Big five accountancy firm Ernst & Young has come out of the shadows with its e-business accelerator practice by announcing a collaborative agreement with the e-business incubator Xworks. Xworks was set up last year by Justin Drummond, a serial entrepreneur in the call centre and mobile telephony fields, last year. Ernst & Young’s practice has chosen a more low-key approach to this arena than some of its competitors, who have been more vocal about their activities. Despite this, Peter Juncker, assistant director of Ernst & Young’s e-business accelerator team, notes that referred and unsolicited deal flow has been good. The team has not said an outright no’ to taking equity stakes in lieu of fees and describes its approach as flexible, although the impression is that fee income is by far the most common route.
“We are one stage on from an incubator. We tend to work with those companies that already have embryonic management teams or some first-round funding, for example, and they are typically looking to raise second-round funding. We mentor them all the way through that process. But there are areas of that process where Ernst & Young doesn’t have the skills or resources in-house, and therefore we have looked for a number of companies we can build relationships with in those areas,” says Juncker. Juncker is, however, keen to point out that companies working with Ernst & Young’s e-business accelerator team would have choice and not be pushed in the direction of a single company, whether for funds or other resources.
In seeking out these new relationships Juncker notes that Ernst & Young is looking for players that it feels have a long term future in this field what he terms “best of breed”. A similar collaboration agreement has already been signed between IBM and Ernst & Young.
This is a new and important network that Ernst & Young is building. Juncker admits that the business’ existing contacts lie predominantly in the mid- to upper end of the market and that, as a consequence, it is easier to find three or four million pounds for a company than a few hundred thousand. This is where the need to link up with niche incubators, such as Xworks comes into play.
Justin Drummond, chief executive of Xworks, notes that Xworks is also in a position to offer services such as advertising, marketing, building websites, online marketing and so on. Some of these services can be sourced directly from the Xworks team and others from its portfolio incubator companies such as Space.
Space is an e-business solutions company that, among other things, creates websites. This is one of Xworks’ six incubated companies, five of which have been launched, four of which are generating revenue and three of which are in profit.