James Caan: A dragon in his den

Tycoon James Caan, famous for his role in the BBC's hit series, talks to Mark Leftly about his own private-equity firm – and how it takes young businesses and turns them into major players

James Caan's real-life lair is far more elegant than the cavernous studio that he and his fellow judges inhabit on the BBC's hugely successful Dragons' Den series.

Caan bought this six-storey converted townhouse in the heart of Mayfair for Hamilton Bradshaw, his private-equity company, at the start of the year – for just £4.2m. Taking advantage of the property collapse in London's historically wallet-emptying West End, Caan has already nearly doubled his investment: the building is now valued at £7.5m to £8m. Should the commercial property market ever get anywhere close to its peak, Caan is looking at – comfortably – a 200 per cent profit.

"Some people thought I was mad to buy property then [as prices were expected to fall yet further]," says Caan, in the slow, deliberate manner that translates so well to television. "But you can't call the bottom of the market; you can't catch a falling knife. I thought it was fair value."

Caan would really like to discuss and plug the iAwards, which he recently set up with the Innovation minister, Lord Drayson, that will "shine a light on new technologies", according to his website. And profiles of Caan understandably focus on the celebrity aspect, his work on Dragons' Den, which he joined in 2007. He obviously enjoys the fame, with a picture of him standing next to the other dragons placed prominently in the office.

Having renamed himself after the American actor James Caan – he formerly went by Nazim Khant – there is also a portrait of the Pakistani-Briton next to the words The Godfather, his namesake's most famous film.

However, what is arguably more interesting is the company that Caan runs, the business success that provided the platform for him to hobnob with politicians and TV personalities.

At the turn of the millennium, Caan was rich, but relatively unknown. He had made his fortune with Alexander Mann, the recruitment group he founded in 1985 and sold 17 years later when ousted as chief executive by buyout firm Advent International.

Rich beyond his wildest expectations – he is today estimated to be worth £65m – Caan needed something to do with that cash. "It's not like winning the Pools or the lottery," says Caan, who grew up in the East End of London as a Pakistani immigrant. "If you didn't earn it, you can be a little more reckless. I went to JP Morgan and Goldman Sachs and asked them what I should do with the money. But it was all equities related, putting it into products that go up and down like a yo-yo."

The British Venture Capital Association helped Caan set up meetings with 14 private-equity firms. He was considering investing in their various funds, which had high returns of as much 25 per cent before the 2007 crash. But he was disappointed. "Every private equity firm I met had a banker, lawyer or an accountant in charge. I was confused. I'd built up so many businesses from scratch– the one thing I'd experienced was that if something could go wrong with a business, it does. What would the banker, lawyer, or accountant do?"

Caan decided he was better equipped to run a private-equity firm. The future dragon sat at his kitchen table with a blank piece of paper, trying to think up a name for the business to suggest respectability. "I needed something olde-worlde," he says ... odd, given that one of his more famous Dragon's Den investments is a telecoms product called MagnaMole. "For some reason, the two guys in the Bradford & Bingley logo came to mind. I thought if I was going to name them, I would call them Hamilton and Bradshaw. It's like having a child."

Name in place, Caan wanted a structure. Unusually, the company would be investing his money, rather than raising funds from outside investors.

He spreads out five sheets of A4 paper showing a flow chart of 80 boxes depicting a private-equity transaction – from finding a potential investment to selling up years later. "The message from private equity was that this was one bloke covering this flow chart," says Caan. "My intellectual background said this was impossible. To gain excellence, we needed specialism."

So Caan employs people to concentrate on specific parts of a transaction, negotiating a price for a stake, say. "We only use my capital, so my job is to manage risk," he grins, stroking his beard.

Set up in 2004, Hamilton Bradshaw has 37 investments and aims to have 60 by 2011. Typically, this is development capital, or investments of up to £10m, to help a firm grow into a real player. The target should be easy to reach, as Caan meets nearly 30 businesses a month wanting his money. The mistake most make is growing internationally before cracking the domestic market. "I saw someone yesterday and he is struggling because he has opened in New York, Singapore and Paris yet has only 3 to 4 per cent of the UK market. I said to him, don't you think you ought to get Chiswick right first?"

Caan identifies Eden Brown, a staffing firm acquired in 2007, as Hamilton Bradshaw's biggest success. In two years, Eden Brown has doubled turnover to £300m; profit is up 300 per cent.

Hamilton Bradshaw also invests in property. On his office table is a model for a £140m residential scheme in north-west London – complete with James Caan Innovation Centre. In the next fortnight, Caan is expected to unveil plans for a personal finance venture to help people invest in homes.

