1. © John Mullins 2007 Deep Sea World: The Rest of the Story John W. Mullins

2. National Entrepreneurship Network © John Mullins 20072 The Flotation: October 1996 DSL floated on AIM at £10 million market capitalisation, £1.60 per share New option package for Crane put into place Construction on Ellesmere Port went ahead

3. National Entrepreneurship Network © John Mullins 2007 3 Ellesmere Port Opened by the Queen, July 1998 Named “Outstanding New Tourist Attraction” for 1998 But all was not well… –Huge cost overrun – again! –Visitor count at half of forecast (2,000/day vs. 4,000 planned) –Located at the edge of the population belt, not city centre

4. National Entrepreneurship Network © John Mullins 2007 4 Implications? Not making the numbers: commercial risk? Was financed mostly with debt: financial risk? Cash running short, DSW can’t service the debt Implications for Norman Yarrow? For Crane?

5. National Entrepreneurship Network © John Mullins 2007 5 Dealing with the Banks Irish banks threatened insolvency Yarrow countered: “Here are the keys.”

6. National Entrepreneurship Network © John Mullins 2007 6 The Outcome The Irish banks took a £2 million haircut Bank of Scotland (thanks to NVM contacts) stepped in

7. National Entrepreneurship Network © John Mullins 20077 Two Years On: Summer 2000 Ellesmere Port two years old Visitor count still at half of forecasts Crane sacked Rights offering at £2 million valuation, 30p per share, raised cash Spanish leisure operator Aspro bought 29% stake (mostly shares of NVM LPs) at 45p, Aspro management stepped in

8. National Entrepreneurship Network © John Mullins 20078 What about Crane? In 2002, Crane sold his shares to Aspro at 38p, a 9% discount to the trading price, netting him £1 million –Recovered his investment Thus, both NVM and Crane escaped a difficult venture largely unscathed –All in a day’s work for a VC investor

9. National Entrepreneurship Network © John Mullins 20079 Lessons for Investors On structuring start-up deals: the instruments hold the key –All the money required up front, but with early cash flow? Use mostly debt-like instruments to reap early cash flow –No early cash flow anticipated? Use multiple rounds combining prefs and ords, hope for a big exit When things go wrong, who gets to fix them?

10. National Entrepreneurship Network © John Mullins 200710 Lessons for Entrepreneurs You can influence the deal structure and instruments used. Don’t leave it to the VC. If you don’t deliver, you’ll eventually be gone Thus, make sure your stock vests as early as possible

11. National Entrepreneurship Network © John Mullins 200711 Lessons re Grant Money Applying is time-consuming, probability of winning is low There is no free lunch – if it looks like one, find out why it is being offered! Don’t let a grant distort your strategic logic –Ask, “Are we still on mission and strategy?” But, if a grant fits, it is very cheap money!

12. National Entrepreneurship Network © John Mullins 200712 By 2005 The outlook had brightened –Visitor count still only 60% of original forecast, but… –Revenue per visitor up sharply Management does make a difference! DSL pre-tax profit £1.6 million

13. National Entrepreneurship Network © John Mullins 200713 2007 Visitor count down Pre-tax profit off sharply Market cap £9.5 million December 2007 –Same as at flotation in 1996, after considerable dilution Still very stormy seas!