Doug Richard: Library House & Dragons’ Den
The Library House chief executive Doug Richard talks innovation
“There’s nothing more exciting than being a business angel, because you’re definitely gonna lose a lot of money,” smiles Doug Richard, boss of research group Library House and celebrity investor.
“Once you get into that mind frame, it’s such a great feeling when you finally pick a business that works.”
It’s a surprising sentiment from one of the UK’s most famous backers of fledgling companies, but reflects the reality of what it takes to be a business angel. Another good illustration is the BBC’s hit series Dragons’ Den, in which Richard stars.
Remember Rachel Elnaugh’s decision to back Le Beanock – a swinging beanbag that you drill into your ceiling, or Phones International Group boss Peter Jones’ roll of the dice with trendy mag Wonderland? Both were big risks, according to Richard; and they’re probably going to fail.
“I managed to hold myself back when Rachel backed Le Beanock,” he says with a grimace. “It sounded like a nice niche product for someone with a loft, but the pricing was all wrong. It’s a massive hanging bag and you have to drill it into beams – not very practical.”
On the subject of Wonderland, he adds: “It was a very effective presentation, if you take away the fact that it’s the riskiest thing you can get involved in. Would I ever invest in one of those magazines? God no!”
But he admits his own investments don’t always go to plan either. For example, he was forced to renege on his decision to back a laser measuring device when the team behind it revealed that someone else had already produced a similar prototype, secured substantial funding and were at a later stage of development.
From the way Richard describes the investments you can tell there’s plenty of playground banter behind the scenes, and while the Dragons seem to get on, there is a subtle rivalry between them – not least between Richard and Jones who are good friends off camera.
It was all the more intriguing, then, when Jones announced his intention to buy Red Letter Days, Elnaugh’s experiences company, out of administration. Richard is coy on this subject, but he rejects the popular headline ‘Dragon saves Dragon’.
“Peter and Theo [Paphitis, Jones’ partner in the venture] bought the company from administration, therefore Rachel didn’t get anything out of it and she loses her business, so that headline is incorrect,” he asserts. “A more accurate one would be ‘Dragon buys company; might do real well’.”
Despite its well-publicised debt and problems with partner companies, Richard is optimistic about its future. For a start, at least 90% of Red Letter Days’ partners have pledged to keep faith with the re-energised business, it has substantial receivables, massive distribution and a 16-year-old brand.
“I don’t know if Peter has been involved with a turnaround before. I don’t think it’s a bad decision, but I’m not sure it’s an obvious winner either. It’ll be interesting to see whether we’ll see the end of the story before the next series goes on air in November,” he says.
Richard isn’t giving up many details about Dragons’ Den’s second airing, but he promises that the good business ideas are better and the bad ones are – unbelievably – even worse. He allows that he made four ‘offers’ during the six shows, but won’t say how many were finalised.
Away from his TV appearances, Richard has three professional concerns at the moment: his research group Library House, an investor readiness programme which he is running through the business, and a brand new start-up that just might turn the mobile phone industry on its head.
He describes Hotxt, his new innovation, as ‘SMS over IP’. In layman’s terms he plans to provide a flat-fee texting service which would save customers 80% to 90% on their bills.
According to Richard, the average 18-year-old spends £400 on texting a year. “We offer a real simple service,” he says, “£4.50 a month all you can text. It costs £54 a year instead of £400, so I’ve taken it down by a little under 90%; sounds like a good idea don’t it?”
It does, but only if the figures work – and they do. When pushed on cost versus profit Richard’s smile broadens: “We know there is a cost because we have servers, we have stuff, but the cost of the actual text is a figure sufficiently small we haven’t got around to calculating it. It could be a thousandth of a penny, or a 10-thousandth.”
There is also a useful privacy aspect to the invention. Like Yahoo!, Hotmail, or MSN Messenger email applications, Hotxt is not tied to the machine it operates on so it’s not immediately accessible by just anyone, unlike a normal text.
In fact, privacy was the inspiration for the service and Richard only hit upon cost benefits later. So the story goes, a friend of Richard’s caught his wife cheating via a loose-tongued text message and, bizarrely, it triggered the eureka moment.
When it’s finally up and running the biggest outlay will be on marketing. That and what he anticipates will be the problem of every big mobile network trying to squash it.
Running the gauntlet
The rest of Richard’s working life is devoted to his primary business Library House, which tracks innovation companies and sells information about them to investors, government groups and business services companies.
“Some of our members are looking for hot new companies to lend their backing to, and some are looking for rivals to stamp on. But we also work with groups like regional development agencies whose business it is to know about dynamic young companies in their area,” he explains.
Obviously, this comes in handy for his own investments. “I have more than one hat. I have my Library House hat and I have my ‘Doug wastes his money on investments’ hat. But of course it helps to be the head of a company that provides advantage by knowing more than everyone else.”
This overlapping of interests is also evident in Richard’s backing of The Gauntlet, an online tutorial helping businesses to achieve investment readiness. He describes it as “like being grilled by investors, but with a second chance”.
Apart from the obvious benefit of being introduced to so many budding young businesses, The Gauntlet means the innovation companies that it is Library House’s job to track are now arriving on its doorstep in their droves.
Richard claims to limit himself to one venture at a time, but what with judging The Gauntlet hopefuls and launching Hotxt – “hopefully very soon” – plus all the attention that will no doubt accompany another series of Dragons’ Den, it looks like time will be his biggest investment in the foreseeable future.