Background After 8 years working in the audit department of Anderson and Cawley, chartered accountants, Carl Munro was ‘more than ready for a change of direction in his professional career, Three weeks earlier, Carl had joined Chrysalis Limited, a business services company specialising in start-up and growth companies, as a consultant in its recently created “business incubator". ‘The incubator unit provided a range of specialist advisory and support services for start-up companies throughout the various stages (and related financings) of their early development. Unusually for a consultancy company, Chrysalis charged its clients a two-tier fee: an initial payment in the form of share options in the company and a relatively small monthly charge. Carl had always liked the energy and excitement of start-up companies and was looking forward to the prospect of working on a range of non-auditing, non-financial issues. Carl was also excited by Chrysalis’ innovative bonus scheme. Each consultant worked on three projects where they received share options in the client companies - Chrysalis passed one-third of the non-cash element of the fee directly to the consultant. Although Carl had fantasised from time to time about setting up his own business, he was unwilling to risk everything on a start-up business; Carl was, however, attracted by the upside of an “equity kicker” For Victor Rawles, head of the incubator department, the success of the incubator was as much (if not ‘more) dependent on the selection process, as on the value-added services that they provided to companies within the incubator. The selection process ‘was a strenuous one, based upon an in-depth evaluation of the proposal and the management team. In the first stage consultants screened the ideas to eliminate Chrysails Limited the “non-runners” as early as possible - an essential step given that the incubator was inundated with proposals. (Rawles estimated that they received about 120 proposals for each one they selected for the incubstor.) Then they would meet with the proponents of the ideas that seemed ‘most likely to succeed, conduct further due diligence on the team and the business concept, and make the final selection. ‘A week earlier, Carl had received from Rawles a summary list of proposals that had been received over the previous week Although Car! found it difficult to screen the proposals with what he thought was a minimum of information, Rawles pointed out that it was an essential skill that he would have to lear. Earlier that morning Carl had looked over the list and had quickly eliminated a few of the ideas. First to go was a software proposal that he felt ‘was a project, rather than a company - it was focused on one product in a relatively small market and did not have any clear way of assuring future product development. He had also eliminated a desktop publishing proposal (@ low value-added, me-too idea), a retirement home concept (Carl felt that it was too much of a property play), and several other “non-starters”. Carl was left with six proposals, and he now had to select two which he would take to the next step and meet with the management team. This would be his first test to see if he could select ideas which had the potential to grow into successful, profitable companies. More importantly, from his own personal perspective at least, it was a real opportunity to begin building a nest egg for the future 1. The Sports Inn The Sports Inn is a proposed themed sports restaurant concept. The core service is the Gelivery of a high quality eating experience in an exciting, stimulating sports-richLandon Business Schoo! atmosphere. The restaurant will be designed as a “sports palace” featuring mementos of key sporting events (the World Cup, the Olympics, etc.), High-definition TV screens will provide live coverage of top sporting events as well as video clips of key moments in sporting history (i.e. England’s winning goal in the World Cup in 1996), celebrity sports stars will be frequent guests in the Sports Inn, and over time it will build up a sports merchandising service. The Sports Inn restaurant concept is intended to take advantage of two growing market phenemona. The eating-out market, in the UK has been growing rapidly over the last decade and is now worth in excess of £15-billion; themed restaurants (TGIF, Old Orleans) has been one of the fastest growing segments, At the same time, the general public interests in sports has increased dramatically and spawned a number of successful specialised sports media (Sky Sports). The target market for the Sports Inn is the male sports enthuasiast aged between 18-35. A site for the restaurant has been identified in central London. John O' Hagan (32) is a highly experienced salesman (and avid sports fan) who has worked in the consumer products area for almost 10 years; John will be the managing director. Nigel Haws (28) eamed his way through college working in the restaurant business; since that time John has worked in a number of leading UK retailers including, Sears and Dixons; John is operations manager. 2. The Piccadilly Collection The Piccadilly Collection will be a specialised selection of high quality branded British goods that will be distributed by mail order to Japanese businessmen. The Piccadilly Collection will focus on high quality brands suitable to mail order distribution; it will include shins and Chrysalis Umited accessories (ties and cuff links), kninwear, bathroom items and personal accessories. Only goods which reflect the best traditions of British craftsmanship, tradition, and heritage, will be included in the Piccadilly Collection, With a population of more than 140m, one of the highest per capita incomes in the world, and the third largest direct mail industry in the world, the Japanese market is an attractive one. The team believes that there is a market opportunity for quality UK products and has created the Piccadilly Collection in response. The target market for Piccadilly goods is the 27-45 Japanese businessman, in the upper income of his age group. As such, he is characterised by 2 conservative taste in working clothes and an emphasis on