The enormous success of David Chilton’s 1989 personal finance classic The Wealthy Barber left him with the funds and the profile to become an angel investor. Appearing as a dragon for three seasons on the popular show Dragons’ Den further fuelled his passion for investing and advising startups.
The 57-year-old Mr. Chilton will be sharing his insights into entrepreneurship on May 14 at The Globe and Mail Small Business Summit.
Your personal finance book, The Wealthy Barber, taught millions of people the basics of saving and investing. How has your approach to personal finance influenced your approach to investing in startups?
I was so lucky in my life. I only had one great idea, but it came when I was 25. Because of the brand power of The Wealthy Barber, I had a lot of opportunities fall into my lap. … I think the common-sense approach that I brought to personal finance is one that I still try to bring to business. At the end of the day, you’ve got to remember the key fundamentals, which is to deliver good value to a customer.
How does what we see on Dragons’ Den compare with real-life angel investing?
It’s remarkably similar, funnily enough. When you’re in the den and people are coming down the stairs, you let your instincts take over. Do the people seem like upstanding individuals? Are they people you would be proud to work with? What is their motivation? Do they have outstanding energy levels? Are they able to persuade and grab people’s attention? All of those things are very similar to that first meeting as an angel investor.
You’re known for vetting potential investments yourself. What’s your process?
You learn a tremendous amount doing due diligence. I speak as often as I can to people on the phone or face-to-face, approaching it like a journalist. One of [the] things that I was absolutely astounded by was how open people were. I was asking people very private questions about their company, and I was shocked how open they were in their answers and that has helped me tremendously. I tend to interview a lot of people, call the CEOs and chief marketing officers, chief financial officers of competing firms. I will call suppliers, people I know who use the product or use a similar product. I do that nonstop and it really helped me get a better feel for things.
What are some red flags when you’re getting pitched?
One of the big myths out there in startupland or businessland is that it’s all about the idea, it’s all about the vision. It’s really all about the execution and that comes down to strong attention to detail and good old-fashioned pride in craftsmanship. When you get the documents from your potential partner and there’s all kinds of spelling mistakes and horrible grammar or there’s missing accounting statements, those sorts of things are really big red flags. In one case, we got packaging from somebody and it had two spelling mistakes and right away I knew we were in trouble.
What are your biggest successes and failures as an angel investor?
I don’t love talking about failures – not because I’m gun-shy, but I just don’t like doing that to the entrepreneurs. A lot of the Dragons’ Den investments worked out really well. The advantage of doing the due diligence yourself is you can see where your brand power or your contacts can make a difference.
The Hardline Curling broom has been a huge success. It’s one of the most successful brooms out there in the whole curling industry. The kelp caviar company, Imperial Caviar, has also done well. That was inexpensive caviar made from kelp. That took off because the entrepreneur was able to get distribution in some of the major grocery stores in Canada. Nonna Pia’s balsamic vinaigrette has also been a very big success. Jimmy Pattison came in and did a round of investment after I took the first one.
Why did you quit Dragons’ Den?
People often ask me why I left the show. I closed 24 deals in three years. That’s a very unusual number, and when you’re helping at least half those people, it gets a little bit overwhelming. I enjoyed it immensely, but it started squeezing out my own businesses and even family time. I kept investing in private companies, but I did only one or two a year and did ones that didn’t need me to be involved.
You must be inundated by companies looking for investment.
It’s crazy. It slowed down this past year, but I’ve been off the show for three or four years now. I got a reputation for closing a lot of deals so people were more likely to find me. There was one day with 53 requests for lunches. And we were just laughing. I’m going to be obese! I’m not considering pitches right now as I’m focusing on my own companies and running The Wealthy Barber stuff, which is amazingly still going strong.
You’re an investor in Borrowell and some other fintech [financial technology] companies. How has that sector fared in the past couple of years?
Fintech all over the world has not done, in most instances, what people thought it would. The concept behind fintech offerings may be good, but persuading people to change is always difficult. In any business, the No. 1 competitor is inertia. In the financial field this is probably even more true and in Canada it’s even more true. People may complain about their banks, but they like their banks. Some companies like Borrowell are growing quite nicely, but a lot of the ones that I saw three, four years ago have already bolted up shop or pivoted three or four times.
You are currently based in Kitchener, Ont. What do you think of the explosion of tech startups in the Kitchener-Waterloo region?
So many things are happening in Waterloo right now, it’s amazing. There’s a lot of hiring going on. It’s amazing how much commercial real estate has been dedicated to all that growth. Shopify and Google have expanded here. I get to meet young people frequently and I’m amazed at how talented they are, how hard they work at expanding their knowledge. Two young men in nanotechnology were pitching me a couple of months ago. They’re spending 18 hours a day studying their field, day after day. We didn’t do that when we were kids. We goofed around a lot and did as little as possible to get through school.
Tell me about your memorabilia business, Chilton & Associates Inc.
People are designing their homes or renovating and they’re looking for artwork, and we find things to use as art substitutes. We have built one of biggest databases in the world for the space, and we have a team of four. A little while ago, we bought an invitation to the Bouvier-Kennedy wedding for a client. We were lucky to buy a treasure trove of original Jetson sketches from the 1960s show. It’s been a delightful experience. I’ve had more fun than in all the years I’ve been in business.
This interview has been edited and condensed.
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