Luke Johnson: The entrepreneur
Article Date: Sep 19 2007I‘ve had one of the busiest Augusts I can ever remember,’ says Luke Johnson, chairman of mid-market venture capital firm Risk Capital Partners. ‘Funnily enough, August and Christmas are great times to do deals as most people are away.’
His VC work seems to please Johnson on two levels. Firstly, he still gets a buzz from entrepreneurs. He’s beguiled by their single-mindedness and ingenuity; addicted, in fact, to helping them grow their businesses.
Secondly, you suspect that he likes getting the upper hand on rivals – outwitting them because he’s bided his time and not played his hand too soon.
He says: ‘The most exciting thing that I do is investing in a growing business. That’s why I look forward to Monday mornings. I’m involved in most of the deals that we do at Risk Capital. Occasionally I’ll find them. To an extent, I’m involved in every step of the way, negotiating, helping to raise debt if necessary.’
The gambler
Venture capital can be viewed as the more respectable brother of gambling, except that the chips on the baize table, the galloping horses or the scampering dogs are entrepreneurs seeking financial clout, an exit or a float.
In this context, Johnson is a notorious gambler. To put it mildly, the man likes a flutter. He takes risks, as the name of the firm suggests, and it seems fitting that he’s the principal owner of the UK’s largest greyhound track operator, GRA.
Money isn’t what drives him. He never has to work again and yet he keeps searching for the next winner. After taking control of Pizza Express in 1993 he grew the business from 12 restaurants to more than 250, and the share price soared from 40p to close to 900p by the time he sold out of the business six years later.
He went on to start Signature Restaurants, which owned the uber-trendy media haunts The Ivy and Le Caprice, as well as the chips, mussels and beer specialist Belgo. This was sold in 2005 and from there he started up the Italian restaurant chain Strada. Both concerns were exited for just under £90 million combined. Last year he exited Integrated Dental Holdings – a business he set up with partners in 1996 and grew into a chain of dental surgeries – for over £100 million.
At present he sits on ten boards, including those of restaurant chain Giraffe and Patisserie Valerie. He’s the chairman of Channel 4. And every Wednesday you can find his polemics in the Financial Times, discussing subjects as diverse as the death of Manchester music maestro Tony Wilson, the quality of companies on AIM and the notion that analysts are a dying breed.
As CVs go, it’s not bad. His addiction to the business life began back in his days at Oxford, where he studied medicine. With a fellow student, he put on a weekly event called the Era Club. ‘It was held in a local club and there were different eras each week. One might be a Bowie night, another a Motown night and so on. We would take the money on the door and the club would take the money from the bar.’
He was 18 and realised the process suited him perfectly. ‘I loved the fact there was no hierarchy,’ he says. ‘You could create the opportunity and initiate something and make a difference. That was what excited me then, and it still does now.’
After Oxford he worked as an analyst for four years, looking at stocks in
the media sector, and then tried investing in several small companies. One sold cars, another was a technology company and the third sold theatre scenery, ‘which was a struggle’. He borrowed money from a bank to invest.
A pizza the action
During this period, which he calls an apprenticeship, he’d also made contact with a certain David Page at Pizza Express. Johnson recalls responding to a classified ad: ‘It was a Tuesday and I saw that David was looking for a buyer for his franchise business, and so we started a negotiation and kept in touch.’
Two years later, Johnson and a partner, Hugh Osmond, undertook a reverse takeover of the entire business, including the franchisee and franchisor arms, for around £25 million.
When it comes to restaurants, Johnson is brilliant at scaling an operation and rolling out a uniform brand. He was crystal clear about what he wanted to do with Pizza Express: ‘There were issues with franchisees, suppliers and landlords. We also needed to clear out some unnecessary head office staff and dispose of head office buildings.
‘What we were not going to do was change the menu or remove the branch managers, who were generally very good. All the customer-facing things were excellent.’
