Nick Jenkins, well known as one of the 'dragons' on the BBC Two series, Dragon's Den, began his career working as a commodity trader for Glencore in Moscow in 1990, just as the Soviet Union collapsed. He returned to the UK in 1998 to begin an MBA, and founded Moonpig.com, the first online, personalised greetings card business, in 2000. He sold the business in 2011 for around £120 million. He has been investing in startups since 2008, and was a member of the Impact Ventures UK investment committee – which invests in social enterprises using innovation to find better solutions to social issues in the UK.
We highly recommend listening to the full conversation below:
But if you’re looking for some immediate insights, here are the three main takeaways.
1. Have a checklist when choosing how to invest, and establish that the key components a business needs in order to be successful are present.
Nick: "First and foremost, I look at the management team. Because for every good idea, like a Google, there'll be a thousand other Googles and the difference is, which team is going to win? So I look for a really driven team who've got skin in the game, who’ve got good, strong commercial instincts and good values but who also people I would quite like to work with. I'm not interested in spending time with people that I just don't enjoy working with. That's quite important. On the product side, I need evidence that the customers liked the product, that they're happy with the price, and most importantly, that they've got some evidence that people are going to come back and back and buy again, at that price. Beyond that, third point would be, is the addressable market big enough and is the idea easily scaled? And the fourth point is, are the gross margins good? Is the underlying profitability of the business good? Those are the four things that I look for in any business."
2. Consider investing through a syndicate, and never be more than 20% of the money in an investment.
Nick: "I have invested through Adjuvo, which is a great syndicate of high-flying angel investors who really know their stuff. Investing in a syndicate makes a lot of sense, because it means that for one, you've got the scrutiny of more people looking at it. Very often there'll be somebody within the syndicate who's got more expertise on that particular area.The second thing, which comes back to my first point about not being more than 20% of the money, is that when you invest as a syndicate, if you decide not to follow on in that syndicate in the next round, it’s not the end of the world for the company: it isn't going to go under because you said No, as long as the other four think that it's worthwhile investing in sales or five in a syndicate that invest in it, if all five people invested in it, and decided not to follow on, then really, that's telling you something that really the business is not investable, but in okay, because occasionally there are times I just don't want to fall on because I've lost interest in the sector, or I've lost interest in the founder. But not that it's not worth investing and following on, I just don't want to be forced to follow on. I like every decision about following on has to be taken on its own merits."
3. Know when to give up on a business, and treat every investment like a new investment.
Nick: "It’s important to know when to give up on a business. You can keep throwing good money after bad in the hope that things will change, but you have to look very very hard at the numbers and make a judgement call. It’s sometimes easier to write the next check rather than bite the bullet, do the analysis and work out that it isn’t going to work, and then you can get in too deep. I had a couple of investments where I carried on investing where I probably should have stopped. I try now to look at every investment I make as a new investment, and then I say to myself, actually, if someone approached me with this business idea, knowing what I know now about it, I wouldn’t touch it, so why should I put any more money in? That’s the discipline you have to have: look at every investment as if you hadn’t previously been involved."
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