ENTREPRENEURSThe UK’s

FINANCIAL TIMES SPECIAL REPORT | Tuesday October 4 2011

VideoIvan Massow debatesthe issues facing UKentrepreneurs withPhil Cameron andAlex Jackman

www.ft.com/UK­entrepreneurs

Inside this issueQ&AJamesCaananswersourquestionsPage 2

Guest column Businessesshould get their affairs inorder early in a recession,says René Carayol Page 2

Finance Alternative fundingoptions to banks Page 2

Profile Nicko Williamson ongreen taxis Page 3

InterviewStephenCatlin talksabout theriskybusiness ofinsurancePage 3

Profile Tony Banks saysgoing into a care homeshould not be a jailsentence Page 3

Profile Errol Damelindiscusses Wonga Page 3

Social enterprise Do welland do good Page 4

Red tape Businessminister Mark Priskresponds Page 4

More on FT.comInterview We talk toPaul Rose, chief executiveof Rixonway Kitchens

Interactive How to cutthrough the red tape; andenterprise zones and taxbreaks in England andWales

It is the best of times and itis the worst of times to bean entrepreneur.

In the UK, start-up activ-ity has always seen an uptick asthe economy has moved intorecovery, since at least 1973,according to David Storey, pro-fessor of enterprise at the Uni-versity of Sussex, who has beenresearching the small businesssector for many years.

“In essence, it tells us thatself-employment will rise with alag after a period of unemploy-ment,” he explains.

There is nothing like thedepressing reality of the dole, itseems, to push people toattempt that business idea theynever got round to when theyhad a salaried job.

Many of those fail – up to60 per cent, according to Mr

Storey. But those who survivewill also create a large numberof new jobs.

Hamish Stevenson, founderand chief executive of FastTrack, the business trackingservice, has been following thefastest-growing companies since1997. He says there are about1,750 private companies in theUK with operating profitsgreater than £3m. They havecombined profits of £27bn,employ more than 1.6m peopleand have added more than130,000 jobs in their most recentyear.

“Knowing many of theseentrepreneurs over the years,they certainly have the fire inthe belly and the track record toovercome challenges and exploitopportunities,” he says.

Entrepreneurship is oftencounter-cyclical and thrives dur-ing downturns, according toAlex Macpherson, partner atOctopus Ventures, a privateequity firm. “If a business canlaunch, test their revenue modeland win customer traction inthese circumstances, they arewell set for rapid growth in morebenign conditions,” he says.

One example of this is TomValentine, managing director atSecret Escapes, an online travelclub offering discounts of up to70 per cent on luxury hotels andholidays, which has attracted500,000 members since itlaunched in February.

Mr Valentine claims launch-ing in a downturn had signifi-cant benefits. “As a discountsite, our message suited thetimes, we had to compete lesswith banks for technical talentand, most importantly, itimposed the discipline of build-ing a business with a sustaina-ble financial model at its core,”he says.

Hugh Robertson, foundingpartner and chief executiveof RPM, a marketing agency,

echoes this sentiment: “As anentrepreneurial business wecan’t afford to ever be compla-cent or stop reviewing the mar-ket, and this is what has put usin a strong position to grow, notjust in the recovery, butthroughout the recession aswell.”

The recession has been a timeto restructure the business tomake it stronger, he says.

At the end of 2009, RPM cre-ated a new layer of managementand formed two new teams tobetter meet its client demands.Mr Robertson claims that saleshave almost doubled since.“Independent or entrepreneurialbusinesses are much betterstructured in their ability toadapt to these changes in the

market and global economy,” hesays.

The problem with askingfounders to gauge the prepared-ness of entrepreneurs is thatthey tend to be more bullish bynature, especially about theirown prospects. There are alsoreasons to fear that this reces-sion will be much tougher forentrepreneurs in the UK.

First, all recessions are differ-ent, and the prospects for entre-preneurs are hard to predict.What is known, is that thekinds of people being maderedundant this time around aredifferent. These people may wellnot be best suited to creatingnew businesses.

During the recession in theearly 1980s, for instance, many

of those being made redundantwere private sector workersfrom industry. This was thenfollowed by a significantincrease in self-employment, ris-ing to a postwar high for the UKduring the early 1990s.

The rise in unemployment atthe moment, however, is beingdriven by public sector cuts,putting people on the dole whomay be less willing and able toturn their hand to entrepreneur-ial activity.

Further bad news for existingentrepreneurial ventures is thatsome of the key factors thathelped them to prosper in thepast, such as a swift economicrecovery and access to reasona-bly priced debt finance, have yetto materialise.

Downturnplus dolecan leadto successJonathan Moulesfinds that a recessioncan be the best time tostart a business, butnot all entrepreneursare created equal

Tom Valentine: launching in a recession ‘imposed the discipline of building a business with a sustainable model at its core’ Rosie Hallam

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2 ★ FINANCIAL TIMES TUESDAY OCTOBER 4 2011

The UK’s Entrepreneurs

For many small ormedium-sized enterprises,it is starting to feel likelate 2007 all over again.

Large companies aretaking their time payingsmaller companies and arecutting back on anythingand everything, frommarketing and informationtechnology to training andrecruitment. These areearly indicators of aserious downturn.

The main differencebetween now and fouryears ago is that there isno run on liquidity for thebanks. Therefore, this willnot be another creditcrunch, but it will be

another period ofuncertainty brought aboutby falling confidenceacross the markets.

The economic problemsin the eurozone,particularly in Greece,have heightened the fearfactor, especially withinlarge corporations.

As those at the top ofthe business food chainstart to panic, SMEs sufferbeneath them; many relyon commercial relation-ships with large companiesas the mainstay of theirbusinesses. And with 70per cent of us working foran SME, it does not takelong for the economicshockwaves to be felt farand wide.

