Interviews  >  Scott Haughton: The man's an angel

Scott Haughton spends his working life matching private investors with high-growth emerging companies. He explains to Nick Kirby what is involved, and gives his take on entrepreneurs in the Channel Islands.

 

Parallels with Dragon's Den are inevitable when you talk about business angels. Love or loathe the programme, it certainly has drawn attention to the phenomenon of wealthy individuals (often with significant business experience) who are looking to invest in new companies in the hope of bagging a serious return.

One of the most prominent firms operating in the business angel arena is Envestors, and they've been around since way before the ‘Dragons' hit our TV screens. Scott Haughton and his three business partners formed the company in 2004, having had varied, generally poor experiences with bank managers and so-called business advisers when it came to raising private funding.

What they wanted to do was use their experience and “bring a no-nonsense, professional and highly regulated approach to the process of matching investors with high-growth companies”.

It's been a recipe for success. Envestors now comprises a network of 750 private investors and family offices and has bases in London, Manchester, Dubai and Jersey. Having recently raised £150,000 worth of funding for Jersey firm DotTVMedia, Envestors now has a foothold in Jersey and is looking for more companies to come forward. Scott took time out to talk to us about the present and the future for business angels and the islands.

Dragon's Den shows a very simplified version of how business angels work – the people turn up and pitch and either get funding or don't. But the process is more complicated than that, isn't it?
Absolutely! We have about 100 companies a month in London looking to raise finance – we meet with about 20 and then engage with four to six. We act as their corporate finance adviser, make sure they are fully investment-prepared and screened before we market them with confidence to our investors.

And it's proved to be a successful approach?
Yes it has. On average only two per cent of companies in the general business environment are able to raise private money successfully. At Envestors, half of the companies that we engage with are successful. In the last three years, we have helped raise over £23 million for 60 high-growth companies.

You've just successfully gained investment in Jersey for DotTVMedia; tell us about that.
Investors don't mind risk, but they do want the potential for explosive growth, and the whole online market and the use of video within websites is only going to increase. We've seen the dominance of YouTube, but that was branded and there wasn't an own-brand label – this is the offering that DotTVMedia have come up with. It's a classic opportunity that scales well beyond Jersey – to the UK and Europe, and potentially globally.

The company gained a lot of investment interest, but they decided to proceed with a single, Jersey-based investor who not only came up with the money but also offered invaluable support and mentoring.

Do most of your investors want to be ‘hands on'?
Probably half are looking for some form of hands-on role, be that providing advice or acting as a non-exec. But there are those who want to invest and simply be kept informed and hopefully reap the rewards.

How does the return work?
Many angel investors will have allocated a chunk of their wealth to invest into a portfolio of high-growth, early-stage unquoted companies. Ultimately they want to try to generate 10 times their money on an investment, but recognise they might need to invest in 10 firms, where four might not be successful, but one or two might offer stellar returns which covers the whole portfolio investment.

“We would very much welcome a pan-island approach. The aim is to create a self-sustaining Channel Island private investor network”

How many other businesses have you seen in Jersey, and how many have you engaged with?
What we have achieved in Jersey is a phenomenal network of about 50 wealthy individuals who are not only willing to invest considerable sums of money, but also to offer support, guidance and mentoring. Our challenge is not finding the investors but to find more companies like DotTVMedia. To date, we have marketed four Jersey companies and we are currently working with another three who we showcased to investors at a presentation event in November. We would urge more to get in touch.

Do local entrepreneurs think they can gain financing themselves, and are they ‘put off' by being on an island where everyone knows everyone?
Clearly some companies are successful in raising finance from people they know already. We have also seen that some people are reserved about telling the community about their business, and almost feel that asking for money is slightly negative. And yet the investors in the audience would not see it as embarrassing, they would very much welcome the chance to be involved and to really grow a high-quality company and assist the island at the same time.

What types of businesses approach you?
We see all sorts of sectors. In Jersey, of the companies we've seen and ones we're working with, there is waste recycling, recruitment, a media business and an e-commerce business. In the UK we have successfully funded manufacturing, software and technology firms. It's more about the quality of the management team and the business model. A good idea is a good idea, after all.

Did you have any expectations from Jersey investors and businesses, and what would you say about the general standard you have found?
I knew that there were some wealthy and highly successful investors, and that has been realised. However, I was surprised by the level of hesitation and reservation of some of the companies we have seen. Clearly Jersey is a small community compared to London and there isn't the depth of companies, but we know there are good companies and we would urge them to tap into the mentor capital that exists on the island – and also within the UK – because we do promote Jersey-based companies to UK-based investors, and those further afield.

You are working closely with Jersey Enterprise: how is that going?
We are receiving very strong support from Jersey Enterprise. We work with a number of development agencies in the UK and really can state that Jersey Enterprise is incredibly proactive, and very commercial in welcoming private sector involvement – and we have the highest regard for that approach.

Are you working with any investors or companies in Guernsey?
We've already recruited a small but strong number of investors there. We aren't working with any companies yet, but we would very much welcome a pan-island approach, and have approached Guernsey Commerce and Employment to replicate the Jersey Enterprise model. The ultimate aim is for a self-sustainable Channel Island private-investor network.

Should there be incentives for doing business with Channel Island companies?
One of the strongest tax breaks in Europe to encourage investment into high-growth, early-stage companies is the UK's Enterprise Investment Scheme – this provides tax incentives to encourage private individuals to invest into these companies. We would urge the States of Jersey to consider this as an extra incentive to support local industry.

We also believe that there is an opportunity to create a co-investment fund whereby private investment in the Channel Islands could be matched by States money. The private investor would be taking the risk and would provide mentoring into the company, and his investment risk is matched by money from the States. I talked to Senator Alan Maclean at the IoD Debate in Jersey about this very possibility, and Envestors are putting together a paper where we are proposing a way forward.

At that same IoD Debate, you touched on Jersey's lack of diversification and its failure to move away from finance and capitalise on other markets. Do you think the islands are too inward-facing?
I definitely think there is a certain sense of complacency, a lack of hunger for growth. Many people in Jersey have a relatively successful lifestyle and a high quality of life. I would urge any island or any population to continue to push its boundaries and continue to grow. Clearly Jersey is very strong in the financial sector but I feel it should capitalise on many of its other talents.

Do you see any other barriers to business?
Possibly speed of broadband. I don't see a problem in the commercial environment – I've been in many offices and hotels and the speed of broadband has been fine. The issue is in the domestic home environment where the speed of broadband seems poor. Many people are living a 24/7 working lifestyle and it doesn't matter that they have broadband in the office, they also need that at home to continue their normal working practises.

How do you see Envestors progressing in general, and in the Channel Islands?
The future for Envestors is looking very promising. We've recently been acquired by the Braveheart Investment Group which is an AIM-listed company. They provide funds under management, run co-investment funds and provide additional investment services for private investors, so it's a very good ‘fit'. In terms of the Channel Islands, a panisland investor network is an aim. We've also seen more high-quality companies coming forward after the success of DotTVMedia, but more firms need to take the opportunity to seek extra finance, and the mentoring support and guidance it can also bring.

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