Richard Farleigh: from 'backward' child to top investor

Richard Farleigh's rags to riches story "takes some beating", says Topaz Amoore in The Daily Telegraph.

The Australian business angel is the latest multi-millionaire to join the panel of Dragons' Den, the TV series in which business hopefuls try to persuade investors to back their idea.

Farleigh's father was a violent alcoholic and itinerant labourer who dragged his wife and 11 children around Australia in a pick-up truck, searching for work as a sheep shearer. Farleigh was barely two when all the children were taken into care and sent to foster homes.

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Having been diagnosed as backward' at the age of five, Farleigh went on to excel at maths and chess, won a scholarship to read economics at university and graduated with a first-class degree. He is now worth more than £121m.

Richard Farleigh: the road to riches

Farleigh's professional career got off to a flying start. He joined Bankers Trust Australia at 23 and ascended the ranks as a trader. He made a name for himself designing trading models and earned his employers an estimated $70m.

In 1992, he moved to Bermuda with his first wife and baby son, after being headhunted to run a hedge fund. Within three years, aged 34, he had made enough to retire to Monaco.

While in Bermuda, his interest in chess led to a friendship with grand master David Norwood, says Danny Fortson in The Daily Deal. It wasn't long before Farleigh was spending a lot of time in the UK with Norwood, looking at technology spinouts - commercial applications of promising research - from Oxford University.

They set up an advisory business, IndexIT, to fund these spinouts and sold it a year later to Beeson Gregory for £20m. Norwood now runs intellectual property investment group IP2IPO and has exclusive first rights to invest in technology spinouts with various universities and colleges in Britain.

He remains, to an extent, Farleigh's "eyes and ears" here, says Fortson, and has helped Farleigh to become a very rich man. The Chilli Newsletter says he is one of the "most successful private investors in the world", with an average return of 20%. The 50-strong list of firms he has invested in "reads like the Who's Who of the UK tech sector" and includes Clearspeed, Amino Tech, and Wolfson Micro.

Richard Farleigh: surviving the 'tech wreck'

Farleigh was not immune to the post-2000 tech wreck'. He sensed the market was overheating and wound down his investments, but exiting private companies wasn't as easy and he lost a £100m paper fortune.

But Farleigh doesn't make all of his bets on tech, says Forston. He has stakes in everything from airlines to medical equipment. In 1999, against the advice of so-called experts, he even put £2m into the renovation of the old French Embassy mansion in London's Portman Square, which was then opened as a private members' club, Home House. It has been a success, attracting over 2,500 members, and was recently sold for a healthy profit.

But Farleigh has also made his fair share of mistakes, pumping £1m into a mining venture in Sierra Leone that left him with 180kg of uncut, unheated and potentially worthless sapphires, which still sit in a US bank vault.

These days, Farleigh, 45, divides his time 50:50 between work and pleasure, says Amoore. He has a new partner, two more children and plays a lot of tennis and chess he represented Monaco in the chess Olympics in 2002. This work/life balance, he says, is just right.

Richard Farleigh: four rules for picking a winner

Farleigh's approach is laid-back rather than gladiatorial, but he has "no compunction about speaking out", says Danny Fortson in The Daily Deal. As a business angel (one who invests in promising start-ups at the earliest stages), he takes a very dim view of his venture capital counterparts (the institutional investors who come in later with greater resources and often push the angels out) and doesn't suffer fools gladly.

While believing background work on firms is essential, there is no substitute for "face-to-face due diligence' over a beer", he tells Topaz Amoore in The Daily Telegraph. "You know in the first five minutes if it is a waste of time," he says. As a business angel, you can't be an expert in every field; if management "believe in what they're doing, and they're capable people, it's unlikely they're wasting their time."

As for Farleigh, "He's the kind of guy that drops a million quid, and if something goes wrong, he doesn't bat an eye," says David Norwood.

Farleigh's philosophy of investing is expressed at length in his book, Taming the Lion, but he has four main rules. He likes firms that are best in their field, are unique, have promising research ventures, or are clearly undervalued. He also looks for firms that are unlikely to face stiff competition and have a good management team.

It is picking winners, rather than getting rich, that appears to give Farleigh his kicks. The yachts and Ferraris have been sold they were "gluttonous" and, in any case, barely used, he says. "It sounds corny, but when you get to the point when you can buy a lot of things, the need to do so disappears. Poverty of possession, I think it's called."