Thursday, 28 February 2008

Taking deep science to market – Plastic Logic

Plastic Logic has grown out of the Cavendish Labs in Cambridge from the work of Professors Friend and Sirringhaus. The firm is at the cutting edge of technology, built on fundamental scientific inquiry (with papers in the top journals and high citation indexes). It presently employs 150 people and as a firm it has absorbed $50m for research and development (after the time in the academic labs of Cambridge) and now a further $100m to develop the factory (not counting any subsidies from the German Government for the factory in Dresden). All in all not a garage start-up by sexy ponytailed fast talking entrepreneurs, but a deep science based company.

For more information about the products and processes please look up the website for Plastic Logic.

From a talk on Enterprise Tuesday at Cambridge Unievrsity

First a few remarks from Prof Richard Friend:

“The proposition is that if we can use plastics like ink – but replace things that are useful like silicon, to provide silicon like functionality, then we can make a great revolution. We can get rid of icons like the huge factories and move to a manufacturing method where objects can be made cheaply…..”

This thinking got the first company underway – called Cambridge Display Technologies now owned by Sumitomo. The fundamental proposition is based on what are known as Polymer organic light emitting diodes (P-OLEDs). Even before CDT, the academic work was published in 1988 and there has been a stream of publications in leading journals in parallel with company development

The progress from scientific inquiry to commercialisation is a long journey and the challenges at the technical level included a search for stability of the product, scalable manufacturing processes, and finding enough performance from transistors so that the end product can do more jobs

“From when basic science was being done – to how to translate this into a product that can be scaled up – when this happens you know that the most interesting things happen in an industrial setting….”

However the virtue of a University setting for research is that we can’t keep knowledge secret, but we can patent and get value, especially if you can get a portfolio of a wide enough interest. We filed a number of patents before we published. And have filed even more patents as a company. So – in 2000 we raised £1.75m (Amadeus, Dow Ventures, CRIL) and appointed a CEO – Stuart Evans – when it felt right to form a company

There are probably three major constructs that scientists need to understand; the differences between doing science; doing technology and doing business. Each is very different and this has an impact on the nature of people that get hired into the business.

As academics we should not be ashamed of moving things into business, but we should be candid, because the interaction between academia and industry can be very valuable. If we look at plastic electronics as an example most of the research and engineering run in parallel, where the interactions, inquiries and work run backwards and forwards. Hence the University environment also gets strengthened by such interaction.

When firms are being kind to us they recognise and say that we lead them into the future. And because managing is not always straightforward we need to recognise the ultimate limitations of the Universities ability in commercialisation. Hence we need to be nice to companies. There is a very positive benefit for both parties.

A few highlighted remarks from Stuart Evans – the founding CEO

If you are going to “make it happen” by taking a deep science project to market there are a number of decision points and critical success factors. Here is what we have learnt so far:

One of the most critical decisions is to decide when to go commercial, when it is no longer a project in the lab. This requires a sense of critical mass of events, evidence and belief in the product’s future. Of course from here the next decision is whether or not to start a company. In the case of plastic electronics, there was only one choice – a company had to be started.

From this key decision the next stages include finding a top name ambassador who also believes in you and your project. This person provides a strong signal to the investor and business community that there is something in the opportunity that draws others to it.

The founders need to then raise some money to get the very early stages of the business concept underway, file patents, get basic communication “out there”.

Then you do need a CEO – who will make things happen at a very practical level, like help to raise money, hire the right people, get facilities organised and start to get to customers and build commercial evidence for further investments and commercialisation.

From here on the CEO needs to find a way to attract a top team and the very early team at Plastic Logic were absolutely at the top of their game, not least Henning Sirringhaus who made it to a Professorship at Cambridge before he turned 40.

There were a number of decisive moments, when investors put in money, including some of the top Fortune 500 companies. One of the major lessons we learnt from that experience is that try and get more than one of them to invest because you can get a better balance in the relationships. In other words you will not become dependent on one set of relationships – which can leave you in a vulnerable position. The trick is to find a lead investor, whose reputation in the market place is gold plated. This lead investor will attract others to follow.

The questions and decisions about where and how to make money – in other words building the business model is perhaps one of the most complex, once you have got underway.

There is a kind of Moore’s Law to the way cash is used up in high and disruptive technology. We had to take the technology itself from say 5 working transistors from a pool of 8 to getting 2 million to work reliably – if we were to make anything useful. This is a huge leap from the lab to the market place and requires a lot of clever engineering, money and smart people. It also requires a huge level of faith.

