InnovationManchester

Archive for the ‘Finance’ Category

Corporation, n.  An ingenious device for obtaining personal wealth without personal responsibility. (Ambrose Bierce)

 It was in the early 1900s that journalist Ambrose Bierce came up with this definition, as part of his charmingly cynical ‘Devil’s Dictionary’. At the time, society was emerging from a century of staggering changes in technological progress, economic growth and social turmoil.

Mr Bierce didn’t include a definition for a co-operative business model in his dictionary, although the Rochdale Pioneers had defined and implemented this fabulous concept in 1844. They made an imaginative quantum leap: they dreamed up a business that was run by and owned by its customers and employees, so that they had a true stake in the business. 

Once again we are living in times when there is great public cynicism with big business and the banking sector in particular, and we’re heading for a period of major economic and social upheaval as unprecedented planetary changes have their effect on populations across the world.

We need some radical new ways of working and living, like the Rochdale Pioneers created – whether that is in delivering public services, or in developing businesses. Has Manchester got the talent and the chutzpah to get ahead of the curve, and become a leading centre for developing and testing bold and imaginative ways of going about our daily lives?

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Investment in start-ups relies more on mentoring and marketing than concerns about Intellectual property and patents.

That was the message of Jon Bradford,Part-time VC, and technology evangelist who was speaking at the Christmas Northern Start up event held in Manchester last night.

After a journey that has taken from Arthur Anderson’s in London to Newcastle via Melbourne and Silicon Valley,Bradford has launched The Difference Engine.

The idea came from his initial look into investing in technology start ups.He couldn’t see businesses that he wanted to invest in,whereas it used to cost loads of money to build soft ware business,it now cost little

He then asked the question,how do you cope with that and how do you tackle micro investment?

The result is the difference engine,an acceleration programme for early stage digital businesses.It is a is a full-time 16 week acceleration programme which combines investment capital of £20,000 (for 8% of the business) with mentoring, support and office accommodation with various other services provided by partners.

For the first four weeks of the course,the entrants are subjected to what Jon described as a “being given a good kicking ” where their plans and ideas are put under intense scrutiny from every single angle.Only after those initial four weeks are they allowed to start building their programme.

At the end of the course they are ready to pitch and present for venture capital.

What’s Jon looking for? His answer- the entrepreneur who will work on their ideas not matter what and see it as a life style decision.

If you’re interest get applying.Applications close on the 4th January and the the first 16 week course begins 10th Feb

When Guinness decided that they wanted to expand their market into Europe,they saw Germany as the biggest growth area.After all the Germans are the biggest beer drinkers on the continent so why wouldn’t they drink the black velvet?

Well they didn’t and Guinness ended up with less than 1 per cent of the market.The reason-well Germans prefer light beers and have an affinity to local breweries.

If one message came out of last night’s  Managing Growth – Tech Entrepreneur Series held in Manchester,it was that to successfully grow a business,listen to what your customer wants,and understand who your customers are

Speaking were Chris Allen,instrumental in the founding of Laterooms.com back before the first dot com crash and Steve  Purdham who co-founded Surf Control, a global provider of internet filtering software and is now one of the names behind free online music service we7.com teaming up with Genesis front-man Peter Gabriel.

Both gave some of the secrets of their success to an assembled audience of entrepreneurs and funders last night.

Chris has worked for 40 years in what he described as the second oldest profession in the world,hotels.Working withinPremium Inns,he tore up the business model of selling rooms,decided that customers wanted something a little more special than their own bedrooms.

Instead he offered them such innovations as the trouser press and satellite television.

It is a pressure business he said because it is a commodity you can only sell once.

After leaving the business he set up LateRooms.com and again tried to tear up the business model by offering hotels a direct fee model instead of the more traditional percentage cut.When this failed to take off he decided to differentiate by giving his customers more choice and a personal level of service,often manning the call centre himself to find out exactly what they wanted.

What the customer wants according to Steve Purdham is free music.At WE7,they have created an environment that customers like,you get a free song and you get an advert to pay for it.

A simple model says Steve,publicised not by advertising and PR but by word of mouth.”If you like it you will tell your friends”.

For both entrepreneurs people are at the heart of any growth model.According to Steve,the biggest restrictor of growth is the person in charge wanting to keep control and not delegate.You must have the courage to move people on if they are in the wrong slot and create gaps to bring new people in.

For Chris,a good entrepreneur needs good people around.These people will grow with the company.

The proof is in the pudding and both men have successfully sold their businesses on for a considerable premium.

For Chris his company was sold in 2007 to First Choice for £120 million in 2007, two years after a MBO.For Steve his Surf control company was sold to US rival Websense in 2007 for £201 million in 2007.Now We7 vies for the free music market along with its better known rival Spotify.

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Despite Manchester and the North West having, besides London and the South East,the highest amount of venture capital activity,the average size of a deal was amongst the lowest in the country.

According to the findings of the New Economy working paper on the impact of public policy on investments talent and networks which presented its findings today,Venture Capital should be regarded as an industry in its own right that can stimulate high growth and provide benefits to the region.

The report’s authors,Adrian Nolan and Michael Corbishley in their working paper, found that in the long term public funds may not be sustainable as they can impact on private enterprise putting the latter at an unfair advantage and clashing with its objectives.

Specifically the report looked at the business angel network and found in the city that there are several private networks but that they are not that well understood and their activity is not dense enough to generate what they described as a critical mass of activity.

The report makes a number of key recommendations for local policy makers.

1.That they adopt a private sector approach to managing public funds especially that of ensuring sufficiently high ceilings of investment for high growth companies.

2.to work with relevent partners to ensure public support is structured to attract talent

3.that a detailed study be made into the demand for early stage equity finance in Manchester.

Public sector VC money is important for Manchester but the challenge for the sector is to ensure that it develops commercial viability.

The seeds of the angel market are there but there needs to be more connectivity.

The working papers draw on work originally commissioned by Manchester Knowledge Capital,Manchester Enterprise Exchange and Manchester city council


Innovation Manchester

Innovation Manchester is a dynamic and diverse network of innovators and entrepreneurs, working together to make Manchester a better place to do business. We’re making Manchester a global innovation leader by creating: - new connections - new business opportunities - radical city-wide solutions Be part of the innovation conversation - all you need is enthusiasm and original thinking.

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