Cambridge Cluster

 I listened to this Scoble audio interview on my iPhone4S: from Robert Scoble on Google+ …..” with +Thomas Korte who runs AngelPad: http://cinch.fm/scobleizer/299019.mp3″. 

The Cambridge Cluster seems to have been left behind in the stakes for theses incubators which attract major investors with some so confident in the skills of the people running the incubators that they offer everyone company an investment.

From the website: AngelPad is a mentorship program founded by a team of ex-Googlers to help web-technology startups build better products, attract additional funding and ultimately grow more successful businesses.  The aim according to Korte is to build better companies faster.

They have 2,000 applicants, of which 500 are good quality and 15 are chosen – so some big hurdles to jump or hoops to get through.  Unlike a few years ago, some of the applicants have products and profits.

No mention of a business plan resource.

AngelPad is started by ex-Google employees – presumably those who joined early and vested.  It just shows the importance to a cluster of sharing the equity in a successful companies so more people can help build the cluster…..

Hat tip: Robert Scoble

I was lucky to visit Kenya earlier in the year.  Apart from the usual tourist joys I was amazed by the Kenana Knitters Computer School where Peter teaches up to 20 students at a time on database software.  Then I was struck by the universal M-PESA which allows Kenyans to transfer money and also buy goods on a mobile phone.  From selling goats to buying drinks in a night club, all is done with M-PESA.  The units equivalent to money are held in a separate account on your phone and all transactions are by SMS.

It was fascinating to learn that M-PESA was created by the old colonial power, right here in Cambridge, UK.  The website of www.paygsolutions.com  says  “We are based in Cambridge, UK, which is where M-PESA was developed and supported for 5 years.”  Apparently the work was done by Sagentia which spun out of Cambridge Consultants some 25 years ago.  It is very strange that I have never heard of this success of the Cambridge Cluster before.

PAYG Solutions has a curious website with lots of talk about teams and Cloud skills but no contact details.  There is a link to the blog of the founder, Liz Galpin, who lives “outside Cambridge”.  Not even a contact number.

Her blog states “Liz Galpin lives just outside Cambridge and her introduction to mobile money came about when she joined the team at Sagentia plc as the Development Manager, to develop and support the M-Pesa project shortly after its launch in Kenya. Her company, PAYG Solutions, uses mobile technologies, combined with cloud computing in sectors including agriculture and microfinance to provide solutions to help people at the Bottom of the Pyramid save and earn money. Although happily living in the UK, her roots are firmly placed in Africa, where she was born and spent the first 30 years of her life.”

One day I hope to bump into her in Cambridge to hear more of this incredible story.

I want to ask the question “When will we have M-PESA in the UK?”

 USA companies do not have to file equity ownership until they float.  However interest in larger companies such as Facebook and Groupon means that sometimes this information is in the public domain or good estimates.

Interesting to look at Who owns Facebook?  and then try and work out the intial ownership.  In the film Social Network, Eduardo Saverin was a founder with 30%.  When he tried to close the bank account, he found his stake reduced by investors.  But you can still work out the initial split between the Facebook founders and see if it helps you with your Founders’ Split.

The Sydney Morning Herald details the ownership of Groupon.  It all looks a little like Ocado in the UK.  It is quite staggering how much cash could be taken out of Groupon by the founders if all goes well.

In the USA there is a rule that when there are more than 500 shareholders/stockholders, the company must float.  In the case of Facebook, allowing a small group of investors to buy shares from founders and employees, this can keep the number of shareholders below the 500 limit.

Not many companies in Europe grow so dramatically so quickly but it is always good to dream and remember a business plan resource.

Hat tip: Amar of ProjectHugo

 Richard Tyler writes an interesting article about Samworth Brothers, the Leicestershire chilled food company which makes Melton Mowbray pies and The Ginsters.  It is a very tasty business owned by the Samworth family since 1868.  Very different from the Active Equity Companies of the Cambridge Cluster.  Very clever how the family has kept the business growing and rewarding the highest paid director (likely not to be a family member) with a £1.4m pay package.  So many family run companies run into trouble as the shares cascade down the generations and the company remains a Passive Equity Company with no need for a business plan resource.

Hat tip: Daily Telegraph 6 October 2011

 Another great post by Fred Wilson on his MBA Monday.

On another post he talks about the difference between a business and a company.  Build a great company with the best equity structure to run a great business.  Howe often in Cambridge, UK, do you find a good business lost in a poorly formed company?

Liquidation Analysis (Continued)
Last week I pointed out that when your company is sold at price points around or below prices where you have financed your company then your proceeds in a sale transaction will not equal your fully diluted ownership percentage times the sale price. You will get less because some or all of the preferred shareholders will choose to take their liquidation preference instead of their percentage of the company.

And in that post last week, I promised to show you all how to model this out.

Before I do that, a couple acknowledgements. Andrew Parker and Christina Cacioppo had a hand in helping me put this liquidation model together (its the second tab in the google spreadsheet). Andrew built the original template when he was at USV and Christina modified it before sharing it with me.

One of the jobs of an analyst or an associate at a venture capital firm is building these models. They are complicated and time consuming. I took a close look at Andrew and Christina’s work before creating this model. I built it from scratch (driven off the cap table model I shared a few weeks ago) and it took me a couple hours to do it. It’s not a simple thing to build one of these.

I did it from scratch for a few reasons. First, I wanted it to be driven off the sample cap table and be part of that shared spreadsheet. Second, I wanted to do it slightly differently than Andrew and Christina’s model. And mostly, I wanted to prove to myself that I can still do this work. I passed that final test by the way.

Ok, so with all of that out of the way, here’s how you model out a liquidation scenario. First lay out the capitalization of the company. List each class of stock, how many shares there are, what the cost of that class was, what the liquidation preference of that class is, and how much of the company each class owns. You can see that work at the top of the liquidation analysis in the section called “shareholdings”. Continue Reading »