IT isn’t quite Dragon’s Den, which gives the impression that investors are prepared to sink thousands into businesses without extensive vetting.
But the principle of Dorset Business Angels is the same – bringing wealthy investors together with entrepreneurs who want backing for their ideas.
Ashley Faull, from Sandbanks, is among the angels. “The main idea is to find entrepreneurs who’ve got a good business opportunity and enable them to raise the money locally, without having to go to London or online,” he said.
He describes Dorset Business Angels as a “one-stop shop to get investment and mentoring and seek support from people who can join the board”.
“For the business, they get two things for the price of one. They get cash but also a mentoring and local networking,” he said.
At a time of low interest rates, backing start-ups can be an attractive gamble for the wealthy, thanks in part to tax breaks introduced by former Labour chancellor Alistair Darling.
“For every £100,000 you invest, the maximum you can lose is £38,000 if you’re paying enough higher rate tax,” said Mr Faull.
The network welcomes high net worth or sophisticated investors – people who have self-certified to say they can look after themselves when it comes to investing.
Ashley Faull and Max Wright are among the angels.
Mr Faull worked at ITV early in his career and was part of more than 20 TV channel launches, including the Discovery Channel Europe, Bravo and Living IT, as well as the cable industry’s pay-per-view movie business and securing the UEFA Champions League rights for ITV/OnDigital.
He co-founded Sit-up TV, which ran the TV auction channels Bid TV and Price-Drop TV and was sold for £194million in 2006. He has since created a successful pawnbroker and gold-buying business, Postgoldforcash.
Fellow angel Max Wright, managing director of Jaguar Consulting, is a 62-year-old serial entrepreneur from Lilliput who has been starting, growing and selling companies over 40 years, working in music and artist management, direct marketing, event organisation, record retailing, video and games sales and rental.
His most successful businesses were in the Apple computer arena and since selling his last business in 2008, he has concentrated on working as a mentor.
“It’s not for the faint hearted, investing in start-ups, because lots don’t make it, but when you’ve got as good a tax break as that, it ameliorates the risk,” he said.
Mr Faull says: “At the moment quite a few pitches come in. A small group evaluates and screens those pitches, talks to those entrepreneurs and whittles that down to four or five pitching companies. Then we’ll have those for our five pitch to a group of probably 40 people once a quarter.
“If investors are interested, generally someone will take the lead and try and do some diligence on the business.”
Mr Wright says there are usually several meetings before a decision. No one would commit the money, Dragon’s Den-style, without due diligence checks, he says.
Mr Faull says the pitch isn’t everything. “Sometimes they’ve got the best person to do the pitch and when you meet the rest of the team, they might not be of the same calibre,” he said.
If angels are inclined to invest in an idea, the question arises of what a business is worth. “It all really comes down to timing. The entrepreneur wants to value their business as if it already had success and the investor wants it at its value today,” said Mr Faull.
Investing angels can also decide to join the board, or to offer support less formally.
Mr Faull said: “I want to see skin in the game in some way for the entrepreneur – whether they’re investing money or going for a period without taking salary or whatever it is. I want them to have their feet to the fire in some way. When I started my first business, I took a 50 per cent salary cut and it’s very hard to get it back where it was.”
Mr Faull says two out of the 12 businesses he has invested in have taken off, while Mr Wright has seen two out of six do well.
A recent enterprise that impressed the angels was the MacGuffin Project, a steampunk-style escape room which opens next month in Bournemouth. It persuaded Mr Faull to break his self-imposed rule of not investing in husband-and-wife start-ups.
Mr Wright said: “I thought the name was pretty poor. Then this young lady called Claire came out and did one of the best pitches I’ve ever seen at an event like this.
“She was very confident, she sold the concept of what an escape room was and how to do it properly.
“None of us have any experience of escape rooms but I think we could all see some potential and where it could go.”
As for the kind of people who invest, Mr Faull says: “Generally it will be self-made entrepreneurs who run and sell their own businesses, but some of the people I’ve talked to recently are fully employed and earning a very good salary and thinking about the tax incentives.
“I talked to a surgeon who’s earning very good money but paying an awful lot of tax. You’re risking 38 per cent of it. I suspect many more people like that will come on board who are not necessarily time-rich but might be cash-rich and fancy putting something back into the community.”