Tag Archives for venture capital

Red Gate Software and Springboard v Brent Hoberman and PROFounders v CfEL v Government Venture Fund

Brent HobermanImage via Wikipedia

Red Gate Software is one of the rising stars of the Cambridge Cluster and now they are helping the next wave.  Entrepreneurs are provided with a desk, Internet and the biggest draw of all, FREE DELUXE FOOD.  We all know that an army marches on it’s stomach but geeks build great businesses powered by sensible nibbles.  If you are working 100 hundred hour weeks you need a sensible diet, some exercise and deep sleep.

In Neil Davidson’s blog post The Accidental Incubator there are more details.  It fits in well with his recent takeover of the Cambridge Network and contrasts with the way CfEL has moved their Summer School into a general management programme called Ignite which no longer concentrates on entrepreneurs but “corporate innovators” prepared to pay the hefty fee.

Both make mention of the importance of a business plan but little mention is made of a business plan resource.  If you do not take your equity seriously then stick to the corporate world.

Or you can try Brent Hoberman’s PROFounders Fund which has culled a list of 500 applicants to 5, I think.  The first investment is in TweetDeck with less than 10% share.  Later investments should be more ambitious and the stake higher.  Great set of entrepreneurs including the impressive Michael Birch of Bebo fame.

But perhaps avoid the Capital for Enterprise Fund backed by the Government and “administered” by the likes of fund managers Octopus Capital.

If the Government wants to encourage investment in small companies, do it via the EIS scheme with entrepreneurs been given higher and higher tax breaks to put in their cash and time.  It is a fact of the Venture Capital world that only the top tier firms spot the winners so fund managers will never make it work; well, hardly ever as the old song goes!

Hope one day to be invited to discuss Equity Fingerprint with the Red Gate Software Springboard aspiring entrepreneurs and take a bite of deluxe food.  Or perhaps Hoberman will serve a tasty dish to tempt me.

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Boodles are a girl’s best friend to relax

In an interesting article on Boodles, it states that the company was founded in Liverpool in 1798 and is now owned by the sixth generation brothers, Michael and Nicholas Wainwright.  It would be very interesting to follow the ownership changes through the six generations to understand how and why members of the family were or were not included in the equity ownership and if they were, how were they bought out.

Nephews James Amos and Jody Wainwright have joined the business and I wonder if they are included in the equity.  James sums up the allure of the life-style or Passive Equity Company “We’ve turned down many offers from private equity – and that boat has probably sailed away anyway – but we really benefit from being relaxed about the pace of the firm’s growth”.

Do you want to be relaxed?  Not me!

Aside: Lots of flash on the website.  Why would I want to go to a website to order a brochure – I want to buy…..  As Grant Dain, internet marketing Cambridge, might say, it is an online brochure – the classic mistake.

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How did the Huffington Post start?

The Huffington PostImage via WikipediaBelow is a quote on the funding rounds for the Huffington Post or HuffPo but there is no mention of the start-up capital.  Did the founders Arianna Huffington and Kenneth Lerer start in the proverbial garage, get traction and then raise funds?  It is such a clever layout and I reckon that I could use the concept of aggregation to boost the Cambridge Cluster site.  It makes it look so much a bigger concern than it actually is.  But I love browsing through the videos and am just disappointed that a great picture (and they are great pictures and makes the format so different from the traditional newspaper) takes me through to only text.  Would the idea of videos work so well in a the business sector – not sure that we would not soon get fed up with all those talking suits. I wonder what they used.

From the Wikipedai entry on the Huffington Post : ”

In August 2006, it was announced that Softbank Capital would invest $5 million in the online news site, which had grown considerably in popularity in only a year, to help expand it. Plans included hiring more staff to update the site 24 hours a day, hiring in-house reporters, and a multimedia team to do video reports. Alan Patricof‘s Greycroft Partners also invested. The news marked the site’s first “first round of venture capital funding.”[4]

The site now has invested in Vlogging, or video blogging, with many of the site contributors contributing via video, and capturing clips in the media and posting them on the site.

