This is edited and abbreviated transcript of the video interview with Sir Tom Hunter by Jonathan Guthrie of the FT
FT: Could you just tell FT.com viewers how you got into business and how you made your money?
Sir Tom Hunter: Yeah, how I got my start in business was working in my dad’s grocery store from a very early age, so I suppose business enterprise was talked about round the kitchen table, but learning to buy and sell in the grocer’s shop was my education really.
And then I did go to university. It wasn’t so much of a help in doing what I’m doing now, but I noticed that training shoes were becoming a big part of what my dad’s business was selling in market stalls and I couldn’t afford my own store, but I thought, here’s an opportunity. So we took some space in other people’s stores and, of course, the market took off, so we were very lucky from that point of view.
FT: And what came next?
Sir Tom Hunter: Well, we took space in other people’s stores because, as I say, we didn’t have the capital to open our own stores. Five years’ hard work and a very forgiving market... we made lots of mistakes, we managed to open our first store, which was 1989, all 300 square feet of it. And then from that... moving from shoes into the celebrated shell suit, so we’re now a clothing retailer, and then I visited America and saw these large out of town sport superstores. And that was 93... we opened our first full line sports store, so selling golf, bikes, fitness, as well as the shoes and the clothing.
So in 1995, we bought the UK’s biggest sports retailer, Olympus Sports, from Sears and we gradually changed that into Sports Division which was my company’s name, and then 1998 we had an approach from JJB Sports to buy the business, which I’d never thought we would do, but when an offer comes in for such a large sum of money, it doesn’t take too long to work out that was the thing to do.
FT: Just outline your activities now in private equity and philanthropy and so forth.
Sir Tom Hunter: So what we’re doing now, after receiving the large cheque and after a few celebrations and a big smile of your face... in fact, I don’t think I’ve stopped smiling, I decided to educate myself about a different approach to business, so for 14 years I had one single focus, which was to grow Sports Division, but then I decided I wanted to do other things.
I wanted to invest in others to help them along the way. So it’s a very different approach and it took me a bit of time and a few mistakes to educate myself in this process. But now through West Coast Capital, we invest in other entrepreneurs, strong management teams, who want to go and do their thing, and we provide the finance and the backing, etc.
FT: And what advice would you give to somebody starting their business for the first time?
Sir Tom Hunter: You’ve first of all got to find something you’re really passionate about because it’s going to take over your life. I don’t think I’ve met any entrepreneur who has been successful who hasn’t worked extremely hard, so therefore find something you’re passionate about, find something you’re really interested in, become the anorak of that particular industry. Know everything about it, know everybody in the business, just consume yourself with that and bring that passion to it.
Hard work... nobody’s ever got there without it, but it’s got to be something you enjoy as well. You’ve got to have a bit of fun along the way, because it’s going to take over your entire life.
FT: And in terms of advice, where’s a good place to go? You have your father, your parents, in a sense and presumably you kind of network around them? What would you suggest to people who maybe don’t come from that business background?
Sir Tom Hunter: I think it’s a bit harder if you’re not in business circles, but if you’re determined enough, I’m sure you can go and find someone. You can do your research... the internet’s a fantastic tool today which we never had in our day, so there’s a lot you can do on your computer, but nothing beats actually getting out there, seeing, touching, feeling, understanding about your own particular business. And if you really are passionate about it, you will go and find all these sources of information and I’m sure you will find a way.
FT: Do you think there’s an equity gap?
Sir Tom Hunter: I think in terms of funds available for new starts, I think traditional private equity houses have moved up the value chain and some of them won’t get out of bed unless the deal is a hundred million, etc. Therefore, I think it is a good idea that there is this seed money for young people trying to start their businesses, because everybody needs a little bit of help, a little bit of encouragement in the beginning. So I think the seed equity is a very good idea.
FT: And where is that available from? From government funds or from private angels such as yourself?
Sir Tom Hunter: I think more and more there are entrepreneurs who are maybe on their second, third time round and the good thing about that sort of money... sometimes it’s quite tough to get, but if you get advice and even a mentor out of that, that can be invaluable and actually the hard cash is welcome, but the advice and the kind of grey matter of being there, done it, got the t-shirt, can be more important than the actual hard cash.
And it’s just a matter of networking yourself, to get yourself in front of these sorts of people. And it’s not easy and getting money out of entrepreneurs is definitely not easy, but it’s really worthwhile.
FT: You career has spanned both being an entrepreneur in your own right and now being a private equity investor. What do you think people starting businesses can learn in terms of management and in terms of people and also assets from private equity?
Sir Tom Hunter: Well, I think private equity people are very focussed on the exit. I think that’s something... when I was starting I never thought of the exit. I thought I was going to do this business for ever more. And I think if you go into a business with the exit in mind, I think that can be quite short term.
I think your first business, you’ve got to go in, you’ve got to treat it as your baby and I don’t think thinking about the exit straight off is very healthy at all, so I suppose that’s a lesson not to learn from private equity. But private equity houses are very disciplined in their financial reporting, their returns they’re trying to achieve, and that discipline is something which people starting their business can learn from.
Because normally what happens in your first business is you see opportunities every corner you turn and a lot of the time with the people I meet, they just need the focus of saying, this is my opportunity and stick to it and not be taken off the track at all the other opportunities along the way.
FT: What’s your view on the climate for setting up businesses now? How good or bad is it, would you say in the UK?
Sir Tom Hunter: I think the climate for setting up business in the UK is fantastic. I don’t think there’s been a better time to set up businesses. It’s easier. There are more sources of funds. I’m not saying it’s easy to get the funds, but there are certainly more sources of funds and there’s more help than ever out there and just as importantly, there are entrepreneurs on the second and third term of doing this who are willing to help along the way as well, and I think that’s very important.