Recessions hit poorly runSMEs hard. Those

businesses that may havemoved into new territoriesduring times of prosperitywithout having doneproper research, or perhapsmade expensive hires withno real understanding ofthe return on thesesignificant investments, areparticularly vulnerable.

When revenues arehigh and budgets are full,it is easy to brushmistakes under the carpet.But they can come back tohaunt businesses whentimes are hard.

Recessions are kinder towell-managed SMEs. Thesebusinesses can pick up thepieces of their failedcompetitors, and they reapthe rewards of havingrestructured at the earlysigns of a downturn.

The best-run SMEs tendto have the agility andleadership to adapt theirnecessarily defensivemindset to a moreconfident approach thatensures opportunities aregrasped at the first signsof recovery.

This is vital, as SMEstend to get the recoveriesthey deserve.

A friend of mine acquireda small, branded shoebusiness in 2005, which hadits manufacturing base and

business offices in theWest Country and its salesoperation and stores inLondon.

He quickly identified anopportunity to close downthe expensive manufac-turing operation in the UK,and picked up sparecapacity in a high-qualityshoe factory in Italy,halving production costs.

He was able to recruitthe services of twofreelance shoe designers,well known to him, whoalso worked for certainlarge fashion houses. Hemoved the offices to aboveone of the stores inLondon and completelyclosed down the WestCountry part of thecompany. This drastic, butnecessary, restructuring

rejuvenated a failingbusiness.

Everything was movingin the right direction, buthe had borrowed andinvested significantly todeliver this businessturnround.

By the beginning of 2008,the recession had hit thebranded area of footwearhard. No one needs to buyhigh-end shoes in adownturn. The banks wereno longer supportive andhis business shrank as hecontinued to limp along,desperately managing hiscash flow.

With financial supportfrom his fellow directorsand an angel investor, thebusiness made it throughuntil early 2010, when thebanks eventually returned

with fresh credit facilities.Given how well thecompany had managedthrough the downturn, andthe painful lessons it hadlearnt, it received offersfrom four banks for newfacilities. It will now adopta multi-banking approachand has set up agreementswith three banks in orderto spread future risk.

SMEs and consumersshare the same mindsetcurrently: they areremaining cautious. Thismay seem sensible forbusinesses, especiallyregarding investment,growth, recruitment andmarketing, for example,and so on, but it alsomakes for a constrainedeconomy. We are living ina vicious cycle that will

only be broken when theeconomy, and especiallythe banks, regain theirconfidence.

Forward-thinking SMEshave a key role to play ina return to a stable andhealthy marketplace. It isa lack of confidence thathas killed so manybusinesses. This is themain lesson for SMEs.

And it is time we tookthe banks off our hatelists. By “shafting” thebanks, they will only“shaft” SMEs. Banks arethe lifeblood of the SMEsector and the SMEsector is the lifeblood ofour economy.

The author is a writer andbroadcaster on business andentrepreneurship

Confidence, not caution, is the key to fast recoveryGuest ColumnRENÉ CARAYOL

Medium­sizedand smallcompaniesare thelifeblood ofour economy

The question of access to funding hasnot been easy to address for sometime. Since the banking crisis, trig-gered by the collapse of LehmanBrothers, the US bank, in September2008, the situation has changed for thebetter, but getting working capitalremains complicated.

Bank lending to small businessescontinues to decline; even the BritishBanking Association admits this in itsmarket analysis. Those with strongbusiness models are being offeredmoney, but the terms attached areoften restrictive or expensive. Over-draft facilities are either beingreduced or withdrawn, so good compa-nies are looking elsewhere for finance.

One example is Owens Road Serv-ices, a 40-year-old haulage businessbased in Llanelli, south Wales. Itscore customer base had been heavyindustry, which has been suffering inrecent years, so Owens spent about£750,000 opening four new sites alongthe M4 motorway to help it expandinto consumer goods distribution. Thestrategy worked: half of Owens’ reve-nue now stems from this new venture.

Its bank, HSBC, had already pushedOwens to move from an overdraft toinvoice discounting to fund the expan-sion. However, the bank was beingincreasingly restrictive in the terms itoffered, so the company switched toCentric Commercial Finance, a spe-cialist invoice discounting provider.

“All of the banks had decided thatthe best way to lend was throughinvoice discounting,” says Robert Wil-liams, the company secretary. “It wasreally the narrow view that the bankswere taking.”

This is proving to be a good time foralternative providers of finance, suchas Centric, which supplies asset-basedlending as well as invoice discount-ing. New business models for lendinghave also sprung up, with many com-panies using the internet to createways of raising funds. Online market-places for debt, including peer-to-peerlenders such as Funding Circle, claimto be enjoying significant growth.

“Crowdfunding” is a concept thatarrived in the UK this year. Instead ofone large investor putting money intoa business, larger numbers of smallerinvestors contribute as little as £10each to raise the required capital. Thefirst UK-based crowdfunding websiteis Crowd Cube, which has so farfinanced one company to the tune of£75,000.

Alternative debt providers broadenthe range of choices available. Butthese lenders are still niche players,and only a small part of the solution.

Equity finance from wealthy indi-viduals is an option that is increas-ingly available. It is encouragedthrough tax breaks, such as the Enter-prise Investment Scheme. Syndica-tions or investment clubs haveallowed these business angels to dobigger deals (£1m or more) and pro-vide more rounds of financing foreach investee company.

This is also providing just a rela-tively small amount of capital, how-ever, partly because most small busi-ness owners in the UK still seem toprefer debt finance.

The total size of a funding roundraised through angel networks andsyndicates in 2008-09 was typicallybelow £500,000, according to theDepartment for Business. In mostdeals business angels contribute lessthan £200,000.

