Ajaz Ahmed: unafraid to cut losses on ugly babies

This article first appeared in the Financial Times - 08/05/2015

The biggest threat to angel investors is "ugly baby syndrome", warns Ajaz Ahmed. "Parents have an ugly baby but they love it because it is theirs. You invest in something and you think it is great when others can see it's awful. It is like The X Factor. People who can't sing are up there and all the family is backstage telling team they can sing. They have a vested interest. It is the same with investing."

Mr Ahmed became a millionaire at 36 when Dixons sold Freeserve, the internet service provider he founded, to France Telecom in 2001. He was too young to retire and was deluged with business offers. He invested in several companies in sectors he knew nothing about, and soon realised he had also handed over his money without receiving any control over the business.

"I was an innocent bystander. I could not affect the outcome. I learnt an awful lot from losing money in those companies. It makes a man of you. Ninety per cent of businesses are crap."
He also backs the mantra "fail faster", where entrepreneurs believe if things are not going well, you give up and start again.

"People are more willing to take a risk when you are looking at a loss. But if you have lost £50,000 you will lose another £50,000. Pull out."

Mr Ahmed, from Huddersfield, now backs a smaller number of businesses. He is still involved in an Asian restaurant chain, Abduls, he set up more than a decade ago with a school friend.

He backs Quba, a digital marketing agency; Browzar, a web browser that promises privacy; and Legal 365. The last absorbs most of his time and provides simple, fixed-cost legal services in a fast changing market.

He said angels such as himself were vital to help exciting businesses grow. "Venture capitalists do not have any venture. They just want safe bets."