In November 2008, Huffington Post completed a $15 million fundraising from investors. The money will finance expansion including more investigative journalism and the provision of local news across the United States.[5]

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Will One plus One makes best in class whilst others fail?

Artimi and Staccato announce that they have taken the best they have to offer to merge into a new entity with the latter’s name for strategic reasons.  They are backed by a “whose who “of the best VCs in the Ultra Wide Band (UWB) field :Allegis Capital
Amadeus Capital Partners
Bay Partners
Charles River Ventures
Formative Ventures
Intel Capital
Interwest Partners

Khosla Ventures
Noble Venture Finance
Oak Investment Partners
Vision Capital

A total of $20million was raised to kick-start the merger and the news that “WiQuest and Intel recently shut down their UWB” programmes.  Presumably Intel will fold their work into the New Stoccato.

As an Angel Investor in Artimi I have privileged information so all this is from the press release.  It certainly will make an interesting study using a business plan resource.

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Samantha Sharpe is the NESTA Innovation Policy and Research Fellow

The Judge Business SchoolImage via WikipediaDr Samantha Sharpe is part of the team at the Centre for Business Research, Judge Business School, University of Cambridge studying early stage companies.  She is funded by NESTA and has a project in the same area as the NESTA project using Equity Fingerprint, the business plan resource.

In  her talk at a meeting at Lancster University Management School (when will it be re-named Lancaster Business School?), Samanthan outlined her work on researching the portfolio of investments made by the N W Brown Group, now IQ Capital Partners.  She has been allowed acess to all the confidential information and so is only able to produce summaries of her data.  Most interesting was a graph which related to Equity Fingerprint.  But whilst Equity Fingerprint concentrates on the decisions made by entrepreneurs in raising fund and how it impacts on their ownership of the company, Samantha’s graph showed the total funing of each round from equity, loan and grants – it showed the gearing achieved by the entrepreneurs on the funds raised.  It would be good to incorporate a measure of the change in valuation at each stage.  I also suggested that she showed the number of founders at each round as it appears that most Active Equity Companies have three or more founderswhich is very different from Passive Equity Companies which have fewer than three founders.

Of course the sample reflects the types of team which will approach a relatively small player in theUK funding and not the entrepreneurs who will chose other routes such as a trade investment, angels or VCs.

Would a study across the funding groups show that entrepreneurs who take a specific route – customer funding to VC – be significantly more successful than companies following the IQ Capital Partners route or taking investment from Cambridge Enterprise?  Or should we stop studying and get on with building business?

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Brothers come to the end of the gravy train

HONG KONG, CHINA - OCTOBER 27:  Guests look at...Image by Getty Images via DaylifeBrothers Nico and Alex van Someren look like they will in for the final windfall from their raising of £110million at the height of the dot com boom nearly ten years ago for their company, nCipher.  Yes, it has taken nearly ten years to redistribute the bonanza from the investing shareholders to the other shareholders.  With the brothers and their family owning some 10% of nCipher, they must have collected a cool £11million between them – enough to buy some nice property in Cambridge I hope.

Two things to learn: first, if you are an investor always have redemption rights so you get your money back first (not possible if you invest in public offerings of course); second get in an experienced executive who has done it all before to sell the business.  The brothers have been trying for years to sell the nCipher but serial entrepreneur and racing driver accountant, Geoffrey Finlay has off-loaded the lot to Thales UK in just over twelve months in a very tidy deal.

NCipher makes a great case study and a real example of opportunism.  We all knew the market was at it’s peak but it takes a special type of brotherly love to close a deal.  Well done to the brothers – I am just glad that I did not subscribe at the flotation.

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Passive equity companies near The Lakes

Railway cottages, TebayImage via WikipediaOut of Eden, Lyon Outdoor and the largest of them all Lakeland are all passive equity companies with the latter in the second generation family control.

The Internet has made it possible to build these companies far from big centres.  However if you start-up in a beautiful small village like Dent, there will come a time when you will have to move to Tebay to cope with the large artics which Lyon Outdoor has had to do.  Also all three companies are re-sellers of other peoples ideas and products.