This level of faith comes from knowing that if you get it right you can lead to new iconic products for the future. So for example with the invention of transistors came great products of the past – the Sony walkman is an example and with further miniaturisation has come mobile phones, the blackberry and other products. So although some of our sceptics say that Plastic Logic is on a hopeless journey our belief is that we are positioning ourselves to be an iconic company. Remember that Apple has transformed itself from being a PC company to a major player in music – through the creation of an iconic product – the ipod.

From our perspective you need great science to make great market opportunities. And this in turn means if you have a great product you can be transformational in your vision.

All this requires cash:

So we have raised cash in a number of rounds starting with the very early $1.75m; then a further $3m to hire research staff, then $17m to scale up operations; $30m for a prototype line and most recently $100m for a factory in Dresden.

Take home lessons so far:

Find customers very early on.
Proof of Concept is not a prototype
Watch out for the big prize
Keep innovating and inventing
Build teams within teams
Focus on industry structure
Search for low cost capital

FT has been generous – reports that we have the best chance of being a $1bn company from a University spinout

Avoiding big mistakes – Lessons from a leading investor

There are very few investors in the UK with the kind of education and training that Dr Hermann Hauser has received. He completed a PhD in Physics at the Cavendish laboratories in Cambridge, the home of several nobel prize winners and source of inspiration to many generations of researchers. (add link to HH and Cavendish)

Following this training Hermann went directly into creating his first start-up – Acorn computers, described at the time as the first ever home computer, now called PCs. In other words he combined his insights in Physics with entrepreneurship. But as he then described at his keynote speech on Enterprise Tuesday, there was much to learn about doing business. Since then Hermann has personally invested in around 60 businesses and as co-founder of Amadeus Capital – probably the leading technology venture capital fund – he has influenced and shaped a further 60 or so investments.

Hermann was candid enough to talk about some of the mistakes he has experienced so that future entrepreneurs can avoid these. Actually making them seems rather easy, getting it right seems much harder! And Hermann has a stronger track record in getting it right than getting it wrong. Phew!

Here are the lessons he learnt.

Inventory. In a business that sells direct to consumers, especially if it is product based, you just have to understand when things will sell and get the volume of inventory right. At Acorn, it took a number of years to scale up production to the levels that were being demanded, but just as production levels were resolved, competition came in with products, timed their entry better and this left Acorn with unsold computers. With cash tied up in inventory – the firm had to be sold on and exit was achieved through a takeover by Olivetti.

Strategy. When you are taking a product that is new to the market, it is somewhat easy to go down blind alleys in terms of market strategy. In the case of Acorn, the team did not spot the growth of set top boxes and later with another firm they focused for too long on “switches” rather than on the chip they had designed to solve the switch problem. Getting the strategy right, together with understanding the business model and how revenues will flow is probably one of the most common challenges faced by early stage companies in the technology sector.

Not believing in yourself. As part of a growth plan – one of the ways of achieving scalability is to merge with a larger organization that has market access. But – if you do not choose your partner carefully you might find that in reality you could have done it better yourself. So a lack of self-belief might lead to the thoughts of mergers or trade exits that might come too early.

Relying more on debt than equity. In high tech when there is a great need for cash, some entrepeneurs are reluctant to part with equity and prefer to borrow. The essential difference is that if and when times get hard, banks can demand their money back. Not understanding the risk profile and using the wrong type of money to grow the business can be expensive to the business. The example provided was of a firm called Harlequin that racked up £30m of debt, rather than take in equity and eventually the bank called in the money and the firm had to be sold off for £1.00. The lenders were Natwest. (was this an early example of NatWest in the so-called sub-prime marketplace?!)

Market size estimates. Entrepreneurial over-optimism is central to self-belief and risk taking. But – thinking in terms of global market size and assuming small percentage market share is dangerous. The mistake is in not understanding market segments, customer needs and not having conversations with potential buyers.

Estimates of time to market. Although markets and customers may well have been identified, it always takes longer to persuade customers to buy! They have internal reasons to better understand how your products or services fit, issues of integration, finding budgets, trusting the suppliers and a host of other factors, all of which can delay decisions and actual spend. The delays eat into the cash available to the firm and if combined with other risks in the business can be one of the most agonizing reasons for failure – so near yet so far!

Understanding the window of opportunity. Timing. Markets and customers respond to needs and you need to get your timing right. For example – no good bringing a Christmas product out in January, or trying to launch a product solution when there is no infrastructure available to support it (service back up and so forth). Markets shift rapidly and the entry of substitutes or competitors can close a window of opportunity quite quickly. The team needs to remain alert.