Henry Ejdelbaum, managing direc-tor of ASC Finance for Business, acommercial finance broker, says theproblem for many businesses in need

of working capital is that the supplyof finance has increased in quantita-tive but not qualitative terms. “Wehave seen borrowers becoming moreconstructive and realistic,” Mr Edjel-baum says. “If you have realisticexpectations you can get funding.”

Kirsty McGregor, executive teamchairwoman at the Corporate FinanceNetwork, a group of business advisersdrawn from accountancy firms, saysthe key to getting finance is havingcredible information to provide to thebank. “Make sure you produce regularmanagement accounts and projec-tions, so you can test your assump-tions about the market,”she says.

Part of the problem for newer com-panies, launched on money eithersaved or borrowed from friends andfamily, is that they only go to a bankwhen they need the cash, Ms McGre-gor says. “You have to be carefulabout spending all your money whenyou are a start-up and then only goingto the bank when you are growing,”she says. “The bank will look at yournet worth and say no because you areasking the bank to take all the risk.”

In a world of centralised credit com-mittees and branch managers whomove jobs and locations every fewyears, banking relationships are nolonger what they used to be.

The difficult truth, however, is thatbusiness owners have to maintain reg-ular contact with their banks, becausethat is how you get a loan. As MsMcGregor says: “Everybody used tothink you had loyalty from your bank,but that went out of the window inthe 1970s.”

She adds: “Things have gone back alittle bit, but it is not so much bankloyalty to the customer; it is thatbanks are looking for businesses to beloyal to them.”

Small businessesmust look beyondthe banks forfunding optionsFinanceUnattractive terms fromtraditional lenders meanentrepreneurs need toexplore alternatives, writesJonathan Moules

Words from the topNext generation‘Young companiesare best fundedby successfulentrepreneurswho then investin the nextgeneration. Thismodel ofentrepreneurs backing entrepreneursis the future of the financing ofentrepreneurship’

Julie Meyer, chief executive,Ariadne Capital

What do you think are theprospects for start­up businessesin the UK, given the uncertaineconomic outlook?The climate is challenging becausebanks are not lending and people aretentative to deploy capital whenthings are so difficult. But if youstill have a compelling investmentproject, the money is out there, it isjust a matter of convincing investorsyou are worth it.

The current volume of investmentis around £2bn a month, so I expectroughly £20bn to be available in thesmall and medium-sized enterprisesector this year. Clearly, there is stillsome money there.

You went to Harvard BusinessSchool quite late in life. Hownecessary is higher education forbudding entrepreneurs?My own experience has been that

business is not easy at the best oftimes. Today, there are so manyfacets you need to master to besuccessful. The more youunderstand, the more prepared youare to make better decisions.

Harvard gave me a strongerunderstanding of internationalbusiness and trade that I had notexperienced before. I went at a pointwhen I had just sold a business, hadsomething of a gap, and I utilisedthat time to gain a differentunderstanding of business. Thedecision seemed weird to somepeople, especially after I had been sosuccessful. “What could highereducation teach me?” they asked.

But you never stop learning. Ifyou are not keeping abreast ofchanging dynamics, it puts youin a weaker position as a businessperson.

What do you consider your biggestsuccess and failure in business?Success was the formation of myfoundation. I wish I had done itsooner. It is a place where I have anoutlet for my success, where I canutilise the proceeds of my businessesin an environment to build schools,villages, help the homeless and be apatron of cancer research.

It is the best job in the world. Ihave a platform to create capital on

the one hand, and then anopportunity to deploy that success inareas where I gain far moresatisfaction than I do in business.

My biggest failure was a few yearsago, when I invested in a sandwichchain called Benjys. It had 100outlets and employed 600 people. Ithought my expertise could be usefulbut I failed conclusively and lost allmy money – millions; I cannotremember how much.

In terms of your investmentportfolio, is there any sector thatyou would still like to make yourmark on or regret missing out on?The sector that I am starting tofocus on more and more is socialenterprise, where you havebusinesses that are real, but thatcontribute to society because theywant to make a difference. It is quitean exciting sector, which plays tomy strengths because it is involvedwith building an enterprise.

There have been a number oftimes when I did not buy certainshares, and then they went on totriple in value. But that is part ofthe journey all entrepreneurs take.

Which brand or company do youmost admire?Google. Its impact on our society andthe business world is remarkable.

They have created a model based ona very simple idea that is now worthhundreds of billions. Not only isGoogle a service that we cannot livewithout, but it is hugelycommercially successful, too.

What do you keep next to yourbedside table?My iPad. I want to know howmarkets are trading before I go tobed because most of my trades areglobal, and the iPad is the best thingfor it. My wife does not think it isso great but, luckily for me, sheusually dozes off by the time I goto bed.

How would you like to beremembered?I have been moderately successful inbusiness, and in the past sevenyears, I set up the James CaanFoundation. If I were remembered,I would like it to be as someone whoused his skills in business to benefitthose who were less fortunate.

I am also involved with thePrince’s Trust [the UK charity] ingiving young people loans to set uptheir own businesses, mentoringthem and helping them come backinto society with integrity. That issomething really invaluable.

‘If you have a compellingproject, the money is out there’Q&AJames Caan, the venturecapitalist, entrepreneurand former TV ‘dragon’,talks to Mehreen Khan

CV James CaanBorn: 1960 in Lahore, Pakistan; movedto London in the early 1960s.Education: Left school at 16 andjoined a recruitment company.Business career: Founded AlexanderMann, a recruitment group, in the1980s. Sold it to a private equity firmin 2002. In the 1990s, co­foundedHumana International, the executiveheadhunter, with Doug Bugie. Studiedat Harvard Business School,

graduating in 2003. In 2004, foundedHamilton Bradshaw, a private equityfirm. Joined the BBC television seriesDragons’ Den in 2007, leaving in 2011.Charity work and awards: Charitiesinclude the James Caan Foundation,which promotes entrepreneurship andeducation. Awards include the BTEnterprise of the Year award in 2001.

