The Cambridge Network Blog

entertaining strangers

Be not forgetful to entertain strangers: for thereby some have entertained angels unawares.

This week we hosted a UKTI group of the Brazilian Venture Capitalists Association, keen to find UK technology to drive the growth of their own country. They met a wide range of local businesses from Cambridge, Peterborough and Norfolk developing agro-bio and clean energy technologies during the day, and went on to a reception for local VCs and angels showcasing companies where the Cambridge Enterprise Seed Fund has already invested.

Some of the local companies have already formed links in Brazil. Green Tide Turbines are developing a run-of-river turbine generator that is particularly suited to powering remote communities in Brazil, and a major Brazilian electricity utility has already offered to pay up to $15m USD to help them set up a subsidiary company in Brazil and form relationships with local engineering firms and academic institutions. Others simply explained the field trial results that they were achieving here in the UK, and the visitors matched them against potential manufacturing partners in their own portfolio.

At lunchtime, we had another separate event, a new Members meeting kindly hosted at Taylor Vinters. 55 people from regional businesses meeting one another and learning how to make the most of the busy upcoming calendar of seminars and grow their own businesses through their own events, news, and jobs postings. The quick cycle ride across to Milton and back was a refreshing wake-up, and walking back into the presentations with the Brazilian delegation I felt a little sorry they hadn't seen more of the town.

After the daytime presentations, we walked from West Cambridge site down to the Backs and into Market Square. The wind was now biting but they wanted to see the historic centre, and understand the college system. It was good to bring them back to an event addressed by Hermann Hauser, whose report on the role of Technology and Innovation Centres is just out. Others there had travelled from Germany and France to mix with this crowd of local academics and serial entrepreneurs and hear about the ideas that could change their own part of the world. I hope we will also be better connected to Brazil.

good to grow

O world, what courage hast thou thus to sing?
Say, has thy merriment no secret pain,
No sudden weariness that thou art young?

This week we met some major corporate investors trying to understand how Cambridge technology can contribute to their growth.

Brazil's GDP is predicted to grow 6% in 2010, and this rate is expected to continue until the middle of the decade. Brazilians are consuming more, with a rapidly expanding middle class and ambitious infrastructure projects worth $500BN in the next 5 years. Brazil is prioritising attracting technology innovation because they need to compete with China and India long term. We're hosting a delegation of the Brazilian Association for Private Equity and Venture Capital for next week, including BNDES, CRIATEC, DGF Investments, Rio Bravo, Portfolio Investments, and Svaros Ventures. They'll meet local businesses with agro-biotechnology, biodiversity-based drug discovery, and bio-energy and get to know the local angel and VC community.

Danaher is an industrial company that has grown at 20% p.a. compound from its original base in Mechanics' Hand Tools in the 1980s to cover Test & Measurement, Motion, Environmental, Product Identification, and Medical Technologies. Locally they own Linx and Leica. They made 20 acquisitions last year - strong brands in areas adjacent existing operations - and they want to get to know our companies better.

P&G sells over 300 branded products in over 80 countries, and operates an Open Innovation model to connect with R&D from outside the company. Today, more than 35 percent of their new products in market have elements that originated from outside P&G, up from about 15 percent in 2000. And 45 percent of the initiatives in their product development portfolio have key elements that were discovered externally. They will be running a Special Interest Group on Consumer Products and Supply with Cambridge Consultants, exploring areas where Cambridge could contribute like personalization of products, Point of Purchase information, healthy living and eco-products. 

These organizations come to Cambridge for ideas that are born global, that can help them serve growing markets in Brazil, China and India as well as the developed world. Unlike some of the venture capitalists we heard earlier in the week, their businesses are generating cash and they can engage where they can see innovation will help them. It is good that they see Cambridge as part of their world.

funding innovation

For who gets wealth, that puts not from the shore?
Danger hath honour, great designs their fame

Yesterday we heard from Amadeus, Atlas Venture and Z/Yen about the challenges of getting funding for technology innovation here in the UK. All three were agreed that little venture capital is available, and as funds raised in the heady days of the dotcom boom end and less new funds are raised there will be even less in future. It seems there are problems both with the dotcom-era VC model of rapid increases in valuations and an early exit (apparently "down is the new up") and with the attractiveness of the UK for overseas investment given ever higher taxes and consolidation and government ownership of our financial sector.

