Entrepreneurs Help Build Start-Ups by the Batch

Just two years after its conception, Prism Skylabs has made enormous strides.

The 20-person company, based in San Francisco, uses video surveillance equipment to give retailers Web-like data on customer behavior in their brick-and-mortar stores. It has secured more than $8 million in financing from investors like Pacific Partners and Andreessen Horowitz and has contracts with 70 retailers.

But like many start-ups finding success in Silicon Valley and across the country, Prism Skylabs is not the brainchild of a rookie entrepreneur who risked everything. One of its founders is Ron Palmeri, a longtime Silicon Valley executive. He is among a growing group of professed company builders who are parlaying past successes â€" along with their own capital and thick Rolodexes â€" into operating companies and venture funds that work on multiple companies at the same time.

“There’s a group of us who are serial entrepreneurs who know a lot about building something and scaling it,” said Mr. Palmeri, who previously worked with CNET’s founder, Halsey Minor, at Minor Ventures. Minor Ventures used this model to build companies like GrandCentral, now Google Voice, and OpenDNS.

In 2010, Mr. Palmeri started his own operating company, MkII Ventures, with Allison Rhodes Messner, formerly of OpenDNS. The company is working on building out four different ideas.

The concept â€" often referred to as parallel entrepreneurship â€" is not entirely new. Back in the dot-com days there was CMGI, which once had a market value of more than $40 billion before dying a slow death and eventually being absorbed by one of its portfolio companies. Idealab, based in Pasadena, Calif., has been doing this for more than a decade, though with mixed results.

What is new is the number of prominent entrepreneurs and investors who are now going this route rather than staking their fortunes on single follow-up acts or taking less active roles as angel investors or venture capitalists.

“Venture doesn’t allow us to explore, only to accept and deny,” said Michael Jones, chief executive of Science, a builder platform in Santa Monica, Calif. He and a longtime entrepreneur, Peter Pham, started Science in 2011 with $10 million in venture backing, followed by $30 million from the Hearst Corporation.

Most of these investors-cum-inventors are motivated by personal passion to create companies. Under this model, entrepreneurs often tap their own networks and wallets to finance their ideas.

“I don’t have any hobbies,” said Max Levchin, a co-founder and former chief technology officer of PayPal. “This is what I do.”

His first version of this model, MRL Ventures, helped start the mobile business-rating platform Yelp and created Slide, a personal-media sharing service that Google bought for a reported $182 million but has since shut down. His new project, called Hard, Valuable, Fun, or HVF, will focus on a few big ideas with longer time frames.

Like Mr. Levchin, many of the builders came out of the recent wave of technology successes. Garrett Camp, a co-founder of StumbleUpon and Uber, has started Expa to develop new products and services and build teams to scale them. In Chicago, two Groupon founders, Brad Keywell and Eric Lefkofsky, put $200 million, primarily their own money, into Lightbank, an operating company. Lightbank has a staff of 20 and 60 projects in its portfolio, including Belly, a loyalty platform, and Frank & Oak, an online men’s clothing retailer.

Company builders say they provide a missing link in the life cycle of start-ups and do so more effectively than incubators. “The primary difference is focus,” Mr. Camp said. “I plan on creating just a couple companies per year, and spending significant time with all of them.”

Hunter Walk, a former director of product management at Google, said, “What’s often needed at the early stages isn’t more capital in a vacuum, but people with operational experience who can give their full attention to these companies.” Mr. Walk is raising a venture capital fund, called Homebrew, with another former Google executive, Satya Patel.

Once an idea gains traction, builders typically turn to venture capital firms for additional financing while gradually giving individual teams more autonomy. “It’s like raising children,” Mr. Palmeri said. “There’s a point where they eventually need their own space, but you’ll continue as a trusted adviser.”

Some company builders invest in a mix of their own ideas and early-stage concepts that fit a particular theme. Others, like Mr. Palmeri’s company, focus almost exclusively on homegrown projects, though they will recruit co-founders and teams to expand the companies into independent entities.

“It’s a highly collaborative process,” Mr. Palmeri said. “By the time we look for outside funding, the idea may have taken many different shapes.”

This approach resembles product development at large companies, like Apple or Google, only on a smaller scale. “The cycle of entrepreneurship can be pretty slow, so why not work on several ideas at one time?” said John Borthwick, chief executive of Betaworks, which was founded in early 2008 and is based in New York. (The New York Times Company is an investor.)

“Over time, you can build common tools, databases, analytics â€" all the things that give each idea a head start in the marketplace,” Mr. Borthwick said.

One of the biggest advantages to working on several companies simultaneously is the ability to share resources.

“The dollars used in the early stages of start-ups are often highly inefficient because you spend a lot of time and money just to get the business going,” said Mr. Jones at Science. His operating company has 25 people on its staff, specializing in areas like human resources, marketing and real estate.