Compiled by Rebeka Shaid

Words from the topLack of demand‘The absence ofdemand is a muchbigger issue forSMEs than accessto bank lending.Consumerconfidence anddiscretionary spending capacity is lowat the moment, impacting traditionalsmall entrepreneurial businesses’

Andrew Owens, founder,Greenenergy International

Out of the den: James Caan describes himself as someone who has been ‘moderately successful in business’ Ben Stansall

ContributorsLiz BolshawFT contributor

Andrew BoundsEnterprise Editor

René CarayolWriter and broadcaster onbusiness and entrepreneurship

Mehreen KhanFT contributor

Rebeka ShaidFT contributor

Jonathan MoulesEnterprise correspondent

Michael SkapinkerSpecial Reports Editor

Hugo Greenhalgh/Paul SolmanEditors

Steven BirdDesigner

Lindsay CameronPicture editor

Jearelle WolhuterSub­editor

Siobhan CassidyProduction editor

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FINANCIAL TIMES TUESDAY OCTOBER 4 2011 ★ 3

The UK’s Entrepreneurs

Tony Banks has changed. Thechief executive of BalhousieCare Group, Scotland’s largestprivately owned care homecompany, may still fly his ownhelicopter, but he has ditchedthe Aston Martin DB9 –“because you can only get twopeople in the car and a packetof sandwiches in the boot” –for a more practical BMW X5.These days the “trappings ofsuccess” matter less.

“What I deem necessary tobe considered successful isrecognition, to be an industryleader, to have a seat at thetable and be listened to. I wantto leave a legacy,” he says.

The youngest of fourchildren, Mr Banks’s fatherwas in the Royal Air Forceand both his parents werefrom Dundee. “We were avery working class-typefamily,” he says.

His work ethic has runin his veins since he wasa lad, “doing paper rounds,chasing chickens”, andremains strong today.

“The difference betweenpeople who are successfuland those who are not isthat successful people areprepared to go that extra mile,to go through a bit of pain.My business is a 24/7business,” he says.

Joining the Territorial Armyto supplement his studentgrant, Mr Banks discoveredthat he “enjoyed the TA morethan I enjoyed the BA, somuch to my parents’ disgust Ijoined the army. I wanted themaroon beret: I wanted to jointhe elite and be the best.”

He saw active service with2 Para (Second Battalion, theParachute Regiment) duringthe Falklands War, but it wasafterwards, during a spell as alife-insurance salesman, thathe acquired his taste forbusiness. It was 1987 and “Ididn’t even have a suit”.

He found he was good atselling and was soon pullingin £3000-£4000 per month.“All my bosses were runninground in their red [Porsche]Carreras, talking on theirmobile bricks,” he recalls.The appeal of student lifefaded and he decided to dohis own thing.

Selling their house inAldershot, Mr Banks and hiswife at the time, who was atrained nurse, bought theirfirst care home in 1992. “Forthe first 10 or 12 years it was alifestyle business. I was doingeverything – cutting the grass,going to cash and carry, youname it,” he remembers.

After a decade, he confesseshe “was getting bored andwhen I am bored, I amdangerous”.

He determined to expand andbuild the business. “Lookingback now, I wish I had donethat earlier,” he says.

Balhousie now comprises 22homes serviced by 800 stafflooking after 800 residents.Turnover is expected to hit£20m this year and he has justacquired a pharmacy business,as he spends “more than £1mon drugs with chemists and wecan do that ourselves”.

Mr Banks is passionateabout the need for social careto be properly funded. Hepoints out that the £570 perweek he receives for a residentfunded by the local authoritywould buy him two nights ina London hotel “and there noone wipes your bum”.

The importance of providingan excellent standard of care iskey to Mr Banks’s vision forthe Balhousie brand: “No onewants to end up in a carehome. It is an unfortunate,distress purchase, but goingthere should not be a … [jail]sentence. It should be a partof your life that you canhopefully enjoy. That is whatI am trying to do.”

A strongworkethic isthe keyProfileTony BanksEx­soldier who built acare home businesstalks to Liz Bolshaw

Words from thetop State of play‘I fear thisdownturncould resultin a genuineadjustmentacross manynations. Ofconcern iswhether the UK is becominguncompetitive with oppressivetax regimes, high costs andnegative sentiment towardsbusiness‘Haraldur Agustsson, managing

director, Globus (Shetland)

When I started thebusiness 27 yearsago … I wanted tomake sure my fam-

ily and I were financiallysecure, and that was the extentof my ambition,” says StephenCatlin about the motivationbehind his independent, Lloyd’sof London-listed insurancegroup and FTSE 250 company.

“If you said to me then, youare going to be running a com-pany that has a market capitali-sation of £1.5bn, writing $4.5bnin premiums, I’d have said, ‘Youare completely mad’.”

Or very prescient: Mr Catlin isthe overall winner of this year’sErnst & Young UK Entrepre-neur of the Year awards.

In the past 10 years, CatlinGroup has grown from 92employees to 1,800. It has diver-sified the focus of its businessfrom 97 per cent London-basedto 50 per cent, and from a com-pany with two internationaloffices to 54 offices in 22 coun-tries. No wonder its founder andchief executive says: “I am moreambitious today than I was even10 years ago.”

But while emerging marketspresent opportunities, Mr Cat-lin’s attitude to growth is cau-tious. “If you’re not very care-ful, you can lose a lot of moneyvery quickly,” he says.

Nevertheless, he says: “I havebeen part of a company that hasbeen setting up new businesses,albeit as subsidiaries of a group,for the last 10 or 15 years. I lovethe start-up process – it is themost exciting thing you can do.”

