James Caan: Caan do attitude

Dragons' Den investor James Caan reveals how he made it, why he's still passionate about business, and whether he and Duncan Bannatyne have patched things up after that non-dom spat.

James Caan first realised he’d made it when his recruitment company, Alexander Mann, hit a turnover of £1 million. This was 1988, three years after setting up the business.

‘It felt like you’d arrived,’ he recalls. ‘That the business model was working and that customers wanted to work with you. That was a psychological barrier as back in the 1980s a million pounds was a lot of money.’

Needless to say, a seven-figure sum is pocket change for Caan these days. He is estimated to be worth £85 million, thanks in no small part to a couple of smart partial exits. He sold a minority stake in Alexander Mann to a private equity firm in 1999 for £25 million, by which time he had already set up and sold a controlling stake in another recruitment business, Humana International.

Caan may have made his fortune, but he notes it could have been a different story. ‘We nearly fell over in the early 1990s. I had started the company in the roaring eighties and it was successful and then the recession struck like a bolt out of the blue. You don’t know what to do because you’ve never been in that position before. Sometimes you can make a decision which is game, set and match simply because of inexperience.’

Guiding light

After reading that 35,000 businesses are likely to fail this year, Caan recalled his own early days in business and felt that many of these insolvencies could probably be avoided if more hands-on help was available. It’s inspired him to set up an enterprise academy, where people can learn from those ‘who have been there, done it before and got the scars’. He says: ‘There are a lot of entrepreneurs who have never known anything other than a boom market. If you’ve never experienced a difficult economic climate, how do you address some of the challenges that are faced in business today?’

The tone may be evangelical but the scope of projects Caan is involved in suggests his interest in the wider world of business is authentic. Apart from the academy and his appearances on Dragons’ Den, Caan has worked for the government as chair of the Ethnic Minorities Business Task Force, he’s a judge for the Nectar Business Small Business Awards and, in addition to all that, he heads up Hamilton Bradshaw, a private equity firm which has made a dozen investments in the past 12 months.

Born in Pakistan (more about his non-dom tax status spat with fellow Dragons’ Den investor Duncan Bannatyne later) and raised in Brick Lane in East London, where his father ran a business making leather jackets, Caan says he always knew he would be the master of his own destiny. ‘When you run your own business you’re in control and have the opportunity to either sink or swim. I like the concept of fear. I like the fact you’re in control.’

Recovery mode

The appeal of starting a business has grown enormously over the past decade, thanks in no small part to shows like Dragons’ Den, which Caan notes with pride is studied in some schools as part of their business syllabus. What those shows don’t always make clear, though, is the baggage that comes with running a company.

‘When you start a business you think it’s only about getting customers and sales,’ says Caan. ‘All of a sudden you realise you have to be quite good at numbers, payroll and managing other people, delegation and making tough decisions.’

Although Caan and countless others went through this baptism of fire, he believes there is nothing wrong with making it easier for people. ‘Doing it the hard way doesn’t mean that it’s the best way,’ he says. ‘If you’re strong and resilient enough to get knocked down and come back, that’s great. My concern is that I think a lot of people will get knocked over and will never get up again. I don’t want the British economy to lose out on entrepreneurs who could have been fantastic but who weren’t really prepared well enough for business.’

After his successes in recruitment, Caan took some time out to live the life of the super rich, relaxing in the South of France and unwinding on his yacht. He resurfaced with Hamilton Bradshaw, which has around 30 companies in its portfolio, investing in technology, leisure, financial services, outsourcing, media and recruitment.

‘We’ve had a very active period over the past two years. Obviously, values have plummeted: it’s been an interesting time to invest because we have been able to get into positions in businesses where in a normal market we never would have got a look in.’

Outside the den

Whereas on Dragons’ Den Caan may get half an hour to assess the viability of an idea, the investments at Hamilton Bradshaw are a little more considered. ‘Of course, we’re not under pressure from the cameras. Typically, we would take six to eight weeks to make a decision and maybe meet the entrepreneur four or five times. We do a fair amount of due diligence on the market, sector and the robustness of the product. We challenge the business plan and the growth projections compared to the market.’

When on the television, Caan states that it’s personality that matters. ‘For me personally, I invest in people. I don’t feel I’m smart enough to work out in 30 minutes whether a product is that compelling; I am probably a better judge of character than I am product.’

Supporting enterprise

As a member of the advisory panel that sat on the Rowlands Growth Capital Review, the government-backed research into the need for early-stage finance in the UK, Caan is adamant that all avenues should be pursued to help growing businesses obtain finance. ‘Today the $64 million question is that if you have a great idea and want to start a business from scratch, we still have no real venture capital community here. There’s no question we should do more as it’s such a fundamental part of growing the economy.’

For Caan, the government should take a direct role in promoting venture capital and he advocates the creation of an organisation similar to the Industrial and Commercial Financial Corporation, which was set up in the 1930s and eventually morphed into private equity giant 3i. ‘Venture capital is the lifeline of the SME market. Even today, whichever business you speak to, they will say that getting start up capital is one of the most challenging things they do. The banks won’t give money to people who don’t have collateral.’

With filming of his fourth series on Dragons’ Den under way, the attention on Caan has not been on his various business activities, but rather his spat with Bannatyne over his status as a non-dom who wasn’t paying his fair share of taxes. Caan points out that he pays income tax, corporation tax, national insurance for staff and stamp duty on properties; he isn’t too convincing when he describes the accusations by his fellow Dragon as a ‘media storm in a teacup’. You sense Bannatyne won’t be getting many invites to Caan’s luxury yacht when he says, ‘We have investments together and I’m sure we’re going to be professional about it.’

Timeline

1960: Born in Lahore
 
1982: Sets up House of Aisha (clothing boutique)

1985: Alexander Mann is launched

1993: Launches second recruitment company, Humana International

1999: Sells stakes in both businesses

2003: Wins PwC Entrepreneur of the Year award; graduates from Harvard Business School’s advanced management programme

2007: Joins Dragons’ Den

2009: Awarded the Star of Pakistan by the ambassador of Pakistan for contribution to UK business

Todd Cardy

Todd Cardy

Todd was Editor of GrowthBusiness.co.uk between 2010 and 2011 as well as being responsible for publishing our digital and printed magazines focusing on private equity and venture capital. Connect with...

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