good dress sense rather than originality - the Piccadilly Collection has bbeen chosen to respond to these needs. Because of the prevalence of purchases by wives for men, middle class married women will also be targeted A catalogue written in Japanese will be published biannually, the costs of which will, in the first instance, be bome entirely by the company. Once it has established its target. market in Japan, however, the suppliers will be asked to contribute to the cost of development of the catalogue Piccadilly will initially send out 50,000 brochures to a test market targeted via rented mailing lists; over time it expects to build up its own house file of regular buyers. The company will use a third party call centre in the UK and Japan to process the orders. The UK based call centre will be staffed with Japanese nationals working an overnight shift to coincide with Japanese daytime (orders from the UK centre will be sent electronically overnight to the UK in English). Stock will be held at the UK call centre from where all goods will be picked,London Business Schoo! packed and dispatched. The price of goods in the Piccadilly collection will be at a discount to Japanese retail prices; payment will be made by credit card or by postal transfer. The Piccadilly Collection was developed by Therese Sampson (29) and Guy Lingard (30). Therese worked for 7 years in a large UK retailer where she has held management positions in merchandising and marketing; Therese will be managing director of Piccadilly. Guy has been a buyer for 5 years and also has experience in inventory control and financial management; Guy will be direct mail operations director. 3. Corrosion Management Services Corrosion Management Services (CMS) plans to capitalise on a patented software process that can detect corrosion in plant and machinery as it occurs (on a real-time basis). CMS intends to develop and sell a software system which incorporates the process, enabling companies to detect corrosion and immediately take corrective action to preserve their plant and equipment. The market for such systems would include virtually all major process control industries (oil & gas, power generation, chemicals, petro-chemicals, etc.) where improved maintenance and increasing the useful life of plant and equipment can have a major impact on profitability. The CMS product will enable process companies to connect various sensors which already exist on their plant and equipment to the software platform, thus enabling them to monitor on a real-time basis the health of that plant and equipment, monitoring not only corrosion but many other factors, such ‘as temperature, vibration, and performance. Such real-time management (especially of corrosion) is not available today and will enable companies to perform maintenance functions on an as-needed basis, often fully Chrysalls Limited automated under the control of the software platform, resulting in significant maintenance cost savings. The partners estimate that it will tke nearly two years for the software platform to be written and field tested, after which sales of the system will begin. The algorithms were developed and patented (personally) by one of the two partners in the venture, James Healy, a corrosion scientist at Manchester University, recognised as one of the leading universities in the world in the study of corrosion. His partner, David MacDougall, has extensive sales and general management experience in oil and gas production and shipping. 4, Mediacom Associates - Mediacom Associates (Mediacom) is a specialist media consultancy being set up to provide strategic advisory services to companies operating in —the telecommunications, media. and entertainment industries. Peter Hyams and Carla Shell, Mediacom’s two founders have a combined experience of 20 years in the media and telecommunications consultancy field and an established position as “opinion” leaders’ in their field, The company’s target client base consists of European companies, or companies with a European market focus. ‘The market for strategic consulting to the media and telecommunications industry is large and fast growing, These industries will form the bedrock of the economy of the 21st century and are currently witnessing profound discontinuous change. Mediacom believes that these industries, and the issues facing the key players therein, are sufficiently complex to justify the delivery of an indepth specialist service Furthermore, this will provide Mediacom with a key competitive advantage, supportLondon Business Sehoo! . the delivery of a high value-added, premium priced service, and enable Mediacom to attract (and retain) a high calibre motivated team of professionals. The founders of Mediacom have proven their ability to build up a media consulting practice within large consulting companies. In particular, they have shown the ability to forge relationships with leading media and telecoms companies world-wide and to work with clients over a long period - the hallmark of a successful consulting company. They believe that the time is now right, and the foundations are in place, to build an organisation capable of delivering the specialist service that these companies increasingly require. Peter Hyams is a graduate of a leading US business school. On graduation he joined Arthur Andersen where he was instrumental in building up the strategy practice within their Communications practice. Carla Shell has worked as consultant in the media sector for almost 10 years and was latterly one of two partners in the media department of Strategic Planning Associates, a leading UK. management consultancy. 