Mr Catlin’s entry into theinsurance profession wouldhave had long odds. “My fatherwas a doctor and wanted me to

go into medicine,” he says. “Ididn’t want to do that, so weagreed on a halfway house thatwas dentistry, and I didn’treally want to do that either. SoI didn’t work very hard anddidn’t get the grades. I landed inLloyd’s by default because Ineeded a job and met a guythrough sailing.”

It paid off: Mr Catlin, whonever went to university – “I’vecertainly got a degree in makingmistakes, I can tell you that” –is now a visiting fellow ofOxford University.

To explain what for many isthe arcane art of insurance andreinsurance, Mr Catlin citesNassim Taleb’s book aboutimprobability, The Black Swan.“You can never, ever predicttiming or causation, but you canpredict effect,” he says. “Thatpretty much describes how wethink as insurers and reinsur-ers. The really important thingis to understand the risks thatwe are taking on.”

Sometimes this meansemploying experts in the moreesoteric insurance classes in

which the firm operates. “Wehave someone who runs our sat-ellite account,” he says. “He’s arocket scientist. Seriously. Hecould bore you for hours andhours about space exploration.”

For a Lloyd’s name the risksare also personal. “I put thehouse in my wife’s name a verylong time ago,” he says.

With big disasters, both natu-ral and man-made, Mr Catlinsays the skill is foreseeingpotential knock-on effects andunintended consequences.

“We hadn’t envisaged 9/11 anymore than anyone else had, but

we had thought of what mighthappen if two jumbos collidedmid-air in downtown NewYork,” he says.

This allowed Catlin Group tohonour all claims made againstthe company.

However, there was a conse-quence to the terrorist attacksof September 11 2001 that evenMr Catlin had not forecast. Thefirm was running a cancellationbook for the NFL American foot-ball games.

“We couldn’t envisage anoccasion when all games wouldbe cancelled,” he says. “It hadnever happened – even whenJohn F. Kennedy [the US presi-dent] was shot. But then 9/11came along. We lost about$10m.”

Mr Catlin ascribes his successto “sheer grit and determina-tion”. He believes that a com-pany needs a vision and thatthere is often a single instigatorof that vision. However, it is thedelivery of a successful strategythrough focused implementation

by a team that is key, he says.“That process from a vision to

delivery is often a 5-10-yearperiod, and not everyone hasthe courage of his convictions toweather the storm on the way.That may differentiate entrepre-neurs from others.”

The biggest challenge duringthe group’s 27-year history hasbeen employing the right peo-ple, he says. “The lesson we

learned . . . is if you can findpeople who share your values,cultural, religious and racialissues go away and you are leftwith the normal challenges inlife, which is the ability to com-municate. Our key values aretransparency, teamwork,accountability, integrity anddealing with dignity with peopleup and down the line, bothinternally and externally. They

either have those values in theheart or they don’t.”

Even more testing than thehunt for the right staff is some-thing over which he has no con-trol – the current macroeco-nomic situation.

“I’ve seen a good deal in mycareer,” he says, “but neverbefore have we had to deal withso many different movingparts.”

Masteringthe arcaneart of theblack swanInterviewStephen Catlin tellsLiz Bolshaw about hisalmost accidentalsuccess in insurance

‘With big disasters,the skill is foreseeingpotential knock­oneffects and unintendedconsequences’

Stephen Catlin: ‘I am more ambitious today than I was even 10 years ago’ Charlie Bibby

“My parents were not silentmovie fans and although Errolis an unusual name, it is lessunusual in South Africa, but Ihave no idea where theinspiration came from,” ErrolDamelin, founder of Wonga,the online, short-term loancompany, tells me over acrackly telephone line. “I likeit though.”

Mr Damelin, whose companyis now four years old, is aserial entrepreneur. After achildhood in South Africa andthree years in investmentbanking, he was involved intwo business start-ups in Israelbefore founding Wonga.

The brand, from its Romanyslang name to the catchy TVads featuring three geriatric,fist-bumping puppets, is self-consciously irreverent. It aimsto take the stuffiness out ofbanking and replace it withslick, quirky humour. It wantsto demystify what is typicallya socially unacceptable needfor short-term cash, and makeit routine – even fun. It is adisruptive player in a crowdedmarket.

“People have and continueto have cash flow problemsaround the world … so we’vemobilised technology to solvethe problem. Data storagecapabilities allow us to deliverthe service much more quicklyand conveniently than anyonecould hope to do withouttechnology,” Mr Damelinexplains.

The company, most recentlybacked by £73m of venturefunding led by Oak InvestmentPartners, has not foundfinancing a challenge. MrDamelin says: “If there’s animbalance today, it is too muchmoney chasing too few goodideas. Even more than that,there are too few good teams.”

Critics say the very highannual percentage rate (listedas 4,214 per cent onWonga.com) takes advantage ofthe poor and desperate. MrDamelin says that is“misleading. Our business islike black cabs. It is outrageousthat it costs you £12 to crossthe West End at 2am, but …for some people for some of thetime it is still worthwhile. Theblack cab’s rates are totallytransparent. Wonga does thesame thing. If we provided theservice for a year – or for a 10-year mortgage – it would bemassively expensive, but onedoesn’t use it like that.”

Average loans are £400 andpaid off in 15 days. Defaultrates are about the same ascredit cards (7 per cent) andabout two-thirds of applicantsare turned down.

“We’re collecting about 8,000pieces of data in millisecondson every transaction before wedecline or accept it. We don’tlend to everybody all the time,”he says.

Using technology totransform the “way lendingwas done traditionally, basedupon individuals’ reading ofother people’s risk” applies anobjective measure to consumercredit, Mr Damelin argues.“Everyone gets to pay thesame – we don’t havedifferential rates.”

Competition is growing,however, and an internetsearch reveals a slew oflookalike companies apparentlyoffering the same service. MrDamelin, though, is notworried. “Consumer servicesare always competitive andthey should be. That is[testament to] the strength ofthe market if people try toclone and copy it. We spendvery little time as a businessthinking about competition.”

