Doug Richard: Exit the dragon

Doug Richard doesn't come across as a dragon. As one of the panel of business gurus on the BBC show Dragons' Den, he was renowned for his barbed retorts to entrepreneurs who risked public humiliation in the quest to secure financial backing for their big ideas.

"I made three investments," Richard says. "One company is going OK, another has gone out of business and another one has not happened yet."

Richard did not appear on the latest series of Dragons' Den, but instead opted to concentrate on adding to his already significant wealth by developing his own ideas.

As well as the being the chairman and chief executive of Library House, the technology research group, he is the founder and executive chairman of Hotxt, a soon-to-be-launched mobile software company.

Until the trial run for Hotxt's consumer service in September, Richard is keeping shtum about his new project. "We are in serious stealth mode. I do like to talk about stuff, but I get into trouble for saying so much," he confesses.

"It is very difficult to put together one of the top software teams in the world without everyone knowing what you are about. The last thing I want [potential rivals] to know is where we are going."

But Richard, an American who has lived in the UK for five years, has high hopes that Hotxt can become a seriously big business. The start-up has already secured nearly £4m in funding, and its founder believes it can be a big hit with mobile users around the world. The Hotxt website says that the company offers a service that enables mobile users to send text messages to each other over the internet. But this is not a clue to what the company will become, according to Richard. "What it is now will not be what it becomes in the future," he says.

For someone who cut his entrepreneurial teeth in Silicon Valley, starting up a business in London has been a chastening experience. "This is the first time that I have tried to start a Californian-style start-up in the UK. It is extraordinarily expensive to found a business in London compared with anywhere else in the world. The pound is incredibly strong and London itself is one of the most expensive cities in the world."

Richard actually started Hotxt in Cambridge but found that the only way he could attract world-class staff was to relocate to London. "These people can work anywhere in the world they want. You have to give them a compelling reason to move somewhere. I can find fantastic development staff in Cambridge but to hire business development guys and product management and marketing and CTOs [chief technical officers] of global calibre I had to move to London."

As if the added expense of setting up a company in the UK, and in London in particular, were not enough, Richard says the support for young businesses from the Government is often worthless. He has been critical of Labour's record in supporting entrepreneurship in the UK. Earlier this year he authored a report with the Small Business Task Force, a body set up by the Conservative Party, that found the Government had spent £12bn on support schemes for business, but could not provide any evidence on what impact its largesse was having. In all, Richard found 3,000 schemes run by 2,000 public bodies.

Describing himself as "economically conservative and socially liberal", he says: "I will take private capital over government capital any day. Public capital tends to look for returns other than profit, which complicates matters considerably."

He adds: "I think in large parts [public sector support] is a hindrance to small business. There are so many folk across so many organisations, it is not possible for them to all be good at what they do. In fact, many of them are not good at what they do because everybody is repeating each other in a thousand different ways and providing a very small amount of actual support. And that support tends to be very basic. If you are an entrepreneur and you go to these public bodies, they are full of advisers. There is only so much advice you can take in life."

For Richard, starting a business is not some mysterious alchemical process.

"In some ways we have mystified the notion of starting a business. Starting a business is no more or less than the notion of waking up, thinking of something and doing it.

"Most of what you need in terms of the raw toolkit is what most people with any level of spirit can reach out and see in any number of places. It can be as simple as going to the library or a website. The rest of it tends to be how much business savvy you have. It's not about inventions, it is about exploiting inventions. It's about getting out there and hustling."

So what advice would Richard give to Gordon Brown as he prepares to become prime minister? "He has to admit a few things," Richard says. "Firstly, the Government has to recognise the key importance small business makes in economic growth. Any increase in levels of bureaucratic red tape will by definition impact on a small business more than a large business. For a very small business it can be fatal."

Richard wants such companies to be exempt from swathes of regulation, including the requirement, for example, to give paid maternity leave in line with large corporates.

Then there is taxation. Richard highlights the fact that taxation on small business actually went up at the last Budget. "I see this as absolutely contrary to any particular logic I have ever seen," he says. "At the last Budget, large corporation tax went down and small business tax went up. This is the inverse to how it should be. It will slow down the engine of growth. Any economy needs large corporations and small businesses - but for different reasons. Large corporations provide a large proportion of capital and job formation. At the same time you need small business to be there to drive innovation and increases in productivity.

"When you look at the lag of productivity in the UK, you need to look to small businesses to solve the problem."

Richard is certain to do his bit. But whether his start-up stays small for long is another question.