I met Ian Hartley of Out of Eden high up on the Langdales where he was seeking inspiration for the next stageof the companies growth.  And where I sprained my ankle slipping on a wet stone.  Each company now has experienced management some of whom may go and join another company in the area or even start on their own.  With passive equity companies, how can the companies offer a stake in the growth of the business without opening up the share register?  It is easier with the Cambridge Cluster and active equity companies where everyone is a winner in the business plan!

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Geneva generates funds to re-found college

Painting of the Hall of Christ ChurchImage via WikipediaThe founders of Geneva Technology, Ros and Steve Edwards, have donated £30million to re-found New College, Cambridge.  It is to be renamed after the Edwards’ and its founder, the late Same Rosemary Murray, with the grand title of Murray Edwards College.  Interestingly, Ros was not a founder of Geneva but joined later and caught the eye of one of the founders, Steve.  The other founder took an early bath and insisted on being bought out of this risky adventure called Geneva for what was in the end a modest sum.  However it gave the Edwards’ great stress as they had to fund the buyout.  The Edwards’ then enticed the late, great Stephen Thomas to join them to power Geneva to a great sell out.

One of the key people of the Cambridge Cluster, Herman Hauser, is donating some £7million to establish an enterprise centre.  News from the “other place, is that Michael Moritz, top VC with Sequoia Capital, has given £25million to Christ Church College.

All these donations come from individuals and perhaps Cambridge Enterprise and others will see the benefit of promoting enterprise in the cluster in an open way.  In the early days, no one would have thought that one let alone these three would have been so successful and so generous.

Geneva Technology makes a great Equity Fingerprint, the business plan resource.

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It is good to be wrong, sometimes

Thoroughbred racing at Churchill Downs.Image via WikipediaLysanda raises a second round of funding and Simon Harris, MBA from LBS and the commercial brains, looks like he has launched a second company. I was offered the chance to be an early angel investor but turned the chance down. However with two funding rounds already, I wonder what the Equity Fingerprint, the business plan resource, looks like.

Hats off to Simon who says: “My aim of course is not just to make other people rich but to share in and contribute to their success. My philosophy is therefore to play a significant part in the business, not just to provide funding, and stick with it until it is up and running. It’s horribly risky of course because it means you don’t have the time to do much else, and if it doesn’t work you are older, wiser but poorer. But it seems to me more likely to succeed than angel investing at arm’s length. It’s like betting at Newmarket to win on one race, rather than each way on all the races. But you need to breed the horse, train it and ride it too!

This seems to be working with Quotient and Lysanda, but I need one or two more to be sure of a minimum outcome. Talking of which, I have found some promising technology in the Engineering Lab which I am casting my eye over.”

Third time lucky we hope but I guess this time the valuations will be high in the early stages – will I be invited to the party?

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Even Babylicious needs an Equity Fingerprint!

Boots GroupImage via WikipediaBabylicious provides healthy food for babies and kids all in special size containers. It saves the parents all the cooking and preparation time which used to bring the family together – now just microwave!

Production is outsourced with the only problem being to make sure the recipes scale from the home to 200 kilo batch production. Routes to market are via Waitrose and Boots.
Sally Preston started the business with family funds of £75,000 and two years later she raised new money from private investor. She says that she took no pay for the first three years and says that she is comfortable with her shareholding.

It is similar to Innocent drinks but they started with a team of three Cambridge graduates and a £250k investment which left four equal shareholders. Innocent also sub-contracts all the manufacture and concentrates on the marketing and selling but the Innocent drinks appeal to a much larger market and not cash-strapped young families.

Babylicious seems to have the same problem as Cobra Beer – working on fine margins in competitive markets.

Equity Fingerprint, the business plan resource, shows that multiple founders with multiple rounds of resources (people and cash) is an easier way to start a business than the lone founder.

One intriguing part of the Babylicious story is that Preston had to spend £34,000 to enforce her trademark as someone tried the equivalent of cybersquatting. It is not only the cash but so much time from a lone founder. Is Babylicious such a good name?

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