Entrepreneurial success restson “thinking big while beingfocused on execution whenplaying in a very big market.Too many good people focus onopportunities that are just toosmall. You need a vision andyou need a lot of energy andendurance.”

Get rich quickfrom online cashProfileErrol DamelinLiz Bolshaw talks tothe founder of theinternet loan provider

Not many 13-year-old publicschool boys caught reading intheir dorm after lights out arefound to have been devouring abusiness autobiography. ButNicko Williamson is noordinary Marlborough Collegeproduct: his entrepreneurialambitions started young. Hedescribes his schoolboy self as“rather rebellious, not good attoeing the line”.

His pukka education – prepa-ratory school, Marlborough,Bristol University – andcomfortable background inrural Dorset followed apredictable trajectory to severalinternships at a couple ofhedge funds until, aged 22, hedetermined to start his ownbusiness. Losing My Virginity,

the book by RichardBranson, the

British

billionaire head of the VirginGroup, may have electrified hisinsomniac teenage years, but achance meeting with IvanMassow, the financial servicesentrepreneur, grounded thatenthusiasm with practicaladvice.

Mr Williamson was stillfinishing his undergraduatedissertation when he wrote thebusiness plan for his environ-mentally friendly taxi service

But “it was Ivan whosuggested I should go andspend a month working atAddison Lee [the largecorporate taxi service inLondon] to really understandthe business,” he says.

He took the advice, raised£200,000 from family andfriends, including £50,000 of hisown savings, and won abusiness-plan competition atLondon Business School thatbrought two MBA graduates in

to mentor the start-up. Climate-cars was born.

“During that first periodwhen we were running out ofcash, I can’t say the thought[of giving up] never occurred tome,” Mr Williamson says. “ButI was confident that the ideawas going to work, and we hada good sales pipeline. It wasjust a matter of cashflow.”

A year from launch, heraised a further £300,000 fromangel investors.

Last year, Climatecars hadsales of £2.2m and is on track,according to Mr Williamson, tobreak through £3m this year.Ninety per cent of the businessis corporate and the company’slargest client, which cannot benamed due to a non-disclosureagreement, is a big USinvestment bank.

Mr Williamson has fewregrets. “There are so manymistakes in the early years, butI think I learned from all ofthem,” he says. “I could have

been better at hiringthe right people –that was a skill Ilacked in the early

stages – but I am notsure I would reallychange anything.”

It is tempting toascribe some of hissuccess to aprivileged start,

but suchaccusations aresimplistic. Ashe puts it:“I was luckyto have

connectionsbut raising

serious

money is never easy. I’d sayI was fortunate but never hadit easy.”

He has not taken on abusiness partner and clearlyrelishes the freedom thatbrings. “I do like havingcontrol and it means I canmake decisions a lot faster,”he says.

Apart from offering bigcompanies green credentials,Climatecars relies on customerservice. “Our cars have leatherseats, mineral water, magazinesand be-suited drivers,” MrWilliamson says. “Apart fromtrying to be the greenest optionavailable, we want to offer achauffeur-level service atAddison Lee rates.”

In the early years, thecompany ran on off-the-pegtechnology, but it has nowinvested in a bespokeinformation technology systemthat is driving everything fromthe online booking to aniPhone app. “It is a technology-driven business now,” MrWilliamson says.

With the business in profitand a solid team in place, he islooking towards the horizon:“There is no reason whyClimatecars isn’t replicable inother cities,” he says. “We areactively looking at a particularcity in Europe at the moment,as well as other cities in theUK, and we have a lot more todo in London, where we arestill a minnow.”

His drive is palpable. “I am avery, very ambitious person,”he says. “I want to buildsustainable businesses. It is notjust about Climatecars. I amsure I will build other

businesses in my life. Idon’t look back, but am

always focused on thenext stage.”

‘I’d say I was fortunatebut never had it easy’ProfileNicko WilliamsonThe green taxiinnovator explains toLiz Bolshaw ambition,not privilege, is whatcounts in the end

Ernst & Young UK Entrepreneur of the Year List of winners

Stephen Catlin Catlin GroupMaster Entrepreneur andUK Overall Winner

Bryan Bodek AirlineServices HoldingsBusiness Products and Services

Michelle Clothier andSam Conniff LivitySocial Enterprise

Kevin Hard EvoEnergyCleantech and Renewables

David Suddens R Griggs GroupRetail and Wholesale

Mark Pearson Markco MediaEmerging Entrepreneur

Jim Walker Argent Energy (UK)Manufacturing and Processing

Steve Oliver and WalterGleeson Entertainment MagpieConsumer Products and Services

Errol Damelin Wonga.comEcommerce and Technology

Colin RobertsonAlexander DennisOutstanding AchievementAward

Words from thetop Job creation‘Duringrecessionsnew oppor­tunitiesemerge andnew solutionsare required.Entrepreneurscreate the precious jobs the UKneeds right now, and should besupported in this‘

Susan Aktemel, director ofImpact Arts Projects

‘I can’t say thethought [of giving up]never occurred to me,but I was confidentthat the idea wasgoing to work’

Photo: Ben Stansall

4 ★ FINANCIAL TIMES TUESDAY OCTOBER 4 2011

The UK’s Entrepreneurs

Ernst & Young Entrepreneur of the Year

The Ernst & YoungEntrepreneur of the Yearawards programmecelebrates entrepreneurs –recognising thatentrepreneurship andinnovation drives the growthof the broader economy andplays an important role injob and wealth creation,writes Steve Varley.

This year’s UK finalists areresponsible for combinedannual revenue of £7bn andhave achieved employmentgrowth of 20 per cent in thepast year. Some of them aregrowing their businessescross­border through exportsand overseas investment.

