Message to new SME Minister: James Caan of Dragon’s Den wants to help
This is a really special interview. James Caan is best known as the kindly one among the five inhabitants of the BBC TV hit show Dragon's Den. Over the weekend I had the privilege of a half hour interview with the man. He's classy, civilised, articulate and passionate about a subject that's close to my own heart. In the interviewing game it doesn't get much better. After watching the video below, aired on CNBC Africa Power Lunch today, you're sure to warm to him too. And prick up your ears, as I did, when hearing his genuine offer to help our new SME Ministry create the businesses desperately needed in SA. If that post-election appointment has any sense, he'll accept the genuine offer and we'll be seeing more of Mr Caan in South Africa. He has worked wonders in the UK, leveraging a £100m grant into the creation of over 15 000 new businesses. Imagine how much of an impact he could have in Sunny SA? – AH
ALEC HOGG: James Caan, the son of Pakistani immigrants to the U.K. left school at 16 because of a burning desire to run his own business. He's a British entrepreneur, best known as the kindest of the five venture capitalists in the BBC hit show, Dragon's Den. Caan leverages his high profile to help the U.K. government create small companies all over Britain. He used a ₤100m grant to create fifteen thousand of these businesses in the last two years. We caught up with him on Saturday when he jetted in to Johannesburg to address four thousand people at a millionaire-to-billionaire seminar. We're with James Caan here at the Sandton Convention Centre. James, you have a thing about names. Firstly, your own name…when you Google James Caan, you get yourself – and a famous actor.
JAMES CAAN: It was so disappointing when he copied my name.
ALEC HOGG: Was it spelt exactly the same?
JAMES CAAN: Yes, absolutely, the same.
ALEC HOGG: From the beginning… Alexander Mann – your first company – where did that name come from?
JAMES CAAN: Alec, whenever I start a business – and as you know, I've started many businesses – I think branding is really quite important. When I set up Alexander Mann, I had this vision in my head that the business I was going to create, was going to be a global business. It was going to be an international brand, so right from day one I wanted it to feel big. I wanted it to sound big. I wanted it to have substance, credibility, and professionalism, so I think the name is very much about the brand that you most associate yourself with or the image you'd like to create for your business.
ALEC HOGG: Where did you get the name from, though?
JAMES CAAN: It's similar to when you name a child. I remember starting my own business. I was sitting in the kitchen with my notepad, just sitting there and gazing into the ceiling thinking 'if my business was a person, what personality would he have? What would he look like? What would he sound like?' All the characteristics I wrote down…the name Alexander, for me, accentuated that image and because Alexander was such a long name, I knew I needed a much smaller, shorter name to follow. I came up with the name Mann, because in executive headhunting, we were specialising in the financial services market and in my head I thought most of the people we would place, would typically be men. Therefore, Alexander Mann had that kind of ring around it and I knew most long names are abbreviated and I came up with the abbreviations. AMA – Alexander Mann Associates – so it was very much around the concept of branding.
ALEC HOGG: Which is important for entrepreneurs and perhaps often, they don't spend as much time as they should, but we're here to talk about entrepreneurship. That's your speciality. That's what everybody knows you for.
JAMES CAAN: It's my passion.
ALEC HOGG: Yes. Reading your book, when did it start? You left home at 16 – let's call it 16. Warren Buffet had, I think, three businesses before he got into his teens. Were you similar?
JAMES CAAN: I essentially knew at the age of 12 I wanted to be doing something for myself. My father was an entrepreneur and I could sense from a very early age, the hustle and bustle of business, doing deals, and trading was something that really excited me. The reason I left school at 16 was since I knew that academia wasn't necessarily what I was looking for. I wanted the opportunity to be in control of my own destiny and to be my own boss.
ALEC HOGG: That is interesting. Here in South Africa, we have what they call the University of Newtown – the old traders who had a part of Johannesburg, which they learned their business from – not at the University of the Witwatersrand. Do you think that academia makes a better or a lesser entrepreneur?
JAMES CAAN: I think it makes a better entrepreneur because at the age of 42 when I sold my business, which was just over R1bn, I look back on my life and say 'if I could do anything different, what would I do differently, the only thing that was missing in my life was education'. Actually, at the age of 42, I went to Harvard Business School to do a business degree there, because I believed it was important. I think it's better to have it, than not to have it. I have two daughters now and I've encouraged both my children to go to university because the one thing we both know is that the one thing, which is guaranteed in business, is that there are no guarantees. You have no idea whether the business will succeed or not. God forbid if it doesn't work out, you need something to fall back on and a good education…I couldn't think of anything better to have as a platform.
