Angel's eyes on the prize

Published on Saturday 29 August 2009 19:11

NELSON Gray is passing on his experiences to budding entrepreneurs in his new role at advisory body Linc, finds Peter Ranscombe

THREE of the heraldic symbols that make up Nelson Gray's family crest seem especially appropriate for the business angel – a coin representing commerce, a cross fleury for his mother's nursing background and the Latin motto Per scientiam, "through knowledge".

Gray's latest role – as special projects director for Linc, the Scottish business angels body – brings together all these diverse elements of the investor's life, as he nurses fellow entrepreneurs through the process of gaining their angels' wings.

While the title may conjure up images of the Dirk Pitt character in Clive Cussler's action-adventure novels, Gray's role is perhaps a little more down to earth. Although he does share in Pitt's international travel to exotic locations, Gray's main task comes closer to home, using his years of experience as an investor to help bring together business angels into groups that can pump money into Scottish firms.

"I've adopted an SAS type principle," laughs Gray. "I keep going out and telling people that it's really not for you because it's pretty tough and you'll lose all your money. Then the more likely they are to come back and say that they're tough enough."

Although he qualified as a chartered accountant, Gray made his fortune as a sheriff's officer, or debt collector as he puts it. He used specially written computer software to connect 350 staff across 12 offices in the days before the internet. After selling the company, Gray became an investor during the mid-1990s.

"My first investment deal was a disaster, it was just awful," Gray says. "It was meant to be branding business, finding products and branding them but it didn't really work.

"Out of the 21 investments I've made, 11 have disappeared. Now I use them as examples in my talks to potential business angels – although I've made 11 mistakes, it's been a different mistake each time.

"The courses I run also educate companies as to what you might expect if you were approaching a real 'dragon' – as opposed to a TV version."

But as well as pointing out the pitfalls of becoming an angel, Gray is also keen to highlight some of the rewards, again using examples from his own background.

While his first investment may not have worked out, his second did. Optos, the Dunfermline-based technology firm that makes machines for scanning patients' eyes, helped to strengthen his technology investment credentials.

"Although it took me nine years to get a return on that, at least I was involved with serious people and a serious business. It was the kind of place where you'd come in on Monday morning and the gents' toilet had been turned into a laser lab over the weekend. If they needed a new darkroom then they just got on and built it."

His work with Optos led him on to Excel Biotech, which made blood diagnostic kits and antibody products for clinical drug trials, and other technology companies.

"It's not all about technology companies – one of the best pound-on-pound investments I ever had was Oregon Timber, which makes timber-framed houses," Gray adds. "I invested 10,000 but have had at least double that back through dividends because it's profitable.

"Last August the housing market had problems but they were good enough to adjust the business model and now they're not just surviving but are growing turnover again."

As well as putting on events to encourage potential business angels to spread their wings, Gray's role as special projects director also involves development work for Linc. He has three lawyers seconded to his service, spending half of their working week preparing three papers that he hopes will be of use to investors, companies and their advisers.

One covers the legal process involved in making investments, while another covers how to set up an angel group, organise pitching meetings, recruit members and, as Gray puts it, "how to get rid of members who are no good".

The third includes how to syndicate investments, bringing groups of business angels together to pump even more money into companies.

While praising Scottish Enterprise's co-investment fund, which matches money put in to companies by private investors, Gray thinks business angels are now plugging the perceived gap in venture capital funding that in the past has been identified in Scotland. He recognises that well-known angel groups, such as Braveheart, Archangel and Tri Capital, are coming together to form syndicates and pump in millions of pounds, rather than the standard 250,000 in early funding that angels traditionally supplied.

As well as nurturing new business angels at home, Gray is also charged with spreading the word abroad. He has travelled far and wide wearing his Linc cap, from Spain to Chile and on to Jordan, his most recent destination, where he helped to launch what he hopes will become the country's own version of Linc.

"We have people coming from the United States to genuinely find out what we're doing here that they can take back," says Gray. "Next month we have a French delegation coming over and they're bringing their version of Jack Perry (chief executive of Scottish Enterprise] because they want to see what Linc is doing and how it integrates into the public sector and how the co-investment fund works."

But Gray's jet-setting comes with a word of warning – he sees the competition that the UK is facing. "What hacks me off is when people say it's OK for industry to leave the UK because we'll have a knowledge-based economy," he says.

"But in Jordan – which isn't rich and doesn't have oil – you have a software firm making a programme to protect your flash video player content and they've sold it to a division of Disney. "In India, I had queues of people asking how they should develop international businesses. We can't rest on our laurels."