“The early days of a company should be spent thinking about strategy and technology, not worrying about negotiating leases,” Mr. Jones said.

When start-ups fail, he said, often it is not because the ideas are flawed but because management did not have the tools or resources to execute the idea, were pulled in too many directions or did not move fast enough. Mr. Keywell and Mr. Lefkofsky noticed the same pattern in previous companies they had started or financed.

“We decided to bring those competencies inside of Lightbank,” Mr. Keywell said. “The whole model is designed to reduce risk and increase reward.”

Though some of the large venture capital firms have invested in ideas hatched by company builders, the concept has its skeptics.

“It’s very difficult to manufacture innovation,” said Andy Rachleff, a lecturer at the Stanford Graduate School of Business, former general partner at Benchmark Capital and chief executive of Wealthfront, an online financial advisory firm. “The reason most start-ups are successful is they had great insight, and the likelihood of having that killer insight more than once in a career is exceptionally low.”

While this approach allows individual teams to focus on ideas without having to worry about the nuances of running a business, it can pull the company builders in too many directions.

In 2011, Evan Williams and Biz Stone, who founded Twitter, and Jason Goldman, another former Twitter executive, restarted Mr. Williams’s Obvious Corporation as a builder platform. Recently, however, they said they would each focus more on individual ideas rather than work on several ideas at once.

“Turns out, we like focus,” Mr. Williams wrote in an explanation on the company’s Web site.

Nevertheless, proponents of parallel entrepreneurship argue that the odds are better for those who pursue multiple ideas. “The percentage of companies that are successful should be greater than the traditional portfolio,” Mr. Jones said.

Venture partners can regard company builders as “a monstrous insurance policy,” he added. “If something goes wrong with one of our portfolio companies, we can quickly dive back in and make things work.”

Powerhouse of the Uranium Enrichment Industry Seeks an Exit

CAPENHURST, England â€" The first thing you notice when entering Building E23 on a tightly guarded site here in northwest England is the loud tick-tock. The sound resonates throughout the long, low-slung building where, behind secured doors, sit row upon row of tall thin tubes.

That ticking means the building’s radiation detection system is working â€" crucial comfort. Inside each cylinder is a centrifuge, spinning a gaseous form of uranium to give it the atomic boost it needs to be used as nuclear reactor fuel.

The company that operates this uranium enrichment center, Urenco, is the world leader in the field. It is also plumply profitable. So why are its owners eager to sell it?

The answer, as with many things involving nuclear power, is a combination of economics, geopolitics and the Promethean prospect of an energy source that is as potentially green and abundant as deadly dangerous.

Urenco was formed by treaty in 1971 when Britain, West Germany and the Netherlands decided for strategic and business reasons to combine their uranium enrichment programs. The company is still owned by the British and Dutch governments, with one-third each, and with the German third held jointly by two big utility companies, E.On and RWE.

Urenco now has four enrichment plants â€" in Britain, the Netherlands and Germany â€" selling fuel for civilian energy purposes around the world, capturing nearly a third of the global market. It is also heavily investing in an American centrifuge complex in Eunice, N.M., that will eventually be its largest plant.

“Over the years we have developed generations of these machines,” said Helmut Engelbrecht,Urenco’s chief executive in a telephone interview. “If you do something continuously you always improve.”

Besides fuel, Urenco’s centrifuges spin off fairly good money: revenue of 1.6 billion euros, or $2.1 billion last year, yielding earnings of 402 million euros, for a profit margin of 25 percent. And its order book stands at 18 billion euros, which mean at least 10 years of steady work.

Analysts estimate Urenco’s market value at about 10 billion euros. For all that momentum, though, the company is at a crossroads. Growth may flatten in the next couple of years, executives say, mainly because Japan â€" a major user of nuclear power until the 2011 Fukushima Daiichi disaster â€" has shut down its reactors, taking about 10 percent of the world’s nuclear energy generating capacity offline. And the Japanese have stockpiled substantial amounts of fuel for the day, if ever, that those reactors go back into operation.

The British government, intent on cleaning up its budget by selling state-owned enterprises, said in March that it had hired Morgan Stanley to look into disposing of all or part of its Urenco stake. In some respects Urenco is an easier business to sell than, say, the Royal Mail, because it has an internationally marketable product and a relatively small work force â€" about 1,400 employees in total.

The German utilities E.On and RWE have hired Bank of America as their adviser. With the German government’s having decided to get out of the nuclear industry in 2011 after Fukushima, the sale of their Urenco stakes would help the power companies beef up their thin balance sheets.

A sale became more likely Thursday, when the Dutch government said it wanted to sell its shares, as long as “the public interest in terms of nonproliferation, nuclear safety and supply security” could be safeguarded.

