"There’s nothing more exciting than being a business angel, because you’re definitely gonna lose a lot of money,” smiles Doug Richard, boss of research group Library House and celebrity investor.
“Once you get into that mind frame, it’s such a great feeling when you finally pick a business that works.”
It’s a surprising sentiment from one of the UK’s most famous backers of fledgling companies, but reflects the reality of what it takes to be a business angel. Another good illustration is the BBC’s hit series Dragons’ Den, in which Richard stars.
Remember Rachel Elnaugh’s decision to back Le Beanock – a swinging beanbag that you drill into your ceiling, or Phones International Group boss Peter Jones’ roll of the dice with trendy mag Wonderland? Both were big risks, according to Richard; and they’re probably going to fail.
“I managed to hold myself back when Rachel backed Le Beanock,” he says with a grimace. “It sounded like a nice niche product for someone with a loft, but the pricing was all wrong. It’s a massive hanging bag and you have to drill it into beams – not very practical.”
On the subject of Wonderland, he adds: “It was a very effective presentation, if you take away the fact that it’s the riskiest thing you can get involved in. Would I ever invest in one of those magazines? God no!”
But he admits his own investments don’t always go to plan either. For example, he was forced to renege on his decision to back a laser measuring device when the team behind it revealed that someone else had already produced a similar prototype, secured substantial funding and were at a later stage of development.
From the way Richard describes the investments you can tell there’s plenty of playground banter behind the scenes, and while the Dragons seem to get on, there is a subtle rivalry between them – not least between Richard and Jones who are good friends off camera.
Seeing red
It was all the more intriguing, then, when Jones announced his intention to buy Red Letter Days, Elnaugh’s experiences company, out of administration. Richard is coy on this subject, but he rejects the popular headline ‘Dragon saves Dragon’.
“Peter and Theo [Paphitis, Jones’ partner in the venture] bought the company from administration, therefore Rachel didn’t get anything out of it and she loses her business, so that headline is incorrect,” he asserts. “A more accurate one would be ‘Dragon buys company; might do real well’.”
Despite its well-publicised debt and problems with partner companies, Richard is optimistic about its future. For a start, at least 90% of Red Letter Days’ partners have pledged to keep faith with the re-energised business, it has substantial receivables, massive distribution and a 16-year-old brand.
“I don’t know if Peter has been involved with a turnaround before. I don’t think it’s a bad decision, but I’m not sure it’s an obvious winner either. It’ll be interesting to see whether we’ll see the end of the story before the next series goes on air in November,” he says.
Richard isn’t giving up many details about Dragons’ Den’s second airing, but he promises that the good business ideas are better and the bad ones are – unbelievably – even worse. He allows that he made four ‘offers’ during the six shows, but won’t say how many were finalised.