Neville Fridge - Co-Founder and Managing Director, Asquith Court Limited
[Originally published 9/27/99]
The United States might be the "land of opportunity", but many entrepreneurial opportunities exist outside the US. After graduating from the Harvard Business School and spending five years in consulting, Neville Fridge and a partner started Asquith Court Limited in the UK. Having overcome some initial difficulties with their investors, Asquith Court Limited continues its rapid growth twelve years later and has been recognized by the EC Commission as one of the 500 most dynamic and entrepreneurial companies in the European Community.
What caused you to take the entrepreneurial plunge?
My partner's family had owned a private school in the UK for decades. We perceived a business opportunity to bring US-style day care to the UK market. In the US, day care is available eleven hours a day, fifty weeks a year. In the UK, the standard then was to be open only six hours a day, thirty-six weeks of the year - not much help for a full-time two-career family.
For regulatory reasons we found that we had to buy existing private schools for school-age kids and add on the day care facilities; but the cost of the private schools was low enough, and the shared marketing worked so well, that the numbers were still very good.
How did you finance the venture?
Our backgrounds, a couple of personal contacts and an attractively laid out business plan quickly got us in front of several VCs. We learned that the key to cutting short the due diligence was finding that one person who really personally wanted to do the deal. This took several weeks. As soon as we had a lead investor who had committed to the deal, however, everybody else we had been talking to wanted in. We became aware that the negotiations on this issue that ensued were primarily about trading favors between the VCs - our introduction to their numerous "across-deal" agendas.
How would you describe your relationship with your VCs once you got funded?
Unfortunately venture capitalists experience their own turnover, and our lead investor left to work for the World Bank within a couple of months. When this happens, your new lead investor will never have had to look his partners in the eye before the initial funding and say that he or she is committing to you, your team, and this deal. This issue caused us problems until, at the cost of much distraction, delay and expense, we brought in a new lead investor eighteen months later. To break out of the local UK VC "cartel" (as it seemed to us), we found we had to go all the way to New York.
What else did you learn about working with VCs?
We naively thought that the worst thing we could do to a VC was run out of cash, and were careful not to. We later realized that our particular VCs loved having management teams do this to a good business as the deal terms can then be rewritten in a non-competitive environment. Most VC investments are not instant smash hits, and on those deals the renegotiations were where our VCs were expecting to make their money.
Our VCs then made it clear that they were willing to wait us out. They were confident that they could do so because the business was sound and they believed nobody in the local UK venture capital network would make a competitive financing offer to a company in another leading VC's portfolio. They would all have too much to lose if they started doing this. We found that their confidence was well founded, and that raising capital in the US was our only option.
We later learned that our VCs had plenty of people in their portfolios who would have been happy to explain all this to us, but we were never introduced to those people and at the outset we never went looking for them as hard as we might.
The US venture capital market is much broader and more competitive, and so some of these problems may be less severe. My advice, however, is that in order to assess a VC anywhere, you do need to look beyond the management teams they will introduce you to as their "greatest hits." You should also go looking for the other ones - who will often be at least as eager to share their experiences with you.
The United States might be the "land of opportunity", but many entrepreneurial opportunities exist outside the US. After graduating from the Harvard Business School and spending five years in consulting, Neville Fridge and a partner started Asquith Court Limited in the UK. Having overcome some initial difficulties with their investors, Asquith Court Limited continues its rapid growth twelve years later and has been recognized by the EC Commission as one of the 500 most dynamic and entrepreneurial companies in the European Community.
What caused you to take the entrepreneurial plunge?
My partner's family had owned a private school in the UK for decades. We perceived a business opportunity to bring US-style day care to the UK market. In the US, day care is available eleven hours a day, fifty weeks a year. In the UK, the standard then was to be open only six hours a day, thirty-six weeks of the year - not much help for a full-time two-career family.
For regulatory reasons we found that we had to buy existing private schools for school-age kids and add on the day care facilities; but the cost of the private schools was low enough, and the shared marketing worked so well, that the numbers were still very good.
How did you finance the venture?
Our backgrounds, a couple of personal contacts and an attractively laid out business plan quickly got us in front of several VCs. We learned that the key to cutting short the due diligence was finding that one person who really personally wanted to do the deal. This took several weeks. As soon as we had a lead investor who had committed to the deal, however, everybody else we had been talking to wanted in. We became aware that the negotiations on this issue that ensued were primarily about trading favors between the VCs - our introduction to their numerous "across-deal" agendas.
How would you describe your relationship with your VCs once you got funded?
Unfortunately venture capitalists experience their own turnover, and our lead investor left to work for the World Bank within a couple of months. When this happens, your new lead investor will never have had to look his partners in the eye before the initial funding and say that he or she is committing to you, your team, and this deal. This issue caused us problems until, at the cost of much distraction, delay and expense, we brought in a new lead investor eighteen months later. To break out of the local UK VC "cartel" (as it seemed to us), we found we had to go all the way to New York.
What else did you learn about working with VCs?
We naively thought that the worst thing we could do to a VC was run out of cash, and were careful not to. We later realized that our particular VCs loved having management teams do this to a good business as the deal terms can then be rewritten in a non-competitive environment. Most VC investments are not instant smash hits, and on those deals the renegotiations were where our VCs were expecting to make their money.
Our VCs then made it clear that they were willing to wait us out. They were confident that they could do so because the business was sound and they believed nobody in the local UK venture capital network would make a competitive financing offer to a company in another leading VC's portfolio. They would all have too much to lose if they started doing this. We found that their confidence was well founded, and that raising capital in the US was our only option.
We later learned that our VCs had plenty of people in their portfolios who would have been happy to explain all this to us, but we were never introduced to those people and at the outset we never went looking for them as hard as we might.
The US venture capital market is much broader and more competitive, and so some of these problems may be less severe. My advice, however, is that in order to assess a VC anywhere, you do need to look beyond the management teams they will introduce you to as their "greatest hits." You should also go looking for the other ones - who will often be at least as eager to share their experiences with you.
posted by gnp at 8:34 PM
0 Comments:
Post a Comment
<< Home