ALEC HOGG: But if it doesn't work out, you should be trying again.
JAMES CAAN: You can try again, but I think that platform of knowledge… When I went to Harvard Business School, many people looked at me. They couldn't believe it. 'Why is this guy who built this amazing business – he's very successful and learned the hard way how to become successful – what difference is a degree going to make to him?' Do you know what? I came back. I felt better. I felt more learned. I understood that business and times change. The things we do in business today are very different to what we did 20 years ago. The impact of technology, globalisation, and the Internet…some of these things that the early entrepreneurs are probably falling behind on. I actually believe that if you want to stay with the times, if you want to be able to do business in the modern world, then a good education gives you a bit of an edge. I don't think you necessarily have to do it the hard way.
ALEC HOGG: Lifelong learning.
JAMES CAAN: Clearly.
ALEC HOGG: What did you encourage your daughters to study?
JAMES CAAN: My elder daughter did political science. My younger daughter did economics with maths.
ALEC HOGG: So that's not entrepreneurship.
JAMES CAAN: No, I think I wanted them to live their dream because when I was growing up, one of the things I did was… I didn't want to join my father's business – he was an entrepreneur – and I was very clear in my mind that what I didn't want to do was exert pressure on my children to live my dream and do what I did. I wanted them to chase their dream and follow their passion. In Hannah's case, economics was her passion. That's what really motivated her and Jemma was very interested in political sciences, and she then did a year out in Paris. She wanted that little bit of experience internationally, so I think what was very important for me, was to give them a chance to do what they thought was right for them.
ALEC HOGG: It's all about passion.
JAMES CAAN: When they were growing up, Jemma wanted to travel. She wanted to do events. She wanted to have a good time. Her motivation was not about money or business. She wanted to live, grow, and experience. Hannah was really focused and thought 'I want to get into private equity, I want to work with my dad, and I want to build a business like he did', so both my children were very different. However, my clear lesson from that is actually to let your children flourish in what they believe is right for them.
ALEC HOGG: It's not just children. Around a broader perspective, your first business is all about knowing people.
JAMES CAAN: Correct.
ALEC HOGG: What you're doing with the British government – and we'll talk about that in detail in a moment – is also finding people, and finding entrepreneurs. What you did on Dragon's Den was all about assessing people. Is that what gets you up in the morning? Do you like people?
JAMES CAAN: That is absolutely what gets me up in the morning. People amaze me. They intrigue me. The inspire me. They motivate me. What I've learned in the last 30 years in business is that a business idea does not succeed by itself. I don't think a product succeeds by itself. Everything needs people to make it happen. If you happen to focus on that ingredient, you're halfway there to understanding the dynamic of business. To me, people make the world go around. People build and fail in businesses. I've spend my entire career focusing on the importance and value of people in business.
ALEC HOGG: Sometimes people don't know their own passions. How do you help them? Can you help them unlock that?
JAMES CAAN: I think you have to give them the ability to grow. It's like a flower. They have to be able to blossom for themselves. I don't think you can force somebody to be passionate about something. Giving people opportunities, giving people flexibility, and giving people freedom allows them to flourish into what they ultimately become successful at.
ALEC HOGG: So in that way, they will find their passion one way or the other.
JAMES CAAN: They always do. I think they don't find their passion if they're following a very narrow path or if they're very restricted in one avenue, because they don't know what they don't know. What I've tried to do with the business I'm involved with is to let people experiment. Let people try things. One thing, which I'm very well known for… Today, in my private equity portfolio, I have 42 businesses, and one of the key messages that I consistently deliver to my Chief Executive is 'encourage them to make more mistakes'. People look at me and think I'm mad. I say 'actually, 'because you don't make enough mistakes, it tells me you're not learning. You're not taking risks. You're never going to flourish because you're too paranoid about getting it wrong'. The problem is that I believe, as entrepreneurs, we take success for granted because we think we work hard, so we don't really learn much but we learn a lot when we get things wrong. In business, it's not a bad thing to make mistakes.
ALEC HOGG: James, the Anglo-Saxon culture is, in many ways anti-entrepreneurship because when you make a mistake, you're written off…the wrong signals are sent to you from everybody around you. Is this something you're trying to combat in the way you're talking to your Chief Executives?
