Venture accelerator has learned its keep

by Andy Gotlieb
Staff Writer

THE SHORT OF IT

Source: Wharton Small Business Development Center

John F. Ulrich and Todd C. Peterson are both young enough that they don't recall the days before touch-tone dialing, cable television, and compact discs. But they are wise enough to know the proper way to spin failure and misfortune.

"You don't make mistakes," Ulrich said. "You have 'learning experiences.'"

Whatever you call them, neither Ulrich, 34, nor Peterson, 30, principals of the Foster Chamberlain venture accelerator, have seemingly made many since founding their company in March 1997.

At the time, they had just one client and were still a few months away from earning their MBAs from the Wharton School.

Since opening their business with $20 in a checking account, Foster Chamberlain's grown like topsy: Its 1999 sales were $1.2 million, compared to $83,714 in 1997. Its two-year growth rate between 1997 and 1999 reached a heady 1,346.55 percent, earning it the No. 5 spot on the 2000 Philadelphia 100, a ranking of the fastest-growing private companies in the region.

The company now counts seven employees, housed in modest digs on Fourth Street. A third principal, Steve Shoff, 32, also a Wharton classmate, joined the company more recently.

The idea behind Foster Chamberlain — the name comes from combining Ulrich's and Peterson's middle names — appears deceptively simple. The premise is that while large companies are in the best financial position to create new businesses, they're not always the most willing or best qualified to do so.

"It amazed us that corporations weren't better at creating new businesses," Peterson said. "We thought, 'There must be a better way of doing it.' "

So what Foster Chamberlain does is help companies get those new ventures started, providing the management skills — but not the funding — to get things off the ground. That might include establishing a gift catalogue for a non-profit agency or a new product line for an established business. They work from the concept phase through business planning to startup.

"It's basically creating services that are new," Ulrich said. "We're good at starting new businesses."

So why would a company hire Foster Chamberlain?

Peterson and Ulrich ticked off a couple reasons.

• A company often fears venturing outside its comfort zone. New businesses can be scary.

• Business development departments often are thinly staffed, because most companies don't want to divert from their core businesses. Their range can be limited.

• Despite the lip service paid to the notion, companies often don't truly encourage employees to consider "out of the box" thinking.

The duo talks excitedly about a project they're working on now for Prudential Fox & Roach, the real estate brokerage, and Conectiv Energy, the Wilmington-based utility. It's called Vital Home Services. Its 30 employees include Ulrich, who claims the title of chief operating officer, while Peterson ranks as vice president.

"We put the venture together and we're running it on an interim basis," Peterson said. "It's basically creating services that are new."

Home buyers today know the hassle of locating their various utilities providers and making the arrangements for those services; a lot of time is wasted on hold. With the new service, home buyers can avoid that — it's automatically done at once for no extra charge.

All sides benefit. Consumers get convenience. The utilities, who pay a fee to Vital Home Services, still save money because they can reduce labor costs. Real estate brokers don't have to worry about increasingly narrow margins.

Like with all its ventures, Foster Chamberlain eventually moves on. Employees want to work on the next project.

"We assume interim management roles until we essentially recruit ourselves out of a position," Peterson said.

By helping with the hiring, his company can assure the new venture succeeds by putting the right successors in place.

Foster Chamberlain starts with its clients on a fee basis. Ultimately, it hopes to take an equity position in the successful growing companies, thereby diversifying its financial base.

"Our intention is to have a bunch of different ventures going and have an equity share in many of them," Ulrich said. "We want to be a part of what we created."

Most people associate high tech companies, computer firms, dot-coms and other startups of that ilk with venture accelerators, but Ulrich and Peterson limit themselves only to those with an entrepreneurial spirit.

"We've helped with Internet ventures, but the focus isn't exclusively there," Peterson said. "We've worked in some of the least dynamnic industries imaginable."

The firm hopes to double its staffing annually. Peterson noted the labor market is tough and that prospects must be knowledgeable and "world-class generalists."

"It's a rare person we're able to find that fits that skill set," he said, pointing out that some good candidates reject job offers because of the unusual environment. "We're looking for an entrepreneur. We're not looking for someone who is risk averse."

The two note that while they aren't experts at the fields they step into, they find plenty of similarities in all businesses. Often, the ventures they're hired to conduct are a marriage of two industries never placed together before.

Individuality is stressed at Foster Chamberlain. While the design of Ulrich and Peterson's business cards is the same, they couldn't agree on a color band at the top. So, Peterson uses gray, Ulrich maroon. Employees choose any color they want.

Peterson and Ulrich don't have huge tangible aspirations for Foster Chamberlain aside from continued growth and developing projects interesting to them.

"I would want every CEO at any big corporation to think, when launching, 'Should I do this on our own or should I hire Foster Chamberlain?' " Peterson said.

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October, 2000 - Philadelphia Business Journal