FT: Do you think red tape’s an issue? It’s something that the business representative organisations complain about a lot.
Sir Tom Hunter: I think real entrepreneurs don’t moan about these things frankly. A real entrepreneur will find their way round about it. I’m sure there’s entrepreneurs setting up businesses in India and China who are not moaning about, “oh, if only this would happen, if only that would happen”, but just getting on with it. And frankly if someone comes to me and starts blaming other people for their woes, that’s a black mark from my point of view. I’m looking for people who are getting round the challenges, not blaming others.
FT: And should entrepreneurs look for government support or are you aware of any schemes that are useful?
Sir Tom Hunter: I think entrepreneurs need to be very wary of government support, because it’s just another dependency. I think, again, it’s very nice if there’s a small firms loan guarantee which is backed by the government. That’s fine, but don’t expect too much of government and you won’t be disappointed.
FT: To which extent do you think fear of failure still holds people back from starting businesses?
Sir Tom Hunter: I think in my own particular case, I had nothing to lose. I was still staying with my mum and dad. I didn’t have a mortgage. I wasn’t married, no kids. Therefore, I had nothing to lose. I think that the older you get, the more responsibilities you take on and then, yes, the fear of failure is a bigger issue, and therefore if you can get into business that little bit younger, then hopefully that fear of failure’s not so important.
FT: If you were starting out again now, what sector do you think you would go into? Clearly you hit a sweet spot with the rise of sports wear.
Sir Tom Hunter: I think if I was starting off now, I don’t know if I’d want to tell everybody which sector I’m going into, because I want to go into it myself. So I don’t want to create all these competitors out there. But the great thing about today is there’s lots of change happening in the world and where there’s change, there’s opportunity.
You know, we’re living in an ageing population which throws up all sorts of opportunity. We’re living in a world where climate change is important... huge opportunities there. So therefore there’s more change today I would say than ever and therefore there are more opportunities.
FT: We talked a little bit earlier about the availability of finance, but certainly Colin Mason I remember once said to me that the clustering of private equity deals within travelling distance of the City told you perhaps more about London investment bankers’ habits than the availability of investment proposals. Do you think that’s fair?
Sir Tom Hunter: Well, I think private equity houses will naturally go to where the deals and the deals will naturally gravitate to where the money is, and London is the financial capital of the world these days, so I would say that would be natural. But for a first time business, private equity isn’t the right source of money. There are lots of other... you know, the three Fs, friends, family and fools, as they call it, so these are where you need to look to start with.
FT: Do you see any regulatory threat in terms of private equity because the FSA is being more assertive?
Sir Tom Hunter: I think it’s such a huge industry, private equity these days, that it is going to attract more regulation. That’s, I’m afraid, a fact of life. We’ve just got to get on with it, understand the rules and abide by them.
FT: I wanted to ask you about enterprise education in schools. How good do you think it is? Do you think there should be more of it? You’re involved, I know, in some education initiatives.
Sir Tom Hunter: There is this great question whether it’s nature or nurture. Can you teach enterprise? And the answer I always give to this is, of course you’re going to have your natural born entrepreneurs like Branson, like Philip Green, but just as you have your natural born athletes like David Beckham and Thierry Henry, but with a bit of coaching, a bit of mentoring, a lot of hard work, I think everybody can be that little bit better.
What we’ve done in Scotland now is that every single primary school pupil gets at least two enterprise modules in their seven year primary education. And that’s not necessarily to make them into business people, but it’s to raise self confidence, it’s to raise aspiration and it’s actually across curriculum. Enterprise in itself is across the whole curriculum. It’s not just a subject in and of itself. It’s a much broader than that. And I believe that is having an effect in Scotland.
FT: Philanthropy is important to you. Could you explain a little bit about how that came about, why you do it, what you think it’s achieving?
Sir Tom Hunter: As I said, at the tender age of 37 I got a very large cheque of £260m, so I suppose my whole life’s work had been achieved at a relatively early stage. Therefore I had to go out, educate myself and find out what the rest of my life was going to be about. And having travelled round about the world and met people in a similar situation, we found this model of venture philanthropy. Really what it did was it re-doubled my efforts in the wealth creation side, because I now had a vehicle in which that money could go into. All of my material needs were dealt with, and my family was dealt with. Therefore we needed another motivation for that wealth creation and venture philanthropy was that.
FT: Could you just tell us a little about the Clinton-Hunter Initiative?
Sir Tom Hunter: A good example of what we now do with our money would be with President Clinton. We have chosen two countries in Africa, Malawi and Rwanda, and we’re trying to assist them, help them to help themselves out of poverty. And this is a more holistic approach that looks at healthcare, education, economic development and because of President Clinton’s involvement, we’re invited into these countries at the highest level and then we work and assist the Government in helping the people help themselves, which is the cornerstone of our philosophy.
We don’t actually believe in charity. We believe this is an investment and the people themselves need to commit to that investment as well.
FT: What were your pet hates when you were building up Sports Division? Or do you find a problem now in the businesses that you invest in? It could be soft issues or hard issues.
Sir Tom Hunter: I think the biggest challenge for someone starting small and growing is going to be taking on people, because there are many people who can have a great small business... it’s maybe just themselves, it’s maybe themselves and a wife, a partner, whatever, but these businesses stay small. If you have big ambitions, you’re going to have to share your vision, your enthusiasm, your passion with others, and sometimes that can be very frustrating because others, perhaps, don’t buy into your vision.
So in order to grow a big business, you need to be able to communicate and motivate others in your business. And that’s great when it’s going well, but it doesn’t always go well and I guess that was the most frustrating thing, when others couldn’t see my vision, couldn’t share my passion, and that really frustrated me.