A person close to planning, who insisted on anonymity because of the delicacy of the matter, said if things went smoothly a sale might occur either late this year or in the first half of 2014.

“Nuclear strategies have changed,” said Michael Kruse, a consultant on nuclear issues for the management consultant Arthur D Little in Frankfurt. “Governments no longer think they need to be in this business,” he said, “and utilities in several countries want out after Fukushima.”

People in the industry say the most likely buyers would be companies already in the industry that might want to offer clients fuel along with nuclear power stations. Areva, a French giant, might fit that bill. So might Toshiba of Japan, which is studying building nuclear plants in Britain. Still, “there are in my view not many companies that can buy Urenco,” Mr. Kruse said.

Urenco’s chief executive, Mr. Engelbrecht, in a presentation to analysts in March, declined to discuss a possible sale of the company, saying he would leave that to the shareholders. But he argued that fast-growing emerging economies would take up the slack left by Japan.

Already, he noted, China is in the midst of a nuclear plant building boom, and India is also seriously pursuing nuclear power. In the Middle East, Urenco has a contract to enrich uranium for the plants in Abu Dhabi being built by South Korean contractors.Countries that are seeing 10 percent to 15 percent increases in electricity demand and that have major air pollution problems “are all betting on nuclear, and that is where we believe the future of our business will be, “ Mr. Engelbrecht said.

The company has 50 customers in 17 countries, which it denotes with little plaques on a wall in the enrichment center’s entrance way. The honorees include the Indian Point nuclear plant in Buchanan, N.Y.; Wolf Creek in Burlington, Kan., and the Olkiluoto plant on an island off western Finland.

Even if the potential buyers are a small pool, analysts say that buying into Urenco would present a rare opportunity. Urenco’s centrifuge technology, honed over several generations of machines, is considered the most efficient way to enrich uranium.

Urenco plants receive shipments of uranium hexafluoride, a granular substance derived from uranium ore, which is turned into gas by heating it. The gas is then piped into the centrifuges which use their spinning power to separate out the lighter and more reactive uranium 235 isotopes. When the gas is cooled again, it settles out as a solid resembling grains of sugar.

Urenco’s process increases the proportion of U235, raising it from a starting point of about 0.7 percent to end up about 4 percent â€" a suitable level for reactor fuel, but only a small fraction of the concentration needed to make a nuclear weapon.

Urenco’s enriched uranium is put in canisters that then go to a fuel fabricator, where it is converted into pellets and loaded into fuel rods which are then delivered to the power plants.

The centrifuges rarely stop at the Capenhurst plant, which sprawls over about 170 acres in what has long been a munitions testing site surrounded by cow pastures and farm ponds. The newest group of cascades â€" as the array of centrifuges is known â€" in the Capenhurst building was installed 15 years ago and “has never been brought to rest,” said Geoff Owens, a Urenco engineer.

Areva, of France, which has about 10 percent of the world market for nuclear fuel sales, began switching over to Urenco’s technology in the mid-2000s for its uranium enrichment. Areva’s and Urenco’s owners each have a 50 percent stake in a company called Enrichment Technology, based in Almelo, the Netherlands, that develops and makes the centrifuges.

It is very difficult for competitors to gain a foothold in Urenco’s business. The details of the technology are closely guarded, and the uranium trade is tightly controlled and regulated. “There are massive barriers to entry,” said Harold Hutchinson, an analyst at Investec in London.

Urenco produces the steady, long-run returns that might be valued by pension funds and private equity groups. But worries that the wrong people may gain access to Urenco’s world-leading technology will probably mean that the shareholders â€" and the British, Dutch and German governments â€" will be highly selective about who can buy stakes.

While Asian or Middle Eastern sovereign wealth funds are said to be among those interested, only companies from North America, western Europe, Japan, or possibly, South Korea, are likely to pass muster, people in the industry say.

“There are an awful lot of security concerns which arise around these types of businesses,” said Fiona Reilly, who heads the nuclear industry practice at Norton Rose, a law firm in London.

Besides potential candidates like Areva and Toshiba, another l shopper might be Cameco, a big Canadian uranium mining outfit. It has shown interest in working with Urenco in the past and already uses a plant in Preston, England, that turns refined uranium ore into the uranium hexafluoride that could serve as feedstock for Urenco’s nearby Capenhurst complex.

“Enrichment is a potential growth area for us,” Gord Struthers, a Cameco spokesman said in an e-mail, while declining to comment on whether an offer might be imminent. “We are watching what happens with Urenco closely.”

Bausch & Lomb to Sell Itself to Valeant for $8.7 Billion

Bausch & Lomb, the eye care company, agreed on Monday to sell itself to Valeant Pharmaceuticals of Canada for about $8.7 billion, sidestepping the lengthier process of an initial public offering.

