Money makers: a start-up masterclass in profits

Gym exercise © Getty images
Bringing gym classes under one roof

In 2010, Payal Kadakia was working for record label Warner Music Group in New York when she set herself the challenge of coming up with an idea for a business in 14 days, says the BBC’s Suzanne Bearne. Just 36 hours later, she had it. An avid dancer, Kadakia had been struggling to book a ballet class. “I visited six different websites, and I couldn’t tell if the class was right for me,” she says. So she raised $500,000 from friends and family to create a website displaying information on dance and fitness classes across the city in one place.

ClassPass (initially called Classtivity) launched in 2012. Her first attempt was a flop. But in 2014, the business switched from allowing users to book on an ad-hoc basis to a model where users book a bundle of classes. Today, users buy credits that can be exchanged for classes across the city. Gyms and dance-class providers pay ClassPass commission for bookings.

The New York-based business is said to be worth $470m, and operates across the US and in nine other countries, including the UK, Canada and Australia. It has secured more than $173m from outside investors, including Google. Kadakia is now worth $50m.

Making a living from rubbish

Daniel Dicker set up Ashortwalk, a design agency that makes things from recycled waste, because he wanted to live and work a short walk from the sea, says Matthew Caines in The Daily Telegraph. At the heart of the 15-year-old business is a concept known as “closed-loop design”, so called because of the circular nature of the product life-cycle. Dicker left his job as a design manager at Dyson “with a desire to… live by the Cornwall coast”, he says. “My only objective was to make a living; I wasn’t thinking about becoming a massive brand or the next game-changing invention.”

His first creation was a tide clock made from recycled plastic and paper. “It was an easy starter”, he says. “It didn’t need lots of research and development (R&D) or huge amounts of investment – it cost me £100 to make the first batch.”

Then he would phone 50 retailers a day to see if they would stock it. One in eight would place an order. “Within three months, I built up a roster of hundreds of shops, which was a survivable income”, says Dicker. Today the Perranporth-based agency sells about 50 items, from plant pots that were once consumer plastic to house signs made from recycled plant pots. It exports to Australia and New Zealand, has ten employees and a turnover of £1.2m.

Housing London’s workers

While running one of the biggest chains of West End cinemas and theatres, Crescent Entertainment, Marc Vlessing came up against a problem, says Liam Kelly in The Sunday Times. Many of his staff, who were priced out of London, had to commute from afar. “We had to house these people, otherwise they would be lost to the London economy”, he says.

Vlessing and business partner Paul Harbard remortgaged their houses and secured £5m in venture capital from US food giant Cargill. Vlessing left Crescent and he and Harbard set up Pocket Living, building small flats, often on sites passed over by other developers. It sells the flats at a 20% discount to the market rate. Since 2005, it has built more than 650 flats. Councils were hostile at first. “I thought the red carpets would roll out — here’s a developer who is going to maximise little infill sites on which there would normally be no affordable housing,” says Vlessing.

But then London mayors Boris Johnson and Sadiq Khan bought into the vision, providing £50m of interest-free loans, which Pocket must pay back in ten years. The founders bought out Cargill, and two years ago, sold a 50% stake to Related, owned by US property billionaire Stephen Ross, in a deal valuing Pocket Living at £25m. Pre-tax profits came in at £4.3m last year.

Get set for the launch of the next generation “pleasure bed”

In 1967 during “the summer of love”, Charles Hall, the inventor of the waterbed, was a student at San Francisco State University experimenting with “flotation furniture”, says Penelope Green in The New York Times.

At first Hall filled his designs with a jelly and cornflour mixture. But after that turned rancid, he switched to water. His first eight-foot-square heated “pleasure pit”, debuted at a gallery show called The Happy Happening. It made headlines. Both bed and chair, it was meant to be the only piece of furniture you would ever need.

Yet, mattress companies rebuffed him, so Hall started selling the waterbeds himself. Hall and a business partner found backers, and their company, Innerspace Environments, opened 30 stores in California, where the first “pleasure bed” cost $350. But by 1975, the company was bankrupt, not through competition, says Hall, but mismanagement by investors. So Hall moved on to other ventures. In the meantime, the waterbed market continued to evolve. Sales had reached nearly $2bn by 1986 in the US and by 1991, one in five mattresses sold in America was a waterbed.

Hall didn’t share in these riches, but he did advise other companies and improve his original design for the waterbed. In 1991, Hall was awarded $4.8m, plus interest, by a jury for patent infringement. Half a century on from his original concept, Hall and two of his former colleagues are bringing out a “next-generation” version, called Afloat. It’s not yet on sale, but a heated queen-size bed is expected to cost between $1,995 and $2,395 in the US.

 

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