The awards programmewas founded by E&Y to helpentrepreneurs achieve theirpotential. Over the years, ithas spotlighted more than1,700 finalists, with past UKand Ireland winners including

Charles Dunstone (CarphoneWarehouse), Aidan Heavey(Tullow Oil), Tim Richards(Vue Entertainment), MichaelSpencer (Icap) and AymanAsfari (Petrofac).

In the UK, there are threeregional rounds. Here theentrepreneurs are evaluatedby an independent judgingpanel. Each regional winnergoes through to the nationalcontest where they are re­evaluated as they competefor the title of Overall UKEntrepreneur Of The Year.

The judges are recognisedindustry leaders, many ofwhom are past winners, sothey understand thechallenges the participantsface. This year, our 2008winner, Richard Harpin,founder of Homeserve, thehome repairs insurancecompany, chaired thejudging panel.

At each step of theprocess – from regional tonational and then global –judges receive a detailedhistory of the finalists andconduct formal interviewswith them.

Finalists are rated onseven criteria:

● Entrepreneurial spirit● Financial performance● Individual and/or

corporate socialresponsibility

● Innovation● Leading and building

teams● National or global

impact● Strategic directionThe overall winners from

both the UK and Irelandthen go on to the Ernst &Young World EntrepreneurOf The Year awards inMonte Carlo. In 2010, UKwinner Michael Spencer

went on to take theworldwide title.

However, this is morethan an awards programme.The entrepreneurs buildvaluable networks, raisetheir profile – the Irishprogramme produces atelevision series shown onRTE, the state broadcaster –and, as alumni, are invitedto world­class events. Theseinclude E&Y’s StrategicGrowth Forum in PalmSprings, US, EntrepreneurOf The Year Retreat inCape Town, South Africa,and annual Irish chiefexecutive retreat.

This year, the programmecelebrates its 25th year ofrunning in 140 cities in 50countries.

The writer is UK andIreland managing partnerat Ernst & Young

Tough economic times havenot stemmed the rise ofsocial enterprise – a looseterm covering mainly not-for-profit businesses thataim to improve society.Social Enterprise UK, thebody promoting the sector,says 62,000 such businesses,including co-operatives, areoperating in Britain.

According to FightbackBritain, a report fromSocial Enterprise UK andthe Co-operative Bank,they are three times morelikely than conventional

businesses to be working inthe most deprived areas(39 per cent compared with13 per cent).

However, they often dobetter than their for-profitpeers, with 58 per centgrowing last year, com-pared with 28 per cent ofmainstream companies.They employ approximately800,000 people and contrib-ute more than £24bn to theUK economy.

Peter Holbrook, chiefexecutive of Social Enter-prise UK, says: “We are see-ing a new generation ofsocial enterprises being cre-ated during these incrediblydifficult economic times, inthe communities wherethey are desperatelyneeded.”

The vast majority of thesebusinesses have fewerthan 10 staff, but Stephan

Chambers, chairman of theSkoll Centre for SocialEnterpreneurship at theUniversity of Oxford’s SaïdBusiness School, detects anew breed that aims tobecome global.

“My profound belief is thatwhat we call social entrepre-neurship today should becalled entrepreneurshiptomorrow,” he says.

He says these types ofbusinesses would be solvingproblems such as crime,poor education, climatechange and water shortagesin future, while traditionalcompanies would just besaddled with the costs.

“The big challenges aresocial. The liabilities associ-ated with social threats arenot on company balancesheets but soon will be. Thecosts are shunted on to gov-ernments, aid agencies and

the poor. That is unlikely tobe successful in an increas-ingly connected world.”

Governments should gen-erally not get involved inenterprise, but should setrules to ensure the innova-tors have a chance to suc-ceed, says Mr Chambers.

“There is always a rolefor government. Businesseshave to be constrained bythe system,” he says.

Mr Holbrook says there isa danger the sector could bethrottled by its bigger rivalsas its public funding is cut.According to him, big cor-porates with a long trackrecord and deep pockets areable to outbid youngersocial enterprises for gov-ernment contracts.

In September, CentralSurrey Health, a staff-owned service lauded bythe coalition government,

lost a bid to run communityhealth services in neigh-bouring north and westSurrey. The preferred bid-der for the five-year deal,worth about £90m per year,was Assura Medical, whichis 75 per cent owned by Vir-

gin, the UK-based groupcontrolled by Sir RichardBranson.

Given that the govern-ment is retrenching staffand returns from tradi-tional investments are low,private money is seeking to

back social enterprise.Emma Turner, director ofclient philanthropy at Bar-clays Wealth, the wealthmanager, says clientsincrease their donations indifficult times, but some areturning to social enterprisesrather than charities tosolve deep-seated problems.

Andrew Haigh, head ofentrepreneurs at Coutts, theprivate bank, says many ofhis clients are looking toinvest in social enterprise.However, there needs to bea system for measuring the“social return”. There isalso an appetite for receiv-ing a small financial return,allowing money to be “recy-cled” into other projects.

RBS, the bank, has beenbacking community devel-opment finance institu-tions, small funds thatchannel money to social

enterprises who struggle toget bank finance. It recentlyopened a microfinance fundfor them to tap into.

Thom Kenrick, the com-munity investment man-ager, explains that CDFIshelp businesses to grow intheir own communities. “Ifour communities prosper,our business prospers,” hesays.

Mr Chambers of the SkollCentre says: “There is awall of investment cashavailable to improve theefficiency of our uses ofenergy.”

Duncan Cheatle, an entre-preneur who also runsThanksto.com, a websiteallowing people to thankeveryone from their inspira-tional teacher to the busdriver that returned theirlost wallet, says: “There is asea change, with many

more businesses comingthrough that not only wantto grow but also want tomake a difference.” For onething, it helps to attractmotivated staff, he adds.

