Cambridge Cluster

From start-up two years ago, to there being rumours of being in discussions to be bought by Google for $5billion is quite a story.  I wondered what was there business plan resource?  I looked at their board of directors.  Of the nine people listed, nearly everyone seemed to represent an investor.

CrunchBase reports that Groupon has raised some$30million in a Series B round in December 2009 and a further $135million in a Series C round in April 2010.  The latter may have been at a valuation of $3billion and bought in new investors so a $5billlion exit seems believable.

CrunchBase sets out the case for Groupon as:

Groupon (www.groupon.com) features a daily deal on the best stuff to do, see, eat, and buy in more than 150 cities around the world. By promising businesses a minimum number of customers, Groupon can offer deals that aren’t available elsewhere.

Groupon brings buyers and sellers together in a fun and collaborative way that offers the consumer an unbeatable deal, and businesses a large number of new customers. To date, it has saved consumers more than $300 million and claims it has generated millions in revenue for the businesses it features.

Groupon originated the concept of using collective buying to get a daily deal on local goods and services, and is an outgrowth of ThePoint.com, an online community launched in 2007 for organizing all forms of group action and fund-raising around a “tipping point” of required participants.

1,000 people work in the Chicago HQ with offices opening round the world.  Not one in Cambridge, UK, sadly.  In the Daily Telegraph, Rajen Ruparell, Groupon UK director, said Groupon will have around 2.5million UK subscribers by the end of the year.  He went on to say that most of the time they are female, they are office workers and they start the day with a chat about “what did you buy, why did you buy it?”.

All linked by Facebook and Twitter to build a large enough group of people wanting to buy a product to justify a fantastic discount.

But a very different business model from the likes of eBay, Google, Twitter and Facebook which provide a structure and the leave the punters to do all the work.

When will a business like this come out of the Cambridge, UK, cluster?

After the Facebook release today, Robert Scoble, Techcrunch and the Financial Times were selected for a special 35mins with Mark Zuckerberg.  The Scobleizer recorded it and released it on Cinch.  I picked out the following points:

– people like to share and be shared with

– games which are social like Zynga do well

– sites need to be designed to be social from the ground up; not social as an afterthought or add on

– people like Facebook Places; some love it and some do not want to use it but do not mind being mentioned by others.  People have different thresholds.

-Places is already massive and growing fast

– power of social recommendation

– tagging of photos is much better than face recognition software

– e-commerce will be later

– main stream sites such as newspapers are becoming social sites

– lots of companies are afraid of disruption (social sharing of their data).  These will be overtaken by companies which embrace social network

– focused on people

– mass location awareness

– in the future, all apps will be personalised

– when Facebook was founded there was only one platform – the Internet.  Now there are many with webs, mobile, apps etc.  HTML5 will go some way to unifying all these.

So lots more opportunities and all the companies will need a business plan resource.

Listen to the Cinch cast to see why Robert Scoble was jealous!

Image via Wikipedia

Very strange reading the papers in the UK and hearing news from the USA about budget cuts and contrasting it with the talk by Paul Graham at the Y Combinator Startup School 2010.

Graham’s talk is all about lots of clever money seeing the quick returns on startups in Silicon Valley and wanting some of the action.  The angels are forming Super Angel groups and the VCs are prepared to invest smaller amounts for first rounds of £300k.  The valuations are going up and up so it is a good time to raise funds providing, as always, you make great progress and can justify a higher valuation at the next round.  Lack of progress can lead to a lower valuation and a dreaded downround or no round.

Ignore the gloom about budgets and get out and start a great company.  But whatever funds you are offered, use a great business plan resource and keep exceeding the targets.  Graham pointed out the recent effect of small startups funded by angels being bought up early giving returns of 10x to angels in one year.  As returns have to be related to time, these 10x returns in one year are way ahead of the returns angels received in even Google where they had to wait five years.

Are you Booming or Busting?

But take great care as ever!

PS Do listen to Ron Conway et al talking at Startup School.

Just like Xensource but not on the same financial scale, Imsense has been absorbed (by Apple in this case) according to MacRumors.com.  Only by searching through the records at Companies House were MacRumors.com able to verify that Apple were the purchasers as the new directors were Apple employees.  The site comments that “We also note that imsense Director of Engineering Alexis Gatt left the company in July 2010, just as it was being acquired, to become senior engineer at Apple” which appears to confirm the story.

Apple has cleared nearly all references to Imsense from the web but there is link to a LinkedIn page (I have copies the page below in case it disappears) and a “video of a 2009 presentation by imsense CEO Philippe Dewost demonstrating the company’s technology is also available“.

