Friday, 18 March 2011

An interview with... Gavin Duffy, investor and Irish Dragon

"Think customers, not money. If you have customers, the money will come"
It was a genuine pleasure to meet Gavin Duffy, an investor and Dragon from TV's Irish Dragon's Den. Far from being intimidating and unapproachable, Gavin was warm, articulate and passionate about his latest investment in beauty brand TanOrganic. Gavin talks to Your Beauty Industry about what makes an appealing investment, what groundwork you should do before approaching investors and how attractive the beauty market is as an investment opportunity.

What attributes do you look for in a brand and a person when you consider an investment?
In a brand, for me to get excited about it, it has to be doing something completely different to what is out there already. We can all claim to have USPs but some of these unique selling propositions are never actually that unique when you get there. It might not be something dramatic, it might be something like ‘here is a premium product, but we are not going to sell it at a premium price’. It just has to be something that little bit different that’s going to catch people’s attention.

But for me, what is more important than the brand is the person behind it; the promoter. I invest in people rather than products and the particular services they are promoting. If the person has a certain drive, a certain commitment and a passion about it and if they are fun as well, then it is something I would give serious consideration to.

"The beauty market is very attractive as an investment because it enjoys ridiculously high margins"
How appealing is the beauty market from an investment point of view?
You want the honest answer? Very attractive. Because it enjoys ridiculously high margins. I can’t believe that the beauty product I’ve chosen to invest in [TanOrganic] is, according to industry experts, wildly expensive to make. And yet there is such a margin, so if we are 3 or 4 times more expensive [to produce] than the rest of the self tanning industry, well then they must be making an awful lot of money.

Probably computer software has to be the best [investment] in the sense that you come up with a piece of software, it costs you X to make it, but then you just need to manufacture it and flog it out. So that’s probably the best, but the beauty industry is coming in a hot second.

Have you invested in any beauty brands in the past?
No, I’m a virgin beauty investor! I had bankrolled one or two spas in the past and made investments like that, but that’s as much about a property play – the hotels we were developing at the time had to have spas. So I have to say it was an industry I knew very little about. I have to also say what I find very interesting is there is camaraderie in the beauty industry that I think is exceptional. People engage in real networking and sharing of information and the help and assistance that we have got from people has been amazing. They are always trying to give you the right contacts to speak to, rather than thinking ‘who does he think he is from Dragon’s Den?!’. I have found this in both Ireland and the UK. 

"Look for an investor that can give you connections and contacts - that makes a huge difference"
What is the best way for someone to find an investor who is most suited to their brand?
It depends how much you’re looking for. If you’re looking for £200,000 or less, you’re usually working within families, friends, twisting people’s arms and so on. If you’re looking to do something a bit bigger, you are probably going to need to bring in an investor at some stage. I would be looking for two things [in an investor] – not just the money, but their track record in the industry and what connections and contacts they can give you. That makes a huge difference.

And so when I invest in businesses – and I invest in a range of industries from hen parties to DIY – what people are getting the benefit of are my contacts and connections. And even though I wasn’t previously involved in the beauty industry, with regards to the big pharmacy chains in Ireland, three of them have used me as a management consultant and know me very well, so I had contacts in this respect.

What top tips would you give anyone looking for investment, before they approach investors?
People when they are setting up a business are fixated about getting money and they come along to people like me, looking for cash to invest in their business. I would prefer if they spent their time going out and looking for customers. Even if they haven’t been able to sell anything to them yet, if someone comes along to me and says ‘I have this idea, and I have spoken to X and I now have 500 customers who are genuinely interested – this is how frequently they said they would use this service...' when you see information like that, even in a recession here in the UK at this time you will find people that are willing to invest.

But what tends to happen is, say for instance someone wants to open a spa, they want to build these big, exotic – expensive – premises and hope people will come in the door. Let’s talk about someone who wants to open a restaurant. They’ll spend all this time thinking about the design of the restaurant, how it will look, its ambience, I’m going to get some guy with a French name to be the chef – you know, all of this sort of stuff. Whereas, do they ever actually sit down and say ‘let’s poll people in the area – what type of restaurant would they want, this is what we’re going to do, these are the type of customers that are going to come...’. if someone like that came into me I would rather invest in that restaurant. I’ve done a lot of investments in the hospitality sector and that very rarely happens, so I am always very impressed when someone comes along and they know their potential customer profile. So that’s what I’d say to people – think customers, not money. If you have customers, the money will come.


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