A leg up for new business
Novice entrepreneurs need help to get an idea up and running. Richard Tyler looks at a £10 million Cass initiative that brings together money, potential and guidance.
Cass's Centre for Entrepreneurship deploys a three-pronged approach: funding for promising new companies sits alongside incubation support and programmes on new venture creation and management development. Five new ventures launched by Cass alumni have already received investment from the £10 million fund, which was created in July 2009 with a bequest by Peter Cullum, a Cass alumnus who founded the City insurance group Towergate. It is this breadth of activity that Nick Badman, Chairman of the Centre and former Head of UK Buyouts for the private equity firm 3i, believes places Cass in a strong position. Where else, he asks, can you receive mentoring from leading entrepreneurs, have access to investment and affordable office space, and hear from the likes of Professor Cliff Oswick, Head of the Faculty of Management at Cass, at tailored Sunday evening lectures? "A lot of academics in a lot of places would not do that," says Badman, offering it as an example of how the academic and venture capital worlds can work together for the benefit of entrepreneurs.
The Centre's incubation space at Cass is a good way for the investment team to get to know the Cass alumni and assess their potential, without immediately handing over any cash. So far seven companies have taken space - located on the edge of the City - before moving on. The office space is home to two companies at the moment. One is Accutrainee, launched in September 2011 by Susan Cooper, a Cass Executive MBA graduate from the class of 2010. She took the Centre's New Venture Creation Programme, which is run by Julie Logan, Professor of Entrepreneurship at Cass, and Nick Badman. The programme, now in its third year, runs for a week each June and aims to help budding entrepreneurs develop ideas that can grow into substantial businesses, spotting any pitfalls along the way and offering advice on investment deals and shareholder agreements. Attending the programme makes would-be entrepreneurs eligible to apply to the Cass Entrepreneurship Fund. Also eligible are Cass alumni and established business owners who have attended the Better Business Programme, a development programme run by Your Business Your Future, in association with Cass.
Susan Cooper, 37, was a banking lawyer with Hogan Lovells, one of the City's largest firms, but was keen to explore legal outsourcing. Tough times and increased competition mean law firms have been reluctant to take on a lot of trainees when they do not have a clear idea how many newly qualified solicitors they will need in two years' time. In recent years there has been a 23% reduction in the number of trainees taken on. Outsourcing low-value legal work overseas has compounded the problem as this is the work typically done in-house by trainees. Accutrainee employs aspiring solicitors then places trainees with firms for agreed periods. The trainees get the experience and the secondments allow firms to cut costs and manage graduate recruitment. Small practices that cannot provide the breadth of training required will now be able to pool their resources and take on trainees as a group. Accutrainee structures the training and pays the trainees' wages and benefits, which are above the Solicitors Regulation Authority (SRA) recommended salary levels. It also guarantees to pay salaries even if its trainees are not on secondment. Susan Cooper is signing up law firms, establishing what their trainee requirements will be and then matching these to her intake. She expects some of her trainees to be in work in the spring. Olswang, the London-based international law firm, is the first to say publicly that it supports the idea. Cooper says: "Once people understand what the model is trying to do we get fantastic feedback. It's a traditional industry and I have no doubt things will take time, but the model is designed to work alongside a firm's existing graduate recruitment processes as well as stand alone."
Another industry facing significant change is financial services, and in particular banks. Bob Diamond, the Chief Executive of Barclays, said in the BBC Today programme's inaugural annual business lecture in November 2011 that the first task was to restore public confidence. Trust, responsibility and citizenship were all themes that banks had to address. It must have been music to the ears of Alberto Lopez-Valenzuela, a Cass Executive MBA alumnus and the founder of Alva, a corporate reputation analysis business. Alva has graduated from the Centre's incubation space to its own offices and now employs 15. It has secured £675,000 of investment, £375,000 of it from the Cass Entrepreneurship Fund. Backers include Andrew Vickerman, the former Head of Corporate Affairs at the global miner Rio Tinto, who is now Chairman of Alva.
The company has also recruited Mark Rigby, the Head of Corporate Affairs at Sainsbury's, and Alan Schofield, an adviser to John Prescott when he was Deputy Prime Minister, as non-executive directors. Lopez-Valenzuela says: "We help companies understand reputation. We tell them what it is, why they have it and how their reputation affects their business. We are bringing clarity around the knowledge of reputation. Companies have struggled with finding a statistical way to analyse their reputation." Alva's algorithms mine online sources to assess sentiment and the company combines these findings with other data such as public polls and financial results. The operation has impressed more than a dozen FTSE 250 companies which have become clients. Lopez-Valenzuela, who has a background in economic analysis and media, says the idea is to help companies to articulate their reputation and create "reputation custodians" across their operations, who will act when decisions are made that will have a negative impact on reputation.
Alva has adopted a high-profile approach to attracting clients. It creates publicly displayed indices that track the changing reputations of the target companies. It created a live index on Utility Week's website and now has most of the big six utility companies as clients. "We have to be bold, brave. But we are also very confident about our methodology," says Lopez-Valenzuela. That confidence has in part come from the supportive environment in which Alva has been nurtured. Lopez-Valenzuela says: "The support of Cass has been absolutely critical and crucial - 2009 was a difficult time to attract investment, but from an early stage Cass was very interested. We submitted our plan in September and by the beginning of November we received the term sheet. And once we had that stamp from Cass, that they had done the due diligence, it gave a lot of confidence to other angel investors. "Since the launch of Alva we have had regular contact with Peter [Cullum] and the Dean [Richard Gillingwater]. Peter is someone to look up to. He is very shrewd but also very fair. He said to focus on three things: making money, doing good and having fun."
Lopez-Valenzuela said other budding entrepreneurs keen to engage with the Centre should make sure they have done their research. "You could make the mistake of thinking it is a university with a committee [of academics] asking fairly esoteric questions," he says. "But no, it's done by people who have been venture capitalists and by people who have been brought in specifically for their experience." Nick Badman has also considered how the Centre can back individuals who have entrepreneurial flair, but have not yet come up with the right idea. It may lead to the development of a matching service: placing alumni with clear potential in charge of existing businesses that require new ideas and energy at the top. "One of the things we are thinking about is whether we should be encouraging those people to buy into businesses," he says. "It's a possible evolution of the fund." Owners of established businesses can sign up to the Better Business Programme run through a partnership between the Centre and Your Business Your Future. Led by Gerard Burke, Senior Visiting Fellow at Cass, Your Business Your Future runs development programmes for owner managers who want to take their business to the next level. Tristram Mayhew, founder of the tree-top adventure playgrounds firm Go Ape, took part in such a programme.
The Go Ape centres offer zip wires and aerial bridges, ladders, walkways and tunnels strung from tree to tree in forest locations. Mayhew says: "We started off as amateurs with a passion to do our own thing. With luck and hard work we managed to get up and going. We got to the end of the start-up phase in the first four years." He adds: "I look back and think that was when we grew up as a business. From being what you could call enthusiastic amateurs it gave us the first of the tool kit to go on, and challenged us." Mayhew also realised the value of setting ambitious targets. "In 2006 we set ourselves the target of doing 30 courses by 2010. We now have 33," he says. "I can say that was down to the challenge we got on the programme. It was a significant investment but worth every penny." Badman says the Centre for Entrepreneurship will build its reputation from the experience of entrepreneurs who use its services, such as Cooper, Lopez-Valenzuela and Mayhew. He is in no doubt that "if we combine the education and development programme side of this with money, we will create fundamentally better businesses."
Richard Tyler is Enterprise Editor at the Daily Telegraph and the Sunday Telegraph.