For a change, this is a spin-out of the University of East Anglia (UEA) but guess Imsense moved from Norwich to the Cambridge Cluster.

Financial details are slim but there must have been some angel funding (I seem to remember so from a meeting some time ago – Robert Swann etc).  According to MacRumors.com “According to a note on the website of Braveheart Ventures, which backed Imsense, the company was acquired by “an undisclosed trade buyer in July 2010”.

More from MacRumors.com “According to a press release from Braveheart, it received £342,000 for its minority stake in imsense, more than doubling its original £150,000 investment in two years.”  We can only speculate without obtaining the share ownership from Companies House, that Braveheart owned around 20% of the company which would mean a sale price of around £3million excluding any earn-outs.  It would be interesting to check out which business plan resource it used.

The success of Imsense and Xensource should inspire the Cambriddge Cluster but it is no good if no one celebrates and disappears with the cash.  We need to celebrate these successes to inspire others and give the Cambridge Cluster a boost.  I hope that there were some lucky angels (they will be listed on the records at Companies House) and I hope that Braveheart invests again and again.

PS. Business Weekly confirms that Dr Robert Swann was a director so well done Robert!  Alas Professor Graham Finlayson was too shy to comment and the University of East Anglia “said it knew nothing”.  I wonder if UEA will call in the Prof for a little chat about IP……  I am sure that Cambridge Enterprise would be hot on his trail if he worked for the University of Cambridge.  After all, tax payers funded some of the work and the UEA deserves to share in the rewards.

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From the LinkedIn link (in case it disappears).  It says it has only two employees:

imsense ltd. is a leading pioneer in automated, effortless, high quality Dynamic Range Optimization Solutions for still and video imaging. Its patented, award winning eye-fidelity™ technology is available for computer and mobile platforms, processes still images including HDR as well as video, perfectly revealing image details in just a click.

Founded by Davies Medal winner Prof. Finlayson, imsense is venture backed, based in Cambridge, and run by former Wanadoo co-founder Philippe Dewost.

Specialties

Computer vision, image processing, Dynamic Range Compression, HDR imaging, imaging software, licensing, IP

• 

   

  CEO – Chief Executive Officer

  Philippe D., Cambridge, United Kingdom

• 

   

  Video Processing Engineer

  Keith W., United Kingdom

Image via Wikipedia

Fred Wilson write a great blog and not much needs to be added to it except that he is one person who got in early and will make a ton of money out of spotting the social network space.  Amazing to have the simple vision to use the tools and then be able to relate to entrepreneurs.  All so simple but he does hide away..  Ooops no he does not as one of his companies, Zemanta, has just popped his photo up!

In his post on convertible debt for angels in the first round, he puts the other case that he prefers agreeing a price and investing.  But he understates the great increase in value he brings to the new company when he says “I can negotiate a fair price with an entrepreneur in five minutes and have done that for a seed/angel round many times.”  We can all agree a price but most entrepreneurs do not bite off our hands!

Fred Wilson operates in a very different environment than Cambridge Enterprise, the arm of the University of Cambridge which “exists to help University of Cambridge inventors, innovators and entrepreneurs make their ideas and concepts more commercially successful for the benefit of society, UK economy, the inventors and the University“.   Their recent News and Events Bulletin states that “Sixteen Cambridge Enterprise portfolio companies are included in Business Weekly’s “Killer 50” list of the most disruptive technology companies in the East of England”.  Amazing companies that will change our lives in the years to come.

But in the mission statement of Cambridge Enterprise there is no mention of angel investors.  Are angels the best investors to start disruptive technology companies?  Do they have deep enough pockets?

Perhaps angels in Cambridge need to entice the entrepreneurs in Cambridge to follow the path of Fred Wilson as demonstrated so well by Rahul Vohra and Rapportive.  A very different business plan resource approach is required.  Perhaps Cambridge Enterprise should establish a new division to support the likes of Rahul Vohra – after all the experience, skills and opportunities given to Rahul Vohra served him well until he upped and offed to Silicon Valley.

The only worry to me as a low-grade angel is that the convertible debt stacks the cards too much in the favour of the entrepreneur and the second round investors.  The first round investors need a great big uplift to justify the huge risk we take.  We might not fund a company to revenue but we fund social network companies to their first major step of customer engagement with hundreds of thousands of users.

Will all this help The Entrepreneurs Graphic Novel when it is is published as an app?