Dragons' Den - James Caan is the new Dragon
15th October 2007 - Multi-millionaire James Caan is set to join Deborah Meaden, Duncan Bannatyne, Peter Jones and Theo Paphitis when the Dragons' Den throws open its daunting doors for a new series tonight.
Once again, fledgling entrepreneurs will lay bare their beloved brainwaves in the hope of winning the ultimate, glittering prize – investment in their inventions.
And, once again, would-be high-fliers face the fear of falling to Earth if, one by one, the flinty-eyed Dragons deliver their crushing verdict: "I'm out."
"This is very similar to what I do in my day job," explains the newest Dragon. "I am a professional investor and I have a 20-year track record of investing both in people and businesses, so the appeal was that it's something I'm very comfortable with, something I've done before and something I think I'm probably quite good at," he adds, matter-of-factly.
And why does James think that viewers tune in to see the (mostly) dry-mouthed candidates beard the Dragons in their Den?
"It's very exciting because it's real – it's not reality TV," declares James, founder and CEO of private equity firm Hamilton Bradshaw.
"These are real people who come to the Den with real ideas and we are real investors, not actors, and we are investing real money, which is our money," he continues.
"If you've got a great idea you can walk into the Den and, within less than an hour, you can get the investment you're looking for. That must be a spectacular result because, under normal circumstances, you'd have to go through banks and have various meetings and accountants.
"Whereas here, if you could get a decision in principle, subject to due diligence, on the day, within less than an hour, there must be a huge appeal to potential entrepreneurs who're looking to raise money."
Courage
James, a graduate of Harvard Business School's prestigious Advanced Management Programme, concedes that it takes courage to make that seemingly endless climb up the intimidating staircase to face the no-nonsense quintet.
"I must admit I would have given you a very different answer before I'd been in the Den, but I actually think that I admire anybody who comes in, because it's not as easy as it looks," he confesses.
"On TV, you're very quick to give views and opinions and criticise the person with their idea. But when you're standing in front of five professional, successful entrepreneurs, who've probably been there and done it X number of times before, and who're grilling you, one after the other, and you've got four cameras facing you, it's not easy."
And he reveals: "The interesting thing is, I bet if you asked any of the Dragons themselves to stand in front of five people, you know what? They probably wouldn't find it easy either. So it's very challenging and it's certainly harder than it looks on TV."
Grilling interviews
Viewers see only a small section of the grilling interviews, the length of which varies.
"It depends largely on the quality of the opportunity," explains James who, in 2001, won the Enterprise of the Year Award for his outstanding business success.
"For something that's not very inspiring, probably 20 minutes. On the other hand, if you have something that's an interesting idea, then it could be as much as an hour. There are no rules within the series that say, if you're going to make an investment, you've got to do it within an hour. So to a large extent it's completely up to the Dragons. We could actually go on for two hours if we wanted, to continue asking enough questions to satisfy ourselves that this is something that really makes sense."
Because the Dragons usually invest an eye-watering sum, they have to be absolutely certain of a copper-
bottomed opportunity.
Exciting
"I must admit, when they asked me [to join the Dragons], my initial reaction was that it sounded really exciting and should be a lot of fun," he says. "I thought it was going to be quite easy. And then, when I actually got into the Den, I found it much harder than I thought. I was genuinely surprised at myself, because I went in feeling pretty confident."
James explains that he's facing the accomplishment of a process which would normally take between 12 and 15 hours – "and that would be a very good and a very quick deal" – in about an hour.
"That was when reality set in," he confides. "I'm sitting in the Den and I'm thinking, I've got five minutes to work the person out, I've got 10 minutes to work the product out, I've got three minutes to work out the financials and I've got two minutes to do the deal. And at the same time I'm competing with four other people who've been doing this longer than me, who've got a lot of experience.
"So on the one hand I'm under quite a lot of pressure because I'm trying to really concentrate on the opportunity and the idea. But at the same time, I've got to be so aware of 'where's Peter coming in, and where's Theo coming in?' Because obviously, if it's a good deal, frankly, we all want it. You very rarely see a deal where one Dragon goes out on their own, with everybody else saying they're not interested but he or she really believes in it."
He adds: "You're sitting there, thinking that it's £200,000 and it's your cash. If you get it wrong, a lot of these are start-up ideas which means you are going to lose your money. And £200,000 buys a lot of Armani suits for me – so I don't want to lose too many deals."
London and Cannes
James, who has homes in London and Cannes, has been creating, building and selling businesses for more than 20 years.
In 1985, he set up the Alexander Mann Group, one of the UK's leading HR outsourcing companies, and achieved a turnover of £130m before selling it to a private equity firm in 2002.