5. Nexor Services ‘Nexor Services (Nexor) will provide a high quality office accommodation service to multinational companies (primarily), initially in London, and at a later stage in other major European capitals. Nexor will provide “instant offices,” short- and medium-term furnished office accommodation in Central city locations, supported by a full range of office services, including secretarial support, and state-of- the-art computing and communications infrastructure (digital telecommunications services, real time video conferencing). Nexor intends to become the “Hertz” of the office service business. Chrysalis Umited The Nexor service concept is based upon the premise that a combination of rapid technological change, deregulation and corporate downsizing is radically changing today’s workplace. Speed, responsiveness, and flexibility, are essential to corporate success, and the serviced office concept provides a tailored response. In the US, the market for serviced offices is well developed, in Europe markedly less so, The European market could, however, ultimately exceed that of the US, given the emergence of a genuine Europe-wide market. Nexor intends to respond to this market opportunity, ‘The target market for the Nexor service will be the multinational which requires a small, sometimes temporary, presence in a European city, and needs a convenient place to set up at short notice. The benefits for the company will include avoidance of capital expenditure, reduction of _ monthly overheads, elimination of direct responsibility for employees, flexibility, and access to the latest technology. The first Nexor service centre will be set up in London; at a second stage, a network will be developed connecting the leading European cities. Nexor will also form a “code sharing” agreement with a leading US office services network. ‘Nexor will be managed by a three person team. Keith Hickson, 38, has 12 years’ experience working in a number of European multinationals (Procter & Gamble, Philips, Whirlpool); Keith will be the managing director. Rachel Cassell, 31, has worked in marketing in a number of multinationals including IBM and Shell; Rachel will be Marketing Director. Roberto Oppenheim is an IT consultant who has worked as adviser to a number of UK corporates; Roberto will be IT director.London Business Schoo! 6. Advance Trainir~ Systems Advance Training Systems (ATS) aims to build a sustainable international position in the development, marketing and distribution of high-quality, premium-price off-the-shelf and semi-tailored business training software. ATS" products will be based on a Proprietary software engine designed to allow the rapid creation of new training titles. These titles will use a combination of tutorial animations, a simulated business environment and artificially intelligent coaching to allow the user to "lear by doing". Computer-based training (CBT) has emerged as one of the most important applications of multimedia technology, particularly in the corporate arena: the multimedia corporate training applications market within Europe is currently $507 million and is forecast to grow to $8.4 billion by 2005 (Datamonitor). CBT is more efficient and effective than other training alternatives: itis self-paced and allows users to focus on the areas where they are weakest; training typically takes 30-60% less time than in the classroom; the learning is active rather than passive; and the use of animation, video, sound, and humour, facilitates understanding and recall. ATS" target customers span a wide range of company size, location and function, ftom small business heads to corporate middle managers, functional specialists, professionals, students and government employees. In general, it will target innovative companies which place a high value on training. In addition to the sale of individual titles, the company’s productiservice range will include semi- tailored versions of the titles for large clients. facilitated. onsite training sessions oneline tutoring. and the sale of updates and add-ons. Chrysalis Limited The title to the underlying software engine belongs to one of the two partners, Peter Conway (35), a former management consultant with McKinsey. His partner. Victor O° Shea, is a trained psychologist with considerable experience in multimedia production. The first two titles, in strategy and marketing, are in an advanced stage of development.Chrysalis Double “0” Software Double “O” Software company has developed a financial planing software based on object-oriented technology to be used by small to medium sized companies. Object- oriented technology allows large complex programs, such as financial forecasting models, to/be assembled from manageable chunks of code called “objects”. Object- oriented tethnology has been fighting its way to become a mainstream technology displacing’ fhe current relational technology which is backed by such heavyweights as Oracle, IBM and Microsoft The main advantage of the software is to do away with endless formulas in cells, such as in spreadsheets, which most companies use as a basis for preparing financial models. Most companies create and re-create such data throughout the year which is not only prone to errors, but hugely inefficient. Double “O" Software guarantees to be error free and to vastly improve efficiency. It has recently aligned itself with some consulting firms to validate its product. Double “O” has not had any sales to date, but many industrial companies have expressed an interest. A recent market study undertaken by the company forecasts worldwide demand to be conservatively around £50m. Jason Tripp (34) has an engineering degree from Cambridge University who has been developing and coding the software for the past 18 months. After leaving University Jason joined a small, but reputable software house where he worked for 5 years until the company was sold to a big industry player. Not enjoying the corporate world as much as he thought he would, Jason decided to leave the bigger company and go on his own. He set up a consulting business from home selling his programming skills. Although this venture was successful his true desire was to develop his own software product which is how Double “O” originated. Jason will be operations and technical manager. David Callahan (45) is an experienced manager who recently left a large computer hardware company because he was excited by the prospects of Double "O* Before working for the computer hardware company as a director of sales, David managed the European division of an American graphics company. David will be the Managing Director and head up the marketing and sales initiative.