Dragons' Den undoubtedly raises his firm's profile, and it manages the investments he makes in the show. For example, Chocbox, a cover for electrical connections, is 25 per cent owned by Caan and another quarter by fellow dragon Duncan Bannatyne, but Hamilton Bradshaw runs both investments.

But Caan's fame has presented problems. It was reported in June that he was embroiled in a £3.3m spat involving Caritas, a Hamilton Bradshaw portfolio firm specialising in healthcare recruitment. A rival, Bluecare, had issued a High Court writ over poaching staff. "They've looked at the share register and gone after the name James Caan," he alleges.

Caan polishes off the croissant that he has been picking at for the past hour. Sipping his glass of water, he seems content, certainly unruffled by a legal row he fully expects to win.

He says goodbye with a firm handshake, the presence of a film star rather than a lad in Brick Lane struggling to make ends meet.

Multi-millionaires united

Duncan Bannatyne

Said to be worth £170m, Duncan used the profits from the sale of an ice-cream van business to expand a group of nursing homes, which made him a millionaire. He has since built up the 'Bannatyne' brand which includes a chain of health clubs. It has turnover in excess of £40m. Other Bannatyne branded ventures include Bannatyne's Casino in Newcastle, which opened in February 2005. Bannatyne Hotels has grown from one 60-room site in Darlington to a further two hotels in Durham and Hastings. And Bannatyne Housing recently began a development in Dumfries.

Theo Paphitis

His name and millions were made buying and reforming ailing high-street brands such as Movie Media Sports, Ryman the stationer, and La Senza. In his eight years as chairman of Millwall FC, Paphitis successfully took the struggling club out of administration and presided over one of its most successful periods when it competed in the Championship and the FA Cup final. Most recently, he has acquired Red Letter Days with fellow dragon Peter Jones. The company, which offers customers a variety of "experiences", boasts "a client list which includes the majority of top FTSE 100 companies".

Peter Jones

Within two years of founding Phones International in 1988, Jones had grown the provider of mobile-phone products into a £44m business, and today it has a turnover in excess of £140m. In 2006, he worked with Simon Cowell to develop a new reality TV format called American Inventor for US network ABC. He is also a published author, with his bestselling book, Tycoon, released in 2007. Jones recently acquired Red Letter Days with his business and TV associate, Theo Paphitis. His business empire is valued in excess of £200m.

Deborah Meaden

With a background in her family's leisure businesses, Meaden bought out her employer, Weststar, in 1999. In 2003 she faced down the prospective buyers for the company when they reduced their price at the last minute. In 2005 she sold the company to Phoenix Equity Partners in a deal that was reportedly worth £33m and saw her retaining a 23 per cent stake as well as an active role in the group. She received £82m when she sold her remaining stake in Weststar to Parkdean Holidays. Post-Weststar, she invested in a market research company. Like other dragons she has also cashed in on publishing deals.

Building an Empire: Great minds don't think alike – they nick each other's notes

James Caan's best mate from Dragons' Den is Duncan Bannatyne, the Scottish entrepreneur who has interests in fitness clubs, hotels and property.

Caan claims that this is simply because the two sit next to each other, with Caan perched at one end. Peter Jones, the lanky giant who stars in the moneysupermarket.com advertisements, is the dragon he knows least, he says, simply because of the distance they are from each other on the programme.

Bannatyne and Caan frequently invest in the same firms and products presented to them on the show, including magnetic cable guide MagnaMole, and Chocbox, a maker of electrical connections covers (pictured). This is not a case of "great minds think alike", rather that the two steal each other's notes.

When Caan puts down his notebook, Bannatyne often picks it up and evaluates Caan's thinking. Caan is no less devious, and also pinches Bannatyne's ideas.

"I can't read Peter [and why he is investing in something] very well, but I can see every note Duncan writes," chuckles Caan.

Caan likes to emphasise his own strengths as an investor. He points out that his firm, Hamilton Bradshaw, has the capacity to help companies grow, contrasting this to Cypriot dragon Theo Paphitis, who has his own business to worry about.

"Theo's main business is Ryman [the stationer] – he's got 280 stores [Paphitis's website claims a more humble 92] to worry about."

With Chocbox, Caan claims to be building an empire. The company is investing in similar products, such as Rapstrap – essentially a tying device that was also presented to the dragons. "We will build up a portfolio under the Chocbox banner," gushes Caan. "Has any other dragon done that? No."