Technology failure. Taking an idea from a laboratory to the market requires, proof of concept, prototypes, understanding methods of production, ease of use and scalability. At any stage in this cycle of events the technology can fail. To avoid this you will need the right type of people around you and this is yet another judgment call, to understand the critical success factors.

Amount of money needed to get to market. There is a simple rule that for every $1 to invent it takes $3 to prove the product and $10 to take it to market. And not having enough money to go to market can kill a business quite early on. Underestimating the challenges, harsh market realities, skills and communication experience, trust building needed and operational effectiveness of getting to market can all contribute to runaway costs.

Overestimating the attractiveness of the new product. As founders of a business or at least as founders of the business idea – we can easily seduce ourselves of the merits of the product. In reality the product may not do “anything” for the customer. Another bland offering or just insufficient “wow” factor. If people are to buy – they will need the product to really solve a problem they have or have so much fun/enjoyment that they can be persuaded to buy.

Having the wrong people around you. Perhaps one of the most common errors in business and the hardest of all to get right. Much as been said about the importance of having the right people, but the challenges of finding the “right” people, recruiting them, rewarding, motivating, trusting and working together is not at all easy. Often we build relationships with the people around us and so there is a fine balance between being hard nosed about business decisions and thinking of people as a resource in the business with managing the emotional, moral and social aspects of working with people.

In summary – getting it wrong is easier than getting it right and so to avoid common pitfalls, try and get some experienced people around you. Read a lot and get training in the basics of business. Build your skills, knowledge and credibility.

shai vyakarnam: Fuelling an entrepreneurial economy needs talent - so is this Government mad?

shai vyakarnam: Fuelling an entrepreneurial economy needs talent - so is this Government mad?

Wednesday, 20 February 2008

Gordon Brown Launches Global Entrepreneurship Week

If there was any doubt about the continued enthusiasm of politicians to provide a strong signal in favour of entrpreneurship - you should take a look at Gordon Brown's speech on the link below.

It seems to me that Mr Brown is among the few politicians or country leaders that "gets-it" with respect to the potential for transformation that entrepeneurs have in their societies. If you were to follow the further links after watching the video - you will see how long and how widespread has been the movement to encourage and empower people to make a difference.
For those of us in enterprise development itis a great delight to see this social movement gainign pace. The celebration of endeavour and success, rathter than envy and scepticism. The tolerance of failure rather than mocking and ridicule. Long may it continue.

So - it still puzzles me that there are economic policies and legislation that constrain people! The threat of freeing the human spirit seems so powerful in some countries (and Institutions) that the country itself runs backwards.

For example - in Poland and indeed elsewhere, Uniervsity Professors are not allowed to have company directorships. Neither are they allowed ownership of intellectual property. The latter I can understand - because in the end IP needs to be vested to a legal entity that can have the rights to negotiation etc.,

But - why would countries - that can see the evidence of economic and human resource policies that are liberal - still continue with top down controls?

Much of continental Europe is held back by these kinds of backward policies, not to mention the continued nonsense of subsidised agriculatre that is holding back the WTO discussions on free and fair trade.

I hope this blog (and more importantly the message of "Mark your Mark") reaches those parts of the EU that normal people cannot reach!

For those of you who are able to influence policy to attain liberty, equality and fraternity - say something!

Sunday, 17 February 2008

From student debt to millionaire – it can be done.

Lord Karan Bilimoria studied Law at Cambridge, but this did not stop him from an entrepreneurial career. His interest was kindled when he was unable to drink the well known gassy lagers with Indian food! He noticed that English ale was not gassy and wondered why there was no lager without gas.

He pursued this interest with Mysore breweries in Bangalore. Cobra beer was born. As volumes grew, the brewing was moved from Bangalore to Bedford, to the Charles Wells breweries. Volumes have risen at 40% per annum and from being a niche entrant to an established brand in supermarkets and restaurants. The big vision for Cobra under present management is to become a $1billion company in terms of sales!

Karan has achieved this trajectory from having a student debt of about £20,000 to building a company worth £145 million in 18 years through a very clear focus. He is so consistent about his values and vision – to aspire and achieve against all odds.

The really interesting story is how he has managed to finance the growth of Cobra over the 18 years! His training as an accountant, prior to his law degree gave him the vocabulary, but his creativity in terms of finding solutions to funding are probably innate. He has used a variety of funding sources to retain his ownership and although he has taken in equity he still owns 50% of his company.