Under the terms of the deal, Valeant will $4.5 billion to the investor group that owns Bausch & Lomb, led by the private equity firm Warburg Pincus. It will also pay about $4.2 billion to pay off its new acquisition’s debt.

Monday’s deal highlights the continued flurry of deal-making in the health care industry, as companies seek to buy the growth they are hard-pressed to generate on their own. Announced merger volume in the sector for the year so far was up 14 percent percent from the same time last year, even as takeovers overall fell 8 percent for the same period.

Valeant, which is based in Laval, Quebec, has long made acquisitions a core part of its growth strategy. The Bausch & Lomb deal is the company’s biggest yet, over three times bigger than the $2.6 billion purchase of the skin care company Medicis Pharmaceutical last year.

Adding Bausch & Lomb, a giant maker of contact lens solution and surgical devices, will significantly bolster Valeant’s offerings in the sector. The eye care company will absorb its new parent’s existing ophthalmology operations, creating a business that is expected to generate over $3.5 billion in net revenue this year.

“With this transaction, Valeant will be a worldwide leader in both dermatology and eye health,” Valeant’s chairman and chief executive, J. Michael Pearson , said in a statement.

Monday’s takeover also means a tidy payday for Warburg Pincus, which led a $4.5 billion leveraged buyout of Bausch & Lomb in 2007. The investment firm already benefited form a $772 million special dividend that the eye care company paid out in March, the bulk of which went to its controlling investor group.

Warburg Pincus had begun exploring a sale or initial public offering for Bausch & Lomb late last year, and held preliminary talks with a number of potential suitors, people briefed on the matter have said. But the firm and its advisers did not unearth any possible bids that reached a target price of about $10 billion, and Bausch & Lomb filed for an initial public offering in March.

Until last month Valeant was pursuing a takeover of a different company, the generic drug maker Actavis, in what would have been a deal worth over $13 billion. When those talks collapsed, the Canadian pharmaceutical concern then pivoted to Bausch & Lomb.

The transaction closes is expected in the third quarter, pending regulatory approval.

Valeant was counseled by Skadden, Arps, Slate, Meagher & Flom and Osler, Hoskin & Harcourt. Bausch & Lomb was advised by Goldman Sachs, JPMorgan Chase and the law firm Cleary Gottlieb Steen & Hamilton.

Club Med Targeted in $700 Million Privatization

HONG KONGâ€"The management and two biggest shareholders of Club Méditerranée, the global resort operator, on Monday initiated a buyout offer valuing the Paris-based leisure company at about 540 million euros, or $700 million.

AXA Private Equity of France, the Chinese conglomerate Fosun International and Club Med's chief executive, Henri Giscard d'Estaing, said in a statement that they planned to make a formal offer ‘‘in the next few days'' of 17 euros per share in the resort company.

The bidding group, which characterized the approach as friendly, currently owns 19.3 percent of the shares and 24.9 percent of the voting rights in Club Med. The bidders said their tender offer would lapse automatically if it failed to win at least 50 percent of the shares in the company.

Club Med has been hit hard in recent years by the euro crisis, which has led to high unemployment and worried consumers across the Continent. Resorts in Europe and Africa accounted for 65 percent of the company's revenue in the three months to the end of January.

In response, AXA, Fosun and participating Club Med management said they planned to privatize the company to help make it ‘‘free from short-term constraints'' as it seeks to reduce its traditional reliance on Europe and expand into emerging markets overseas.

Shares in Club Med soared to match the offer price, rising around 23 percent to around 17 euros in Paris trading on Monday morning.

Club Med Targeted in $700 Million Privatization

HONG KONG-The management and two biggest shareholders of Club Méditerranée, the global resort operator, on Monday initiated a buyout offer valuing the Paris-based leisure company at about 540 million euros, or $700 million.

AXA Private Equity of France, the Chinese conglomerate Fosun International and Club Med’s chief executive, Henri Giscard d’Estaing, said in a statement that they planned to make a formal offer ‘‘in the next few days’’ of 17 euros per share in the resort company.

The bidding group, which characterized the approach as friendly, currently owns 19.3 percent of the shares and 24.9 percent of the voting rights in Club Med. The bidders said their tender offer would lapse automatically if it failed to win at least 50 percent of the shares in the company.

Club Med has been hit hard in recent years by the euro crisis, which has led to high unemployment and worried consumers across the Continent. Resorts in Europe and Africa accounted for 65 percent of the company’s revenue in the three months to the end of January.

In response, AXA, Fosun and participating Club Med management said they planned to privatize the company to help make it ‘‘free from short-term constraints’’ as it seeks to reduce its traditional reliance on Europe and expand into emerging markets overseas.

Shares in Club Med soared to match the offer price, rising around 23 percent to around 17 euros in Paris trading on Monday morning.