Mr Chambers agrees. Theprofile of those attendinghis course has changed overthe past few years, fromcharity delegates to moreconventional MBA stu-dents. The divide betweenthose who want to makemoney and those who wantto do good is shrinking.

“There is a mainstream-ing of social entrepreneur-ship. Most people didn’tknow what it was eightyears ago, 100 per cent nowknow what it is. They wantbusiness to make the worlda better place. They see nodistinction between doingwell and doing good,” hesays.

New kind of company wants to care for the communitySocial enterpriseAndrew Boundslooks at turning aprofit from solvingsocial problems

‘Many morebusinesses notonly want to growbut also want tomake a difference’

Mark Prisk, business minis-ter in the Conservative-Liberal Democrat coali-tion government, likes to

quote Ronald Reagan, the late USpresident, as saying the scariestwords in the English language were“Hello, I am from the government andI am here to help.”

The familiar refrain raised a laughfrom the audience at September’sMade festival in Sheffield, attended byseveral hundred entrepreneurs andmore than 2,000 people hoping tolearn from them.

Mr Prisk, a Conservative member ofparliament who ran a property con-sultancy before entering politics,believes the best thing the public sec-tor can do for the private sector is getout of its way.

“We cannot let thousands of flowersbloom if I trample all over them.”

However, he then went on to listfive things the government was doingto help. They range from tax reform –incentives to invest in start-ups – to amentoring scheme. The tax system istoo complicated, he admitted. “Wewant to make this country one of thebest places to start and to grow yourenterprise, not just for the sake of theeconomy but for communities.”

He claimed the government hadscrapped legislation that would havecost small and medium-sized busi-nesses £350m. “There are 21,000 bits ofred tape and regulation on the statutebook. We are working to strip thataway.”

The coalition has adopted a “one-in,one-out” strategy under which it mustfirst repeal a regulation before intro-ducing a new one. However, theeffects have yet to be seen.

Mr Prisk said replacing government-paid advisers with voluntary mentorswould transform business support.The government is recruiting the first10,000 and hopes to increase that to40,000.

“These are people with businessexperience,” he said. “A little greyhair makes a lot of difference.”

However, on the most controversialpoint – the temporary 50 per cent toprate of income tax brought in by theprevious Labour government and con-tinued by the coalition – he was silent.

Most entrepreneurs want to see itcut back to 40 per cent. A Treasurystudy reporting this year is likely tofind it raises little, if any, revenue, asit can be circumvented. But the LibDem partners in the coalition believeit is necessary to show that all sectorsof society are sharing the pain as aus-terity measures start to bite.

Some question how much regula-tion can be cut, given the constraintsimposed by the European Union,whose demands can be seen to beresponsible for 80 per cent of UK legis-lation.

Duncan Cheatle, a co-founder ofStartUp Britain, a private sector cam-paign to encourage enterprise, saidthe government’s best intentionscould be thwarted by Brussels.

He said the biggest bugbear amongmembers of his Supper Club network-ing group was employment law,which they view as favouring employ-ees. “Employment tribunals are amore important issue than cash flow,”

he said. “I have seen businesses giveup because of this. The costs of fight-ing are so great that most companiesagree to settle,” he said.

The government is reviewing thesystem, believing it is too easy forstaff dismissed for incompetence toclaim they were victimised. Mr Prisksaid it would enact measures to targetvexatious and repeat claimants.

However, the Labour governmentdid do much to encourage entrepre-neurship, according to Stuart Watson,a partner at Ernst & Young, the pro-fessional services firm. “There is arise in entrepreneurship,” he said,with some credit due to GordonBrown, the former prime minister,and Sir Ronald Cohen, a veteran ofthe venture capital industry, forbringing its techniques to governmentand creating a range of tax-friendlystructures for investors. But he saidthe UK faced a constant battle.

“Entrepreneurs have to compete onthe world stage; governments have tocompete on the world stage.

“Entrepreneurs create businessesand jobs and disrupt things. You havegot to encourage people like that tolive in your country. That is a mix-ture of local government making it aninteresting and vibrant place to live,good transport links [and] research-led universities. Is it the kind of placeyoung, thrusting people want to live?”he said.

Governments need to keep taxeslow, and invest in a fast and wide-spread broadband network. However,Britain’s private providers havebaulked at funding this.

Mr Watson also questioned theeffectiveness of public sector venturecapital funds, aimed at bridging the“equity gap” of up to £5m where start-ups find it hard to attract investors tohelp them grow. “The problem withthese funds is they can only fund youso far. If they can only go up to £2m,who is coming in the second and thirdround? You can’t find them,” he said.

With funding still a big issue somehave called for radical action bygovernment.

Richard Lambert, the former editorof the Financial Times and ex-directorgeneral of the CBI, the employers’

organisation, has urged the govern-ment to stimulate lending to smallbusiness by reducing the capitalrequirement set aside as provisionagainst such loans. He has also sug-gested that the Bank of England could

invest in bundles of small businessloans.

However, such bold ideas areunlikely to be adopted by a govern-ment committed to Ronald Reagan’sdictum.

Minister:UK red tapeis stranglingbusinessAndrew Bounds reportson this year’s Made festivalfor entrepreneurs

On the train:business minister Mark Prisk

addresses entrepreneursen route to this year’s

Made festival

View from the FSBRegulation hinders growth

A third of entrepreneurs have saidthat regulation is the single biggestobstacle to growth. The GlobalCompetitiveness Report from theWorld Economic Forum, the inter­national business conference, stillranks the UK 89th out of 139countries for the burden it placeson business.

Government must make microfirmsexempt from new regulations in theEU where possible; reduce the flowof new regulation in the UK as wellas tackle the existing stock, andensure inspection regimes areproportionate and risk­based.

John Walker, national chairman ofthe Federation of Small Businesses