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A man of enterprise

Scotsman.com Business - Economy - A man of enterprise

BUSINESS INTERVIEW

DOUGLAS FRIEDLI
dfriedli@scotlandonsunday.com

PUFFING on a cigarette in the lounge of Edinburgh's Sheraton hotel, Peter Shakeshaft fires a warning shot. "If this is one of those cynical pieces then I'm leaving now," he growls. Shakeshaft, arguably the best-known figure on Scotland's business angel investor scene, has just stepped off the stage at Scottish Enterprise's annual public meeting and looks a little wary. After all, the agency is going through another of its regular run-ins over policy and direction.

Shakeshaft may have been a risky choice of speaker. Straight-talking and a passionate believer in free enterprise, he certainly makes an unlikely ally for a public body which this year has been handed £510m of taxpayers' money to spend. Shakeshaft is aware that some would prefer alternative ways of distributing our cash, but he is here to endorse the agency's support for early-stage companies - those with whom he is most familiar. "I'm not Scottish Enterprise, I am private capital down to my bones," he insists. "But I am a fan of the co-investment fund, and I am happy to stand up and say so."

Shakeshaft has just ended five years in charge of Archangel Informal Investments, one of Scotland's biggest private investor groups, although he will stay on as a non-executive director. A group of entrepreneurs who came together in 1992, the Archangels include Barry Sealey, the former managing director of Christian Salvesen; Gavin Gemmell, ex-Baillie Gifford; property dealers Eric Young and Mike Rutterford; and Ian Sword, the former chairman of Inveresk Research. As self-styled "gatekeeper", Shakeshaft's role at Archangel involved selecting investable companies on their behalf.

Although Shakeshaft has invested in private companies himself - he made some money at the liqueur company Drambuie and elsewhere - he did not put any of his own cash into Archangel firms. "I decided at the start that I would invest in every single company, or in none, and I am not that wealthy," he says.

For most of his time at Archangel he went under his quirky title, which changed to the more familiar appellation of chief executive just before he switched to his new role. "The group has become a little more structured, and the title reflected that," he says. His replacement is John Waddell, previously a director of Noble Grossart, the merchant bank.

Shakeshaft's immediate plans are as hazy as the smoke which surrounds him, although he recently took a similar non-executive role at LINC Scotland - a "marriage bureau" for investors and young companies - and is on the board of four early-stage businesses.

But it is clear that the Scottish Enterprise role was not a one-off: "I am interested in doing something for the public sector, not on the social side but on business, because I believe that the business agenda for Scotland is important."

It is a timely reminder after SE chairman John Ward sobered up the audience at his agency's meeting by admitting that Scotland's growth rate trails that of the rest of the UK by between 30% and 50%.

Shakeshaft reflects on the business climate 25 years ago, when he was running a printing firm in Scotland. "Back then you would never have used the word 'entrepreneur'. Success was frowned upon. There has been a cultural change which says that business is good. We are on a bit of a roll in terms of developing that culture.

"Scotland used to be an enormously socially dependent country. You had the feeling that the state would look after you. I think that social dependence is now changing, and it has a lot to do with entrepreneurs such as Tom Hunter and Brian Souter."

While tycoons get more respect these days, they are also putting money down for the next generation of entrepreneurs. The support of these business angel investors - popularised by the television show Dragon's Den - ensured that funding for young companies did not dry up when the stock market collapsed between 2001 and 2003. "I think [the funding scene] is pretty bloody good here now. Europeans look quite seriously at Scotland. I think we are well served. People who have done well in business like the idea of putting a bit back."

Archangel is a high-profile and high-spending business angel group, but it is not untypical. During Shakeshaft's tenure at Archangel, the group invested £33m in 37 young companies. Around half of those investments were supported by Scottish Enterprise's Co-Investment Fund, which was set up in 2003 to encourage the private sector to invest more at the sub-£1m level.

He confesses to a few early doubts about the scheme, but was quickly converted: "It is different. When SE created it, they created something new and it does give Scotland the edge. In a large number of cases where Archangels would not have invested, it has given us the support to go out and do the deal on our terms and with no bureaucracy."

He has similar hopes for SE's new Scottish Investment Fund, which will invest alongside the private sector at between £2m and £5m a time, compared with between £100,000 and £1m from the co-investment fund. A detailed plan is expected by Christmas.

"I would like to see the same kind of boldness. If you start off with a £40m pot of money, that needs to be leveraged to get more out of the private sector," says Shakeshaft.

Some venture capitalists say that companies looking for between £2m and £5m would be funded by the private sector if they were any good. Shakeshaft does not agree: "We did research which identified 50 companies which will need funding of that kind of level. Somebody might say that none of the 50 or so is any good. I absolutely do not believe that. The risk profile is still high. A lot of venture capitalists will not look at companies that are pre-revenue, and prefer to look at investments such as management buy-outs. The investment fund will maybe take some of the risk out."

Another criticism aimed at the fund is that, by investing solely in Scottish companies, it may put off large institutions which want to spread their risk geographically. However, on this point, Shakeshaft is more understanding: "I accept that Scotland is a leader in global fund management, and they don't all want to be seen investing just in their own backyard. But if you look at places like Boston, Massachusetts, a lot of companies do invest in their backyard.

"There is a lot of value in investing locally because you create a better environment for your business. Anyway, the fund will be looking at real investments with real returns. It is a good opportunity."

Despite getting close to Scottish Enterprise, Shakeshaft is unlikely to get a job as a full-time civil servant. His previous roles - including executive directorships at Drambuie and John Waddington, the printer - taught him all about large organisations. "If I learned anything from those jobs, it is that I make a very bad employee. I prefer to work for smaller companies where I can make a difference. I work better in an unstructured way," he says.

Much of his role at Archangel was to sift through thousands of business plans on behalf of the other investors. The propositions are getting better, he says: "I think the quality is improving because people are becoming more realistic. The cases coming forward now are well researched."

His own directorships include Adventi, the IT support company; Amoebics, a biotechnology firm; and Earlsgate Holdings, a kiosk technology developer. He is also on the board of Connect Scotland, the group which brings together early-stage companies and potential investors.

And he rules out the idea of winding down: "I don't see me ever retiring. I love the challenge of business and making a difference."

AWAY FROM THE DAY JOB

Age: 57
Hobbies: "I am a passionate salmon fisher, that is my real love. I work so that I can justify going to the Spey and around Scotland to fish."
Films: "I went to the premiere of a film called Junebug - it was quite enjoyable."
Books: "I am in the middle of a John Grisham novel. I recently finished the new Harry Potter book."

September 5, 2005 at 01:07 AM in UK | Permalink | Top of page | Blog Home