Personal finance;
Credit cards;
Small firms loan guarantee scheme;
Bills of Exchange based on an unused over draft facility of one of his clients; Debtor finance – which means “selling your invoices” to the finance company who then advance you 80% of the money owed to you immediately and the rest after they have paid;
Convertible loans – to preference shares
And finally the use of a “payment in kind” Hedge Fund instrument which I confess is a bit beyond me to fully comprehend!

What do we learn from Lord Karan Bilimoria. The so called “soft skills” are a major strength of the man. It is perhaps the acute awareness of these skills that enables him to leverage the relationships and trust to get the support of some of the smartest people. His personal motto is to go the extra mile; to take initiative, have integrity with what you want to do and continue to be original. It is also clear that he has passion for what he does.

In addition I would say – learn the language of business and finance! It is merely another language and no more complicated than any other discipline.

The common sense of entrepreneurial team building

Louisa Fletcher is currently the founder and MD of Propertypriceadvice – an internet business. She is also hugely successful as a person in terms of wealth and clarity of thought. Louisa comments on property in the media. She also seems to have swallowed some high powered batteries. Louisa is also young and pretty, so she ticks many boxes. Louisa recently delivered an inspirational speech on Enterprise Tuesday at Cambridge.

But what has this young, dynamic woman got to say about the way she hires, and then builds people into her entrepreneurial businesses? Surely we need to hear from the greyer haired entrepreneur to really understand the issues? Not a bit of it. She is also very smart and articulate.

Here are some tips that she has picked up, used or learnt through her own career:

You need to be able to make a “Land Rover bonnet” speech at the spur of a moment, much as a military leader might have to do to send his troops to battle. In other words leaders need to have the skill to be able to inspire their colleagues when needed.

The leader also needs to try and instil a team ethic where everyone comes together, especially at moments of urgent need. Can individuals within a group see themselves as team members and pitch-in when required.

Leadership is also a quality where you need to be able to “do stuff”. In other words your qualities of leadership should not start to create a distance from the coal face, especially in early stage and growing businesses.

The challenges of inheriting a team from an earlier leader are quite different to hiring your own. You need to spend much more time to get inside the heads of the people, to understand where they are coming from and what makes them tick.

Although you have a single team, there are several individuals and each has a separate need and motivation. It is really necessary to understand the strengths and weaknesses of the team members and to ensure that you can draw on the best side of each person.

Sometimes – if the business is not going well – you may need to downsize and it is here that a leader can be seriously challenged. Not so much with the “firing part”, but with the retention of those who stay. Dealing with the sense of guilt of the “stayers” and motivating them to give of their best in a really bad situation. You end up splitting teams and destroying loyalties. Take advice and have a mentor handy to deal with the pressures. In these situations you need to show the “balance sheet”, be open and people will understand more easily the driving forces of your decisions.

The worst form of team building is spending 4 days in the Brecon beacons getting wet, hungry, cold and irritable. The best is to find out what makes people tick by asking them and then developing processes to meet those needs.

Fear and respect are sometimes used in management. So is trust. People seem to use these sentiments in different ways. But at the heart of a positive team experience, there must be some combination of trust and mutual respect!

In hiring future team members, Louisa only uses networks of people. This secures trusted individuals, probably with shared values. Rather than interviewing people she also has them do a day’s work or a short assignment – a sort of “try it before you buy it” approach.

Her phone is never off – especially for colleagues. Louisa likes to be “always available and accessible”. Perhaps she is young enough for this extreme measure! Often the calls are to seek her confirmation and reaffirm her trust in the team, rather than to make decisions.

At the tail end of her speech we heard a metaphor – managers need to be like a pane of glass. To stop the bad stuff reaching people who report to you but to allow the light to shine through.

As a self confessed control-freak Louisa has worked hard on gaining a better understanding of team building and leadership and she exemplifies the possibility of making a success of taking on a leadership role.

Tuesday, 12 February 2008

Do Finns take risks?

Laurea University of Applied Sciences made a strategic choice to implement, develop and use Learning by Developing as an operational model in order to contribute to the growth of the region around Helsinki, as well as to provide tangible employability benefits to its population of 8000 students. The LbD model at Laurea is work in progress but a quick review of it indicated a number of useful lessons.

Learning by Developing (LbD) is an innovative operating model which requires students to undertake projects rooted in the world of work and acquire two sets of competences. The first being generic such as work/life knowledge and skills and the second are subject specific competences.