JAMES CAAN: Absolutely, because it doesn't make it right. History or culture doesn't make it right. The world has changed. Many of the things I quite like about America is in Silicon Valley today, when you go and raise capital… When they're looking an assessing you, if you haven't failed before you're not very appealing to them. They actually mark somebody greater who has failed before, because they recognise that he is actually much stronger and therefore, the chances of him knowing how to combat failure… He has experience. If you've never failed, you're actually not that attractive as an investment. To me, that's why I'm so passionate about sharing that focus about the importance of recognising that the journey of success includes failing.
ALEC HOGG: Did you have that as one of your tick boxes when you were sitting in Dragon's Den?
JAMES CAAN: When I looked at people… If I saw somebody who was inexperienced and was not a risk-taker, I would never invest in them anyway. If I saw somebody that actually looked like they were very much trying to look for safe options, looking for the safety net: that's not entrepreneurship. Entrepreneurship is about embracing risk and understanding that, in order to make something out of nothing, you have to risk. If you're not prepared to do that, then really, you're the perfect person we should employ.
ALEC HOGG: In the four years that you were on the television program, how many investments did you make?
JAMES CAAN: Fourteen investments.
ALEC HOGG: And how did they go?
JAMES CAAN: I think typical venture capital statistics…a third of them are probably going to lose my entire capital, with a third of them I'll probably get my money back, and I'll probably make money off the last third. Probably one of them, which actually has happened in reality, has done incredibly well.
ALEC HOGG: Which one was that?
JAMES CAAN: It was a business called Choc Box.
ALEC HOGG: Looking back on it, how did the decision to invest in that one differ to the ones that you're going to lose your money on?
JAMES CAAN: When you watch the video clip on Choc Box, you'll see that he was an entrepreneur who got his business up and running, had two-hundred-and-fifty thousand Pounds in the bank, was generating one million orders per year for the product he was selling, and his biggest challenge was that he couldn't scale the business. He couldn't expand and grow the business. Despite the fact that it was doing well and making money, it was still a bit 'boutique-y. His challenge of coming onto the show was not just looking for the capital. He was also looking for a mentor. He needed somebody to show him how to break that glass ceiling he just couldn't get beyond and for me he demonstrated that the business was alive. It was working. People wanted to buy the product. It actually felt to me like a tried and tested opportunity.
ALEC HOGG: So if would-be dragons, who are looking at other businesses/other entrepreneurs…what they could take out of that presumably, is don't always go in right at the ground floor or the basement. Wait a little while.
JAMES CAAN: Certainly, on that particular investment, that was the key driver for me but also, I could see that this individual could run a business. He could manage customers. He could manage finances. He could actually get the business up and running. Actually, to get it to where he'd got it was quite an achievement, but where it could have gone was a whole different journey and that was the journey I wanted to share with him.
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ALEC HOGG: Welcome back to our special edition with James Caan who is here in South Africa over this weekend. James, we know you from the Dragon's Den on BBC, but you've been involved lately with the British government. They gave you a chequebook, a rather large chequebook, to help them promote entrepreneurship.
JAMES CAAN: Yes, it was an amazing opportunity for me as an entrepreneur and somebody who's built his own business, to be given that opportunity to travel around the country to meet thousands of other entrepreneurs, to give them an opportunity to start their business using the government's capital to do that. How cool is that? For me, it's probably been the most exciting thing I've ever done. When I embarked on this campaign in my mind my target was…I was very focused around starting one thousand new businesses for the UK economy.
ALEC HOGG: How much capital were you given?
JAMES CAAN: ₤100m. The idea was that if I could start one thousand businesses, then essentially, I was creating one thousand jobs because every entrepreneur who starts a business creates a job and then through that entrepreneur, hopefully you hire other people. The thing that really drove me was the opportunity of job creation and Alec, I'm really delighted to say March 31st was the end of my second year and with a starting target of 1 000 businesses, we finished year two with 15 200 business successfully launched – and having created literally thousands of jobs up and down the country. Without a question of a doubt, it's really amazing… As Chairman of Start-Up Loans, I don't receive a fee or a salary etcetera, and yet, when I look back on my life it's the thing that I probably enjoyed the most. The opportunity of doing something for the country, giving something back, and knowing today there are thousands of people around the U.K. today running businesses that I was instrumental in identifying and facilitating. With each of those businesses, which I started, I ensured that those entrepreneurs have a mentor, which we provide. It's not just capital that's important, but giving them a local mentor to help him flourish in his business, too.
ALEC HOGG: It's an enormous number of companies you've helped start there. How did you select?
