSource, of Palo Alto.

XenSource offers a so-called open source virtualization technology, which we’ll leave for open source fans to comment on. But as XenSource’s folks put it, virtualization “allows enterprises to realize significant savings from server consolidation running multiple operating systems and mission critical applications on a single server.”

Kleiner’s Kevin Compton and Sevin Rosen’s Nick Sturiale will join the board. Founders include the leader of the Xen project, Ian Pratt of the University of Cambridge, Nick Gault, an enterprise software veteran and formerly founder of Network Physics, and Open Source veteran and openMosix leader Moshe Bar. Pratt and his co-founders at the University of Cambridge will continue todevelop the technology and manage the Xen Open Source community project, the company said.”

Now that is a lot of wonga. Where did it all go? How much stayed in Cambridge? Was Cambridge Enterprise involved? It would have ranked as one of their top investments. If not, why not? Why was such a good deal funded outside of the Cambridge Cluster? Did any of the Cambridge Angels or the other groups invest? There is no trace of Xensource on the Cambridge Evening News website. It would make a great Equity Fingerprint and case study but I guess it was registered in Delaware and so all the details are not available. Hopefully the Cambridge Cluster has a couple or ten of new angels to keep turning the wheels. Just think what the Cambridge Cluster could have done with $500million……

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Perfect Pitch at Seedcamp

Seedcamp has a video on the front page to inspire entrepreneurs to join their one week camp.  Rowland of sums up the perfect pitch.  It is three sentences:

– what does your business do?

– why is it special?

– why is it going to be successful?

Say it every day to anyone who listens until you have refined it and refined it and are ready to blast the VCs away!  It is so easy to help someone else and so difficult to do it on your own.

Modest Twist runs with Velocix

The Mathematical Bridge over the river Cam (at Queens’ College)Image via WikipediaAdam Twist bills himself as astute businessman and product innovator” on the Velocix site – sounds as if he should be on The Apprentice. In the 90s, he started Zeus Technology from his University of Cambridge college room and built it to over 200 people before missing out on the top of the dot com market whilst hanging in, I guess, for the big time.

His latest ideas use P2P technology in the same way as Skype to get large video files humming round the net. 3i is an investor so hopefully Continue Reading »

Multi investors or the Warbug Pincus way

Bill Janeway is a successful VC with Warbur Pincus and maintains that it is better if there is only one VC in a deal as they can move faster. Fine if you have passed the entrepreneurial/founder stage and are backing professional managers but not all entrepreneurs and founders want to put their faith in a VC.

In the Cambridge Cluster, Equity Fingerprint shows that the successful Active Equity Companies are multi-founders, multi-investors (money and people) in multi-stages. But then Equity Fingerprint is interested in founders and entrepreneurs whilst Bill Janeway is interested in building businesses using options to reward the professionals. Perhaps that is the reason that Warbug Pincus does not rank in the top stream of the Silicon Valley Venture Capitalists. However I am sure that Bill Janeway keeps his partners happy with his carry percents and the investors keep the funds rolling in.

NESTA making new waves

The arch pattern.Image via WikipediaNESTA is making a break from the past and there is an excellent video at the FT Enterprise site. The FT site is “old fashioned” and just provides a URL and not an embedded video link as you would find on YouTube. There are other interviews by leading entrepreneurs, none from the Cambridge Cluster but all with a good story to tell.

Jonathen Kestenbaum was recruited as CEO of NESTA to shake it all up and get away from funding small start-ups which were not innovative. Now it is about funding larger deals where the NESTA funds make a difference. Kestenbaum sold the family silver (well, the family firm) so he has experience in building and selling a business and the inclination to make a difference.

NESTA are funding a research project with Equity Fingerprint to see if equity funding does make a difference.

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Going green is easy charge

General Motors’ new plug-in Volt will give the users headaches. The batteries are great for short commutes but then the charging motor is never used and will slowly cease up and the fuel with deteriorate. You need to have aged friends who will take it for a Sunday run to keep it fresh. But more power stations will be required to charge the batteries and will everyone be able to use off-peak times to charge. 220v halves the charge time compared to 110v users who will have to wait six hours for a full charge.

The best way to stay green is to live close to work and play and walk or cycle. I must remember to turn the computer off and not use the mobile phone or that will need charging. It is a tough call and easy for those “Leaders” who fly around the world to tell us all how to live! What happens to all the batteries? Aerodynamics is the key to low fuel consumption so perhaps this will be the end of “White Van Man!”.

Making money from greens with an Equity Fingerprint

Nic Frances MBE (47) founded Cool NRG after learning the hard way in Australia.  Frances makes money out of social enterprise projects such as providing low energy light bulbs for the Sun to give away.  On 19 January, the Sun gave away 2.5million light bulbs and sold an extra 400,000 extra copies.  So everyone was pleased.  Tony Blair is writing the foreword to Frances’s new book The End of Charity.

But best of all Cool NRG has an Equity Fingerprint with the 14 0ther employees holding a 20% stake and turnover forecast at £200million.

An Active Equity Company with profitable greenback credentials.  But then Frances comes from a successful rich family that floated their hotel business.  So he has first hand experience of Equity Fingerprint.