Whatever the definition of LbD, its overall “pedagogical” lessons, the vision and its values, its implementation, the practicalities, or even the sheer magnitude of challenges in getting it adopted by 500 faculty, the most striking feature of the programme is that it turns the intent of the Institution by 90 degrees.

From being concerned about tick boxes of grades and achievements, from form filling for the Government, from being concerned about teaching units, efficiency, resource utilisation and so forth to a deep concern about enabling students to learn what they need to learn so that they may succeed in their lives and careers. This University is being run as if students matter! A value set not unlike the seminal work of Schumacher in the 1970s whose book “small is Beautiful” was a turning point in liberating the spirit of individuals.

Do Finns take risks? Well at Laurea they seem to – but they do so with a very deep sense of values, based on trust that the students will rise to the challenge and take on the behaviours and aspirations that are being expected of them. It is very early days yet to see if this is going to work, but the evidence I saw is that when you believe in people they respond. So, maybe they do not take risks after all!!

Friday, 1 February 2008

Increasing your odds of success in social enterprise

Duncan Goose of One Water – gave a talk to around 250 Cambridge students recently on Enterprise Tuesday. We wondered how he would bring his personal experiences together with a topic on increasing the odds? Would it be just a “Frank Sinatra” story of “I did it my way” – or would there be general lessons we could all take away?

Duncan was in marketing before his mid-life crisis. And yes – he bought a motorbike – but not a Harley Davidson. He bought a bike and went round the world!! Already this man stands apart from his peers. It was during this journey when the purpose and meaning for his life became apparent, especially when he reached Africa only to find that there were so many people without the most basic of human needs – water.

So he created One Water, established an entirely transparent accounting system and by seeking and receiving help he has started to sell bottled water. Why? Because the profits from the sales of water goes to installation of “play pumps” near or at schools. These pumps use child play-power – they are roundabouts and as children play on them they pump up water –approx one litre for every rotation!

The consequence of this? Children come to school. The water is also used for cooking, the benefits of local community and for growing vegetables. A wonderful circulation of benefits in the local ecosystem. The funding for these pumps comes largely from the profits, so the business model is actually sustainable. And Duncan tells us that his little company made more profits than Nestle’s brands of water! This is some achievement of goodwill over capitalism.

So – how does Duncan “increase the odds – when he is cash strapped, resource hungry and a young emerging business?

Lesson1: Start with a goal – a vision that is truly clear and simple to articulate. I can’t agree more with this. I am trustee of a charity and we came up with a goal for the area in which we work – we want it to become a “cataract free zone”. Nice and simple and like water – eyesight is a basic need that can easily be provided.

Lesson 2: Know how much you are prepared to lose in the pursuit of your vision. It is not about being a risk taker – but more about defining your risk limits. Are you prepared to lose your home or your family? What are your limits?

Lesson 3: Be prepared to be contrarian and have the self-belief that what you are doing is the right thing. Of course there is a fine balance between self-belief and stubborn error. You need to be balanced between being open to suggestion and having a strong resolve. Only you and perhaps a mentor can sort this out. You will need to break rules (not the law) of business. Being creative and imaginative is more powerful than taking competition head-on.

Lesson 4: One of the key attributes of entrepreneurship is the need for and ability to manage credibility. You need to appear bigger than you are as a business. You need to project yourself like a peacock! A fan of feathers to attract attention. This is not to say that you should be deceptive – but it is about your mentality – being and thinking like a big business that is starting up – rather than a timid little business that hopes one day to grow.

Lesson 5: If you are getting into social enterprise – one of the strongest values you need is that of Give more than you take. People should always feel that in the balance of relationship they are getting more from you. In such circumstances the goodwill extended to you will be enormous and the combined energy of each person giving to you will propel the organisation forward.

Lesson 6: Action speaks much louder than words. Maybe this is why Nike has its brand associated with the terms “just do it” But in the case of One Water – this action followed a very clearly laid out vision. Action by itself is just irritating!!

Lesson 7: As part of your preparation – you will need to get to know your markets, customers and industries. This sounds like such a common sense statement, yet entrepreneurs, firms and even larger businesses are very weak in this area. It is this “common sense” that is still being taught in ever more sophisticated ways by Business Schools.

Lesson 8: So long as you make a strong link between socially responsible behaviours, good causes and behave in accordance with your espoused values, it is possible for customers to reward you with profits. This is really in stark contract to the pursuit of profit when values can get compromised.

I shall leave it to you to absorb the 8 lessons from a social entrepreneur. We can only delight that anecdote and theory can sometimes merge!