He also founded an executive headhunting firm which he successfully expanded globally through its Humana International brand and grew to more than 147 offices across 30 countries before it was bought by a New York-listed company.
Although James knew of the existing Dragons, he didn't know them personally. But he says of his fire-breathing colleagues: "They're really good people." He admires their track records and their deals, and adds: "You're with a very good bunch of people who are, without doubt, extremely successful in their own right, so it's a really good panel to be part of.
"And they've been really friendly, very warm, and I think when you walk in to an existing situation where there's already an existing relationship and everybody knows each other, it's actually quite hard when you come in as a new person. But they've really gone out of their way to help me feel comfortable."
James reveals, though, that as a new Dragon, it's hard to clinch a deal.
Target
"What happens is, when somebody is looking for an investment, they tend to target a Dragon because of industry sector. So if you have an investment from somebody you've never heard of, somebody you've never met before, actually that's not very appealing. So all of a sudden I find myself in a situation when I do like a deal and I'm competing with the investment, and the entrepreneur is more interested in going with somebody he's seen on TV or he's familiar with or he's read about."
He adds: "So I think, as a new Dragon, you actually have to work quite hard, not only with your money, but also to convince the individual that you can add as much value as everybody else."
James, a married father of two daughters, has previously declared that he makes a point of investing in people, being a great believer that it is people who create a success in business through their passion and conviction – but is his Dragon persona friendly or formidable?
"I would say I'm quite balanced," he comments, "because I think that with people who've never run a business before, it's very important to treat them as adults.
"Business is not all about good news," he says frankly. "I think sometimes you have to be stern and tell somebody when something isn't working and when they've made a mistake because we're not dealing with theoretical money here – we're dealing with real money.
"There's a phrase, you may have to be cruel to be kind, and sometimes in business people find it difficult to say no. As an investor, I truly believe I have a responsibility to the people I invest in to be straight with them and give them the bad news as well as the good, because otherwise they'll never learn."
Inspire and motivate
James, recently a Resident Entrepreneur Mentor for MBA students at London Business School, continues: "You've got to inspire them, motivate them, keep them really believing in what they're doing, because you want them to be successful. At the same time, you want them to be realistic; the one thing that viewers constantly see is people walk in with delusions of grandeur about what they think they're going to do, but reality sometimes is different.
"I think the biggest lesson I've learnt is that in business anything that could go wrong generally does; the test of a good entrepreneur is how they deal with that."
James, who was PricewaterhouseCoopers' Entrepreneur of the Year in 2003, does have strong views that it is people who make businesses successful, not just the product.
"Of course the product is important, but if you had the best product in the world, and you had poor execution and you didn't have the passion, the drive, the conviction, the belief – is it going to work on its own? Things don't sell on their own; people buy people first," he declares.
Viewers can look forward to more weird and wonderful inventions in the new series of Dragons' Den.
"We've seen some really quirky ones, some crazy ones and some hilarious ones," he reveals. "I've seen all of the series and I would say this is going to be the best. I think a lot of that is because as a show matures, people get to understand what it's all about and therefore the quality of pitches is definitely better because people are more knowledgeable – they understand what the Dragons are looking for, they know more about the programme and some of the opportunities were certainly quite impressive. There are going to be some huge success stories coming out of this series," predicts James, who has made some investments during the series.
Eventual success
But the tough-talking Dragons don't always have the Midas touch; some ideas and innovations rejected in the Den have gone on to enjoy eventual success.
"Nobody has the Midas touch," says James. "I remember Body Shop: Anita Roddick was only looking for 10 grand and she couldn't raise it. It was actually a guy she met in a car garage who lent her the money, because every bank had turned her down.
"And I attended a conference with Bill Gates once and he was saying that when he was starting out, one of his biggest challenges was that he couldn't get a bank to lend him the money to give cars to some of his people. So even Bill Gates, when he was starting Microsoft, struggled to get a bank loan and car companies wouldn't lease him cars.
"So of course the Dragons will get it wrong. People will come in and within that relatively short period of time we'll miss something. I hope we get more right than we get wrong, which is really what investing is all about," he explains.
"You've got to take a portfolio approach," he adds practically. "If I invest in five opportunities, they're not all going to be runaway successes. You might have one that doesn't work, one that breaks even, one where you get your money back and one that's a runaway success."
Although James doesn't strike you as a gambling man, isn't what happens in the Den exactly that? And could the fire-breathing five end up getting burned?
"I wouldn't use the phrase gamble," he replies thoughtfully. "You take risks and I think the success of a Dragon is his ability to calculate that risk. So fundamentally yes, of course it's a risk and people who do better than others are the ones who can calculate that risk better."
Then our allotted interview time is over – James escorts me to the lift and, to borrow the Dragons' famous phrase: I'm out.
Read the profiles for the other 2007 Dragons...