Of all the ventures he’s been involved in, he says that Italian restaurant chain Strada has been fulfilling: ‘It was created from nothing, whereas obviously with many of the deals I’ve done I’ve bought an existing business and improved it – or tried to.’
Judgement call
Over the years, Johnson says he’s found acquisitions to be an area that prove tough to judge. ‘At Integrated Dental Holdings, we bought businesses that didn’t always work.
‘There is no doubt that some acquisitions go wrong. You buy a business and the management leave or the key customer deserts you. There is a raft of things that can happen, and Murphy’s Law often applies, sadly.’
If one were to be critical of Johnson’s CV, you might question his “stickability”. In some ways, his encyclopaedic range of interests is Victorian in its scope and, like some of our 19th century forebears, he could be accused of being dilettantish – a Jack-of-all-trades, master of none.
Johnson doesn’t think so, reeling off his decade with Integrated Dental Holdings and seven years each with Pizza Express, Signature and Risk Capital. ‘I’ve been involved in the restaurant business for over 15 years. I think that’s consistent,’ he says, curtly.
Constantly reinventing yourself and testing your skills by going into unfamiliar areas strikes Johnson as healthy. ‘I can’t pretend I’m an expert at everything and I always rely on partners who perhaps are experts, but the idea that we have to be in a rigid box for life is restrictive – a bit dull and unimaginative,’ he says. After a silence, he adds: ‘Each to their own. I also admire people who pursue a craft all their life and love it. That’s fine too. Why not?’
In terms of the new, taking on the role of chairman of Channel 4 in January 2004, which turns over close to £1 billion and has nearly 1,000 staff, was unfamiliar fare indeed. He admits it’s been a challenge, adding that the appeal lay in its impact as a broadcaster – ‘it makes a lot of noise’. And while it’s a public corporation with responsibilities to the taxpayer, it is self-funded. ‘It’s very different to the rest of the public sector and has many characteristics of the private sector, which is why I think I enjoy being involved,’ he says.
The race row at the beginning of the year in Celebrity Big Brother, which then Chancellor Gordon Brown became embroiled in, took Johnson by surprise. He acknowledges his handling of it was a little too casual. ‘I may have done things slightly differently,’ he says. ‘Hindsight is a wonderful thing and you can’t dwell on regrets. I also think the debate over the programme has diminished somewhat. At the time, it seemed a matter of extraordinary importance.’
Going off on a tangent, he observes that newspapers enjoy bashing broadcasters. ‘The print media resent the power and scale of broadcast media, so they rather enjoy giving the BBC, ITV and Channel 4 a hard time.’
Taxing problems
Forward thinking, momentum and relentless innovation form Johnson’s credo. At length, he tears into politicians for the employment legislation and tax burden on growing concerns, observing that none of the present Cabinet has had hands-on involvement in running a business.
‘Ultimately, politicians are absolutely part of the public sector and therefore you do wonder if they’re interested more about extending their empire than actually providing for a more prosperous society,’ he says.
Anything that restricts the spirit of commerce is to be resisted. That extends beyond legislation. Resolutely, he avoids going over the lost bets he’s had over the years, the failed ventures: ‘You mustn’t dwell on mistakes as you can end up wallowing in them and that can be discouraging. You can become demotivated.’
Onwards. Forwards. Be sure the next venture is a winner. Johnson comes across as a hard taskmaster, the resolute libertarian capable of a pithy remark – someone who doesn’t like being told what to do (which makes the decision to go to Channel 4 all the more interesting).
There is also something of the voyeur about him – a certain detachment. His dalliance with medicine is appropriate as he has a clinical, surgical air.
If Johnson was a gambler in the conventional sense, at the track, wearing a flat cap and sipping tea from a polystyrene cup, in all likelihood he’d be watching the punters and not the race – observing the stewards, making a mental note of what type of food was served. Then he’d see the crumpled betting slips on the floor and, when the race was over, he’d go and cash his winning bet.
