Dabs founder re-investing fortunes in start-ups

DAVID Atherton has set up a new venture capital fund alongside accountant Alex Clarke to invest a significant chunk of the proceeds he received from the £30m sale of Dabs.com four years ago.

The pair set up Atherton Clarke LLP during the summer as a vehicle to house all of Mr Atherton’s investments. They first met back in the 1970s when they were both working as tax inspectors.

Clarke describes his role as adding a cynical eye to some of the investment prospects which find their way to the new firm’s front door via venture capital funds and business angel networks in a bid to weed out some of the potential failures.

“It’s a damn sight more engaging that the average accountancy role,” said Clarke. “It’s probably a good combination with David’s enthusiasm to stop him from going out left, right and centre writing cheques.”

The pair will share the profits made from successful investments, albeit on a proportional basis since Atherton is providing the funding.

Mr Atherton estimates that he has invested around £8m of the £30m he received from the Dabs.com sale in various business ventures – although much of this was committed prior to the new partnership being formed.

Some £2.6m has been spent on a portfolio of properties run by in Atherton Waring – a subsidiary which specialises in buying cheaper properties in areas such as Burnley and Wigan, spending significant amounts on upgrades making them fit for purpose and then letting them out for social housing purposes.

Mr Atherton said that homes in Burnley are bought at auction for an average of around £20,000 and then improvements worth around £10,000 are made to them. Some are then sold on at a profit but others are retained and attract rentals of approximately £4,000 a year, offering a gross yield of 15%.

His plan for Atherton Clarke had initially been to use his experience in ecommerce to invest in “pure play” internet start-ups but this has since broadened to include all manner of risk capital funding for start-ups, refinancings and some business recovery investments of up to £1m.

“Everything is delivered via the internet these days,” he said.

Indeed, although Atherton Clark has made a relatively modest investment in a game delivered through the Facebook social network that “will either explode or it won’t work” Atherton Clarke’s investments to date have been more of a mixed bag. The firm has put £100,000 into Phagenesis – a Manchester University spin-out which has developed a treatment for Dysphagia (a condition suffered by stroke victims that prevents them from swallowing).

Atherton’s investment was part of a £2m fundraising carried out by Phagenesis which also saw leading private equity chief Jon Moulton taking a stake in the firm.

“There are a couple of deals where Jon Moulton has invested where we’ve followed on his coat tails,” said Atherton. “We will follow more experienced investors.”

It has also invested money in a Manchester-based business known as Ticketsense which allows individually-owned venues like Band on the Wall to sell tickets directly to music fans and a Southport-based wholesaler and retailer called One1 Solutions that sells widescreen TVs operated by industry veterans who needed extra working capital. 

Atherton is also the largest single shareholder in Blackdog Ballroom- the Northern Quarter bar and pool hall off Oldham Street opened alongside seasoned bar operator Ross McKenzie (Ampersand, One Central Street) and Northern Quarter restaurant founder Jobe Ferguson.

“It’s been a great investment,” said Atherton, who argued that the original loan had been paid and that shareholders were in line for a dividend – although this could be delayed if the shareholders plan to open further Blackdog Ballroom outlets, which is something that has been discussed for other parts Manchester’s city centre.

“Some of Ross’s ideas seem a bit wacky but he’s a well-established operator and I’ve got to back his judgement,” said Atherton.

He added that investment was “a long game” and that he expected a sustained period of losses until investments eventually begin to pay for themselves.

“We will take a bath on a few – but the more you do the more you’ll discover what will work and what won’t.”