Interesting case study on the life so far of Ten Lifestyle Management. For £300 per month, Ten - intelligent support – helps it’s 450,000 with anything they wish that is legal. Founded by Alex Cheatle and Andrew Long in 1998 and funded by angels, they let costs run out of control. In 2003, TLM went into Company Voluntary Arrangement (CVA) and costs, mainly staff salaries, were slashed. Headcount was cut from 100 to 33 and all employees earning more than £30,000 (that is per year for any footballer reading this) took a 20% pay cut.
Last year the company had revenues of £12million and a pre-tax profit of £400,ooo and hopefully growing to sales of £17million this year. TLM is now debt free and cash positive.
Turning to equity, Cheatle owns 20%, 11 members of the management 10% and over 100 angels (private investors) the balance of 70%. I wonder if these angels are the same as the original angels and, if so, did they have to invest more cash? Why are co-founders Cheatle and Long not equal shareholders? Did one put lots of cash up, leave his secure job first or have the idea? Interesting to see if they used the Equity Wheel and a business plan resource.
Already they are finding it difficult to scale this business – they have done incredibly well so far; but we are just trying to learn – but are unlikely to need to raise more equity.
After a rocky start a nice little earner but when and how will the angels get their money back? Will the company have to be sold or floated soon? And always the problem of investing in a business that does not scale but, when on the right tracks, no need for more money. Even with more investment, they are going to find it very difficult to grow.
Just amazing that 450,000 people are so busy they need their services. It reminds me of asking the wonderful drivers of Camtax in the 1980s to take the kids and au pair to the supermarket. Such guilt!!
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.
| Website: |
yelp.com |
| Location: |
San Francisco, California, United States |
| Founded: |
July 1, 2004 |
| Funding: |
$56M |
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
The obituaries are a strange place to look for business lessons on equity funding to build a business. However the obituary of Chris Haney who helped to invent Trivial Persuit makes for interesting lessons. It has it all: the inspiration, the perspiration, the desperation, the break, the envy and the success. I quote:
“After a stint with the Canadian Press news agency he worked as a picture editor at the Montreal Gazette and met Abbott in December 1975 after being assigned to help with coverage of the 1976 Summer Olympics held in Montreal.
The two developed their idea after work on December 15 1979 while playing a game of Scrabble in a bar and finding that some of the letters were missing.
Over a few beers, and scribbling on the back of some paper napkins, they sketched out a game based on questions of trivia, with a six-spoked circular board and six question categories: art and literature; history; science and nature; entertainment; geography; sport and leisure.
The following year Haney resigned his job and, with his wife and child, travelled to Spain, spending the autumn and winter of 1980 researching 6,000 questions across the categories. In the meantime, with his brother John, Scott Abbott, and a lawyer called Ed Werner, he set about raising $75,000 in capital to market the game. The foursome appealed to friends, colleagues and acquaintances. Some turned them down flat — but eventually 34 people each put up $1,000.
The first investor was one of Haney’s high school friends, who earned a return of some $50,000 in the first two years alone. Although the game went on sale in 1981 Haney said it was two years before they “saw a nickel” for the idea.
Initially 1,100 copies of the game went on sale in Canada for $15. The company Haney and Abbott formed to market the game, Horn Abbott, lost money on each of these initial sets, which cost $75 to make. Because none of the big games manufacturers was interested, Haney and his cohorts sold the game mainly via mail order.
After exhausting his savings, he was stricken with anxiety attacks, and spent some time in rehab. In February 1982 Haney and his team showed Trivial Pursuit at the New York Toy Fair, but found themselves allocated a room at the far end of a remote corridor; most of the people passing by were actually looking for the lavatory.
But when the game was featured on a television chat show, with the host reading out questions to the guests, sales picked up.
Originally developed under the name Six Thousand Questions, Trivial Pursuit now sells in more than 50 countries and 20 languages all over the world.
Haney became a multi-millionaire, and regularly took the Queen Mary II across the Atlantic to Europe — and especially his favourite country, Spain — because he was afraid of flying.
In 1984 and again in 1994 lawsuits were filed against the distributors of Trivial Pursuit. One man claimed the creators had lifted questions from his trivia books. Another, who claimed he had been hitchhiking when Haney picked him up, said he had outlined his idea for a game and later realised that Haney had hijacked it. Both cases were thrown out, one by the US Supreme Court.”So sad that his life was cut short at the age of 59 years; an amazing entrepreneur among many other qualities and a great loss to his family and friends.