JAMES CAAN: I have distribution partners around the country, so from day one, this was a business to me from day one. I was actually starting a business. Start-up Loans in itself, is a start-up business. We have an idea. We have a concept. We need to make it work. Right from day one, I knew that scale was going to be my biggest challenge. I didn't want to start five or ten businesses. Literally, I'm starting today 30 businesses every single day, so that's about volume and scale. For that, you need distribution, so I literally have distribution partners all over the country, whether it's Manchester, Birmingham, or Liverpool, so I have organisations on the ground who are equipped to be able to assess somebody, to evaluate a business plan, to find a mentor, and to help facilitate the funding of that business. I therefore have 42 different partners all around the country. We have about 160 people spread throughout the UK who are there, assessing these individuals. I have a website called startuploans.co.uk. We attract over one thousand applications every week. I use my name, my brand, and my connections to drive traffic through to the website. I then have a team of 40 people in London who then manage and co-ordinate the activities throughout the organisations. It's a very sophisticated organisation today, but only two years ago, it was just an idea.
ALEC HOGG: It's a wonderful lesson for South Africa. We are now in the process of taking small businesses seriously as a national priority, and we're also in the process of creating a Ministry of Small and Medium Enterprises. Perhaps they could consult you or perhaps you could give us some ideas on the way you would structure it.
JAMES CAAN: I would be delighted to do that, because building a national organisation, building a national distribution, understanding who to back, when to back, how much capital to give them, whether you give the capital all upfront, whether you put milestones together, how you track it, how you monitor it and linking it to a mentor as well. Mentors are not necessarily people who are chairmen of public companies. I'm looking for mentors in the U.K. that are running small businesses similar to what the entrepreneur is looking to do. I need local people who are prepared to give up one or two days per month – a bit of their time – to give somebody else an opportunity. Today, I think we actually have just 4000 mentors registered across the U.K. that are available to support some of our businesses. Some of my mentors mentor to three different businesses. Some of the mentors do it via email. Some of them do it via Skype. Technology really transformed the way we do business today.
ALEC HOGG: Your brand as well has been leveraged very aggressively into this field, into a very good field into entrepreneurship. How did you get onto Dragon's Den in the first place?
JAMES CAAN: Through my private equity fund, I built a very good reputation – something I'm very proud of – where I've invested in people, so I've become quite well-known in the U.K., but I'm not an entrepreneur who necessarily invests in a product so I'm not a sector specialist. I'm not a retail guy or a technology guy. I'm a people guy so I invest in people, and some of the people whom I've invested in, have literally gone and built multi-billion (and one entrepreneur in particular that I invested in, went on to become Businesswoman of the Year). We sold the business for nearly R4bn, and it was a start-up. I do have a bit of a reputation for picking winners, and people who really flourish under my mentorship of the business I facilitate. The BBC were looking for somebody in Dragon's Den who had that edge of understanding people and investing in people, because so many of the opportunities… People come on the show and say 'it's not just about the money, but I'm looking for somebody to help me' and I rather fitted that profile. They approached me and said 'would you be interested' and the idea of giving something back to give other people the opportunity was very inspirational for me. In addition, I felt that sometimes on the show we can be a bit too aggressive because whilst the show is entertainment – people enjoy the type of banter – I also think we have a responsibility because so many of our young people watch that show. Discouraging people by being overly aggressive…I just didn't like that. I thought maybe somebody on the show should have a bit more balance because we still need to motivate these people and inspire them, because when people don't make it I want them to have the courage to come back and have another go.
ALEC HOGG: Only 14 investments in four years: you were fairly selective.
JAMES CAAN: I think you should also remember you're there on stage, you're being watched by six million people and you actually need to be smart. It's not just because you're wealthy and you want to throw money around. You're there, demonstrating. What are the characteristic of a good business you should be investing in? I want people to learn from that. They say 'I like the way James made that decision. I can see why he invested in that business, rather than the other business' so yes, of course I could have invested in many different businesses, but I'm there as an investor and I'm there to demonstrate how to make a return from the money you invest.
ALEC HOGG: You're learning as you're watching. By the way, it's a lot more than six million people. It's very popular in South Africa as well. A couple of things about business: they tend (sometimes, anyway) not to go in a nice even uptick, but rather to be as though you were climbing steps in a house. During this period of extreme growth is often the biggest challenge for entrepreneurs. You've grown a couple of businesses of your own and many other people's business, too. How do you address those challenges?
