The Monday Interview: Jon Moulton

Jon Moulton, the venture capitalist who will probably have "he nearly bought Rover" as his epitaph, is feeling a little bemused. When I meet him, his firm, Alchemy Partners, had just placed a prominent advertisement in the financial press stating it is still looking for deals despite the fallout from the terrorist attacks in America. "Alchemy Partners remains open for investment", it proclaimed. "Our investment committee is not paralysed."

"I've had two responses so far," he says. "One phone call at 6.15am and one abusive fax from an anonymous sender. The person sent the advert back with a message scrawled across it saying 'deeply insensitive advert' etc etc. We could have written a much more insensitive one than that. I thought it was quite measured."

Mr Moulton, who is 51 in a fortnight's time, seems to attract these kinds of responses. Indeed, following his failed attempt to buy Rover Cars last year he still gets letters from dissatisfied Rover customers.

He is speaking in his surprisingly small office in a quiet street in London's Covent Garden and talks in rapid gunfire fashion. He has a spare, rather austere look, accentuated by small, unrimmed glasses. And it was this, no doubt, that helped newspaper headline writers describe him as "the unacceptable face of capitalism" when it looked like thousands of jobs would go if his bid to buy Rover Cars were to succeed. It is not something he loses sleep over. "The pros were that it put our name out globally. The cons were that it killed the deal flow while we were looking at it."

He is dressed casually in an open-necked shirt and oatmeal jumper bearing the name Goldsmiths, the jewellery business Alchemy acquired a couple of years ago. "I would possibly have worn a suit had I known a photographer was coming," he says with his trademark sarcasm. We are here to discuss the impact of the US attacks on the venture capital market and he says his office is quiet.

"It's certainly the worst environment I've seen," he says. "Nobody is comfortable doing a deal at the moment because prices are changing so rapidly. Buyers don't know what to pay. Sellers don't know what to take. And everyone finds it extremely difficult to forecast how their business will be doing over the next few weeks, let alone a year or two.

"The only deals that are being done are where there's a bankruptcy, a financially-distressed seller, or where deals are already well advanced. The banks don't know what to do in this market. So they are doing nothing. The one thing that does kick them into action is payroll difficulties. We are currently looking at no fewer than three public companies at the moment where we believe they have problems covering their September payroll."

Mr Moulton says the terrorist attacks may have surprising impacts. "Many manufacturing companies will be having a side-effect which will be quite painful – pension fund pressure. The worst effect is in old industries. Take a hypothetical company like a shoe manufacturer in the UK. It probably had 10,000 employees 20 years ago, it would probably have a few hundred now. Inevitably if the pension fund starts being under-funded it gets very frightening. Even if the final salary scheme ended years ago you could end up with huge contribution rates and very few people working to support it."

He says he finds the current volatility difficult. "It is much easier to invest in a steadily declining environment than the current one. A distressed seller is one thing. But an uncertain one is probably not a seller at all." But he does find it stimulating. "Oh, I enjoy it. It's harder and we tend to prosper in hard times. I'm actually at my worst when prices are going up and up and up. I don't know how to deal with it."

He claims Alchemy's 30-odd investments are stable. However, he admits some of the Meridien Hotels, bought in conjunction with Guy Hands of Nomura earlier this year, have been hit hard. Interestingly the two live opposite each other in Sevenoaks, Kent with Mr Hands' property said to be particularly large. "There are some things, apart from Guy Hands' house, that I can see from the front of mine, but not many," he jokes.

What is he looking at right now? "Ooh, we've got a couple of things on the go but nothing I can tell you about." He has been linked with a takeover of Royal Doulton, the struggling china company which would represent a form of homecoming for the Stoke-on-Trent born financier. That interest is likely to cool in the current market and his pursuit of Beeson Gregory, the stockbroker, also appears to be at an end.

Of course venture capital firms face problems themselves in markets like these. It is hard to raise cash and nigh-on impossible to sell out of existing investments. He says Alchemy has no funding problems but admits that selling out of current investments is tough. "We will probably exit five or six small to medium deals whereas we could have done four or five big ones and half a dozen small ones as well. We've invested about £750m and got about £300m of that back for investors [with 30 plus companies still in the portfolio]. That's not bad. But what I'd like to see is a few big exits so we can show a much stronger record. That's going to have to wait for a better market, hopefully next year."

He then cracks a couple of jokes and says the sense of humour around the office is one of the things that makes him look forward to coming in to work . "If you spend a bit of time in here you'd realise that there are a lot of people here who Kenneth Williams would have got on well with (Carry on Camping is his favourite film)."

Where does his drive come from? He says it's not a legacy of childhood illnesses (he suffered TB, sinus problems, then later amoebic dysentery and aplastic anaemia.) And it is not the money. "The money ceased to be a motivator some time ago." Where next? Having walked out of Schroder Ventures and Apax Partners he says he has no plans to jack it in. "I can't envisage it. And my wife would be horrified. A moderate amount of contact seems to be the basis for a long and stable marriage."