Bulls or bears in Regent's Park?

Business student Richard Downs wanted to set up his own company. Huw Richards talks to a university fostering the next Richard Branson

Getting a job has rarely been a problem for an alumnus of London Business School. The 1996-97 Higher Education Statistical Agency First Destinations Survey found that of the 257 students who left LBS in the summer of 1997, precisely 257 were safely lodged in their first jobs by the census date at the end of the year. But what kind of jobs?

Ten years ago everyone went into consultancy or investment banking, according to John Bates, a teaching fellow at LBS since 1985. But when LBS surveyed its master in business administration (MBA) students a decade later, it found that 14 per cent expected to start their own full-time business within a year of graduating. Two per cent had already started. "That score would have been zero in the 1980s," says Bates.

The school found that 70 per cent thought it likely or very likely that they would start a business within five years. Reality does not always match up, but the survey reflects a huge shift in expectation.

John Quelch, who became dean of LBS earlier this year, points out that this is more than just a shift in fashions, with Richard Branson and Bill Gates replacing more corporate figures as the role models of choice. Corporate Man is a dwindling breed: "The Fortune 500 companies have been destroyers of jobs in the past five years through downsizing and restructuring," says Quelch.

The school has run popular entrepreneurship as part of its programmes for several years. Now LBS is going a step further, offering venture capital through its Foundation for Enterpreneurial Management, of which Bates is executive director, and premises in an "incubator centre" near LBS's Regent's Park campus.

Among the first to take advantage of the opportunity is Richard Downs, 32,from Swindon, a former employee of Salomon Brothers who completed his MBA this year. He went to LBS with the idea of acquiring the skills needed to start his own business. While there he had an idea, launched at last winter's Ski Show at Olympia, the online ski chalet-booking company IGLU.COM.

"The customer base is professionals from 25 to 35 who are likely to have online facilities in their offices," he said. '"If they are traders, they are accustomed to buying products off screen. The supply side of collecting chalet information is inefficient - you have to go to a travel agent, pick up brochures, compare them and go back to the agent. What if you are in New York and want to book a chalet in Switzerland? There may not be much information and you are likely to have language problems."

The business plan he drew up won several prizes and was sufficiently good to persuade the foundation's board to fund its pre-seed (validating the concept) and seed (up to key revenue or development milestones) stages. Of the Pounds 500,000 capital now wrapped up in IGLU.COM, the foundation contributed Pounds 50,000.

"This isn't soft or easy money. I had to satisfy commercial criteria for LBS in the same way as for the other backers," says Downs.

One of two LBS-backed companies in the Gavron Business Centre (the "incubator" centre offered the companies at a flat rate of Pounds 300 per person), IGLU.COM has benefited from its facilities. "The ISDN line was incredibly useful, providing non-stop internet access," says Downs. He also got advice from Michael Stoddart, foundation chair and one of Britain's top venture capitalists.

"To have a couple of one-on-one sessions with someone like that was an immense help," says Downs. "LBS support gave a context and structure to what is often an unstructured process."

Ironically, the one thing Downs cannot do is ski, thanks to a rugby injury suffered playing for LBS.

Bates expects to back about 20 companies over the next five to seven years. All must have an LBS connection, even if it is just employing an LBS graduate. "If it really isn't working we will pull the plug as any other backer would do," he says.

About Pounds 2.5 million has been raised from a variety of backers. "We are not using the school's resources - that certainly would not be prudent," says Quelch.

But LBS will receive 40 per cent of the profits from each venture. Bates says: "On average returns should be about Pounds 1 million, but there is never any guarantee with start-ups. At the bottom end you can make nothing,but if you get a real winner, the sky's the limit."

So one benefit for LBS will be the beginnings of an endowment. But there are others: "Students who want to start their own companies will be able to visit someone nearby who has had a similar experience, but is a year or two down the road."

Quelch believes this is the first venture of its kind, although Helsinki University of Technology has had an incubator park for some years. It will doubtless inspire imitators, but he warned: "You can't do it from scratch. You need an excellent entrepreneurship faculty, support from entrepreneurs,providers of capital and an institution that regards entrepreneurship as its top priority."

WHO QUALIFIES?

* An individual alumnus of London Business School

* An executive management team that includes alumni of LBS

* A management team that is committed to recruit an LBS graduating student to the team in an executive capacity

* Other teams "connected" with LBS THE INCUBATOR

* Phone/fax internetconnection, email, voicemail, computers, network, printers, copiers etc

* Hot desks, meeting rooms and board room

* Close to LBS in centralLondon and linked to LBSnetwork and informationservices

* About Pounds 300 per month per person plus consumables and telecoms usage

* Minimum three-month commitment, maximum 12 months On the right track: most graduates from the London Business School eventually plan to start their own companies