A few weeks ago we were announcing the launch of a new web business accelerator in Birmingham, United Kingdom – Oxygen Accelerator. As the accelerator model was quite new and intriguing in many ways, we have decided to interview the founder of the Oxygen Accelerator, Mark Hales and we had the chance to ask him a few questions in order to better understand his view on some of the main issues raised by interested entrepreneurs. In case you think Oxygen Accelerator is a good opportunity for you and your business, applications can still be submitted until the 30th of June 2011.
HTW: Mark, as I first question I would like to ask you about your passion for supporting technology entrepreneurs. You have dedicated most of your career to mentoring and investing in tech startups and businesses. Where has this motivation come from?
Mark Hales: I’ve always been interested in tech and business, so working with tech entrepreneurs gives me a great deal of personal satisfaction. My main reason, however, is a firm belief that helping people at an early stage in their development has a significantly better impact for them and their businesses than later down the line. When you help teams make the rights decisions at the start and help them miss some of the pitfalls, it can be the main difference between success and failure.
HTW: You are already a founding investor for the Springboard business accelerator in Cambridge. Why another web business accelerator? Any why in Birmingham?
MH: My experience is that there aren’t enough accelerators to support startups and many talented individuals with great ideas fail to get the support (financial and non-financial) to get their ideas off the ground. My programme is aimed to support those people that see the value of the programme; if they need neither the money nor the support because they have all the skills and connections to go it alone, then clearly they wouldn’t benefit from the programme. The fact that hundreds of people applying to Tech stars, Y Combinator and other accelerators aren’t successful suggests that there is a need for more support to be provided (YC probably got 1000+ applications and selected 60 teams, so that’s 940 teams who will not receive support this year alone). I chose to set up Oxygen in Birmingham because I believe we need to create a sustainable economy across the UK, not simply in and around London.
HTW: A lot of voices in the media and blogosphere seem to think that asking for equity from the startup in exchange for a mere loan is unfair. A common argument is that banks offer you significantly bigger loans for zero equity. What do you have to say in favour of your model?
MH: It is true there are alternative sources of funding including bank loans through the government supported Small Firms Loan Guarantee scheme; this loan is only available to companies that can prove the ability to repay it. However, these loans charge a facility fee, are interest bearing, have fixed payment terms, and the founders are required to give personal guarantees. The 75 per cent guarantee made to banks by the government only kicks in once the personal guarantees from the founders have been exhausted. Our loan is interest free, has no fixed term, is secured only against the business, does not have any personal guarantees and is only repayable if and when the business can afford it without jeopardy to the business. If the business fails (which inevitably some will) the loan is written off. It is made at a time when in most cases the founders have an idea; they may not have incorporated, may not have a business plan or even a well thought out strategy. The 6 per cent of equity is not directly related to the £20k. The 6 per cent equity is in return for the full programme, including aftercare. We are enabling companies to reach an entirely new level, through the provision of facilities, mentor guidance, accommodation, investors, an evergreen loan and office space for 6-months – plus we will keep a vested interest, providing an open-door policy to the team in Birmingham.
An important point is that it’s a loan of UP to £20k – purely to enable the teams to get onto and through the programme. It is not seen as an investment to last them post-bootcamp, but allows them to reach ‘investor day’. They don’t have to take this loan if they don’t require it.
HTW: What are some of the mentors you are most proud of having attracted into the Oxygen Accelerator programme?
MH: We’re really proud to have attracted almost 100 mentors, each of them offering something a little different to the other. When we first set out to build our mentor base we wanted to create a pyramid of mentors with a mix of skills, sectors, personal and business achievements, contacts and time availability. Some of our mentors are highly successful entrepreneurs who have built several start ups and had successful exits, some are running very large corporations, whilst some are still building their dreams. For example: talking to the CEO of a global corporation about “how do I meet the payroll commitment on Friday when I’m running out of cash”, won’t have the same impact as the talking to the founder of a small business who has experienced this problem recently. Whereas talking to the CEO about an introduction to one of his contacts at another global corporation could pay dividends.
HTW: What sort of companies are you most interested in funding through the Oxygen Accelerator?
MH: We don’t have a sector bias at all, we’re really interested in talking to people with ideas around Social Media, Gaming, Mobile, Video, Education, SaaS, Dev Tools, Analytics, and others, most importantly we’re interested in talking to teams that are bright and have a scalable business opportunity.
HTW: What are the main benefits of taking part in the Oxygen Accelerator program for a startup?
MH: Undoubtedly it’s the programme itself and the mentor base, these two combined will allow great ideas to turn into great businesses much faster.
HTW: Can startups from Eastern Europe also take part in the program?
MH:Yes, we’re interested in applications from all over the world.
About Mark Hales
Mark Hales joined home care services firm Claimar Care in 1999, when turnover was around £250k per annum. During a 10-year period the business grew to be the 4th largest provider in its market with turnover of around £65m per annum. Growth was achieved through a combination of organic growth of around 20% per annum and acquisitive growth achieved through a series of around 30 acquisitions. Mark exited from Claimar in 2009 and has become an active Angel investor.
Mark provides business advice and support to private companies, helping them to build and realise value over the long term. He also provides transactional support and advice in relation to acquisitions, disposals, capital raising and capital restructuring. He is currently a Non Executive Director at The Rabbit Hole Ltd, Chair at Optimo Care Group Ltd and a Non Executive Director at Thebusinessdesk.com.