Enterprise News

Doug Richard: American dream

Dec 07/Jan 08 issue
 

With a passion for growing businesses and an intellect to match, Californian entrepreneur and business angel Doug Richard has quickly become a champion of entrepreneurship in the UK. He talks to
Nick Britton about how British business could be made better

‘Entrepreneurialism is a fancy word for letting people start a business,’ says Doug Richard. ‘If you’re asking me: “Could we help businesses more?” I’d say yes – not through business support, but through a clear path: less regulation, less burden, less taxation.’

It’s a typically bracing view from the former Dragons’ Den star, now chairman of research institute Library House and CEO of mobile social network Trutap. But he hasn’t even started.

‘Ten years ago the Government created a programme of taper relief that is crude and has issues, but has been beneficial. On its tenth anniversary, just when we should be celebrating it, they effectively remove it, increasing taxes on gains by 80 per cent and reducing people’s ability to make investments.’

Richard argues that the withdrawal of capital gains tax taper relief punishes entrepreneurs, removes demonstrable benefits to the economy and damages the Government’s credibility.

‘It’s been done under the rubric of simplicity,’ he adds. ‘But I can give you plenty of simple things that are not flat. Picture a taper system that starts at income levels of taxation, then decreases over ten years in a smooth line to a nominal rate.

‘This is already used in the share options schemes that large corporations offer their employees. It’s the devil’s own system because it means people are always encouraged to stay employed. I mean, I’m not making this up.’

Though Richard has recently given his support to a Government-backed website, Venture Navigator, that helps businesses evaluate their ideas, he is sceptical about many state initiatives to support growing companies – and the thinking behind them.

He is particularly dismissive of the Government’s efforts to plug the so-called “equity gap” between business angels and venture capitalists (VCs).

‘It’s not a case of “not believing” in the equity gap. I don’t believe in the Easter Bunny either,’ he says. ‘The contention was that there was an artificial market failure between £250,000 and £2 million. There may be market failures, but they correct themselves over time and the idea that this market failure could have existed in exactly the same form for seven years is patently absurd.’

Richard believes that a shortage of VC money is not the key problem. Even if there were more money, he suggests, there might not be anywhere for it to go – after all, VCs are already ‘struggling’ at times to find decent investments.

‘VCs acknowledge that entrepreneurship [in the UK] is still growing. There are not enough second-generation entrepreneurs, not enough seasoned management teams,’ he argues.

Testing times
Though Richard stops short of offering prognostications for the year ahead, he admits the future seems ‘terribly uncertain’. Having weathered a few economic ups and downs in his time, he has this advice for entrepreneurs facing a slowdown.

‘I have very simple rules in life. If someone offers you cash, take it. If you have cash, preserve it. And imagine what’s the worst that can happen and prepare for that, because things can always get worse.’

He is more upbeat about the prospects for companies in certain sectors: telecoms, new energy and material sciences, for instance. In particular, he sees success ahead for companies poised to exploit digital convergence, which he thinks is about to enter ‘the last mile’.

‘The world at large will soon start to get an inkling of what convergence will be like,’ he says. ‘People will suddenly start to realise: “So that’s what internet TV means. The music business is dead, yet a new music business is born.” People will wake up in 2008 and realise: “Bloody hell, this is a big deal!”’