JAMES CAAN: Firstly, by knowing and understanding the one thing, which is guaranteed in business: if anything can go wrong, it absolutely will go wrong, so the first thing is don't be surprised when it's not just one step at a time. Sometimes you climb four at one time, but you drop 15. It happens. The markets change. Your customers change. Economies can change. Price competition comes in. So much happens in business that you have to be prepared for. To scale a business, to me, is about people. It's about resources and recognising that as an entrepreneur, you cannot be the best at everything. The one biggest lesson I've learned in business is that 100 percent of nothing is still nothing. When I look at businesses, I constantly say to people 'business is about attracting the best talent'. The say to me 'but James, it's okay for you because you can afford it'. Well, actually that's not true because in the beginning, I was the same as them. I didn't have any capital, but what I did have was equity and I recognised it was worth sharing some of that equity to find the talent that compensated for my weaknesses. If I'm looking to scale a business, I need somebody who's done it before. I need somebody who's best in class. How do I track that person if I don't have the capital? Actually, what I can do is share in the capital of the equity of the company because if he buys into my dream and we can do it together, we're both going to win.
ALEC HOGG: Typically, how would you do that? Let's just say you've started a business, you own it all, you have 100 percent, you need an accountant and you need a marketing person.
JAMES CAAN: Let's say I find a marketing person who wants to earn X amount per year, but I can't justify that kind of cost. However, this person buys into me. He can see what I'm seeing. He can see my vision. He can see this business is going to be very successful. Maybe I can start him off with a five percent stake in the business and say 'rather than paying you X, I can pay you less than that, but I can make it up with some equity, because if you believe in what we're doing the equity will be worth a lot more than the income you're sacrificing'. Maybe, when the accountant comes along, I give him five percent. Maybe I'll bring somebody on whose head of sales and I give him a piece. Even if I end up with 50 percent of the business, 50 percent of a business making a lot of money is worth a lot more than 100 percent of nothing.
ALEC HOGG: Fifty percent… Would you keep control?
JAMES CAAN: I don't think it's about control. I think many people overplay this issue with control. Ultimately, control is about leadership. It's not economics because each of them own maybe five percent. To me, if you're the founder, if you're a good leader, and if you have integrity and honesty in the way you run a business… I don't own 100 percent of every business. I'm absolutely not afraid of diluting down to 30/40 percent. To me it's not the number but rather, it's what it's worth. Never lose sight of the value because the number in itself has no value because 100 percent of nothing is still nothing.
ALEC HOGG: Indeed, and as you were saying earlier, that's what your father taught you back in those days. Is the ultimate objective for the businesses you start, to be listed on the stock market?
JAMES CAAN: Not always. I think there are certain businesses that fit very well in a public/stock market type of environment, but I don't necessarily believe all of them do. I've generally gone down the private equity route. I currently have a business where we have two options. We can either list it, and we have the stock market doing extremely well in London right now – it's a prime candidate for listing. However, I'm actually probably going to choose a private equity option and essentially, not sell 100 percent, but sell 60 percent of the business, retain 40 percent of that business, and still have a vested interest in the business going forward. I think the private equity firm will bring even more capital, more expertise, and continue to build there. The business I sold – Alexander Mann – I sold to a private equity firm that we sold for just over R1bn. They held it for three-and-a-half years and sold it for R2bn. The next guy just sold the business two months ago, for R5bn, so you can actually see. When I look back, people say to me 'you must feel really upset that you sold it too cheaply'. Actually, I don't because when I sold it, it was the right decision at that time. The fact is the business has continued to grow and build, and today it's the world's most successful human resources business on the planet, which gives me a lot of pride that that business, which I started from literally a broom cupboard with no money, today has a market capitalisation of over R5bn. For me, to see businesses continue to succeed even after you is something to be proud of.
ALEC HOGG: Just to close off with, we've spoken a lot about entrepreneurship, but we haven't spoken about money. Clearly, you've made a lot of money in your life. Is that the scoreboard entrepreneurs should be measuring themselves against?
JAMES CAAN: In the beginning, there's no question. When you start out, you're hungry, you've driven, you're motivated, and you need to have that recognition of success, be it the nice house, the nice car, or the nice holidays, and there is nothing wrong in that. We shouldn't be ashamed of that. We should celebrate success and enjoy success, but I think what happens is over a time period you realise that once you have those trappings and those toys, they in themselves don't become enough. What happens then with many entrepreneurs is what you can do for other people. It's what you can do for the country. It's what you can do for other organisations. How can you share that knowledge/that expertise? Today, that is my scoreboard. It's not what I'm doing for myself, but how I can make a difference for other people.
ALEC HOGG: James Caan, it's been a privilege. I hope you enjoy the rest of your stay in South Africa.
JAMES CAAN: Thank you very much indeed.