On the positive side, more large corporates are turning to Open Innovation models to find close-to-market technologies, so there are opportunities for early revenues and exits through trade sale (although half of all Tech M&A last year was concentrated among Microsoft, Cisco, eBay, Oracle, HP and Google). Smaller funds and angel groups are still active in some sectors. It is ever cheaper to develop and distribute software, thanks to the internet, and so software businesses that can take an initial investment of $1M and achieve an exit of $20-$30M get funded. By contrast carbon futures, semiconductor or biotech ventures requiring $50M upwards to achieve larger valuations over longer periods are struggling. And companies with investors are having to plan and syndicate to control risks in upcoming funding rounds or where an existing investor sells their share.

Many questioned if government is doing the right things: you can ask the parliamentary candidates for Cambridge debating on 15th April how they will support entrepreneurship and value creation. We'll have corporate technology scouts from some big multinationals meeting local companies through our Cambridge Corporate Gateway from 21st-23rd April. Funding Cambridge ideas to go out and change the world is clearly an art where there is more to share.

managing mobiles

La donna è mobile
Qual piuma al vento,
Muta d'accento — e di pensiero.

Tonight we heard from some local companies managing the software on our mobile phones and other devices. Anglia Business Solutions and RealVNC both talked about the very robust and widely used mobile applications of their software to manage quite different problems.

For Anglia Business Solutions, the mobile data terminal or phone is capturing data for central Enterprise Requirement Planning systems or timesheets or giving mobile workers access to line of business applications like Customer Relationship Management and diaries. They overcome the poor signal quality available when workers are in remote locations or inspecting goods in ship's hold by developing applications on the mobile device that synchronise periodically. By contrast, RealVNC is giving a central operator a view and control of a mobile device so they can help a disatisfied customer get their Smartphone working, allow a games developer wanting to drive input from multiple mobiles for testing to control them remotely, or provide simple linking between a smartphone and automotive systems or home automation devices.

What is common about both companies is the scale and demands of the enterprises they are serving, the huge volumes of mobiles those organizations are trying to manage, and the poor useability of mobile devices and services. Anglia Business Solutions customers like Capespan or G's Marketing and RealVNC customers like NHS, DOD, or NASA will have very bad outcomes if systems do not communicate reliably. Just one of the OEMs integrating RealVNC into mobile operator support, SICAP, has 80 mobile operators supporting 800M mobiles around the world. Today smartphones make up less than 20% of the 1BN phones being shipped each year (rising to 80% in 5 years), but support calls are already 3 times as long as for old style phones and 15% are being returned in the first month.

The other thing they have in common is that as small privately-held companies working with enterprises, they haven't had to tell their story too much locally. It was good to learn more about some local Cambridge software ideas that are changing the world by connecting us all better.

strategic investments

Then the clouds part,
    Swallows soaring between;
The spring is alive,
    And the meadows are green!

This week I was asked to dinner with Vince Cable (Deputy Leader of the Liberal Democrats) to give him an update on Cambridge hi-tech industry. It was a large dinner, but Vince circulated between tables and I wound up being sat next to him for about half an hour.

Vince used to be Chief Economist for Shell, so I mentioned that Arie de Geus has been coaching some of our local CEOs on scenario planning through our Cambridge Leaders Academy, and talked a bit about the companies involved including ANT, ARM, CSR, Jagex, Redgate... He turned out to have worked closely with Arie on scenario planning in Shell in the 1970s. We discussed the positive impact that the strengthening dollar is having for local exporters and I pointed out that our local hi techs often have 70%+ of their revenues from export and are bringing money into the country.

In his open seminar earlier in the evening, Vince had pointed out that whatever government is elected will have to make very large spending cuts. He asked for our input. Exporting businesses locally are being constrained in their growth by congestion. Our local Regional Development Agency, EEDA, has always had relatively low budget compared to Northern RDAs, and flat cuts across the whole country would stall infrastructure investments in transport here. Initially Vince joked that Cambridge had always been congested (he was an undergraduate here), but he did agree that infrastructure was a government responsibility.

Vince had also mentioned earlier in the evening that he had been involved in "picking winners" in the Labour government of the 1970's and that had been a failure. I mentioned our concerns that emerging industries where Cambridge research had given local companies a lead (organic semiconductors, stem cells...) needed financial backing here or we might lose them to incentives offered elsewhere (e.g. Germany's Spitzencluster programme). Vince was sceptical. Many industry lobbies are threatening to relocate elsewhere unless they are subsidized here. I pointed out that our hi-tech companies have a track record of generating revenues with whatever support they are given.

It really was a privilege to get a chance to chat to Vince in the pressures of a general election campaign. Scenario planning gave Shell an advantage because their decision-making processes were better able to cope with the stresses of the oil shock of the 1970. Whatever the financial storms our country faces, we need to help our leaders understand the impact that our region can have.