Dragons’ Den: Series 13, episode 1
With the Den open for business once more, we recap on a pitch that didn't run out of steam and a business with "the most ridiculous valuation ever"...
This week saw the return of Dragons' Den with three new faces joining the investor panel; Moonpig founder Nick Jenkins, Hawes & Curtis' Touker Suleyman and restaurateur Sarah Willingham, alongside Peter Jones and Deborah Meaden.
With the new Dragons intended to “breath new fire” into the entrepreneurial BBC series, the episode highlighted the ups and downs of pitching for investment with an emotional presentation from a company deemed “unfit for investment”, alongside a pitch which an outraged Willingham dubbed “disrespectful”.
From yoga classes to steam cleaning, we've reviewed each of the pitches and provided key takeaway business lessons on what you should and should not do when asking for investment…
Concept: “Innovative” home appliances
Investment sought: £70,000 for 10% equity
Investment received: £70,000 for 25% equity (Meaden and Jenkins)
Ben Fridja got off to a promising start having outlined details for his company which wholesales, imports and retails innovative home appliances – his core products being a steam cleaning device and a low-cost juicer.
Having blown a kiss at Meaden and raised smiles in the Den, Fridja had initially worked the panel and Jenkins said the founder had created a “phenomonal product”. Yet Jenkins found it confusing that Fridja had two products instead of one; “why bother with the juicer?” and Jones agreed; being the first investor to declare himself ‘out' as he couldn't see “longevity”.
Fashion entrepreneur Suleyman was more concerned with the issue of patenting and pointed out that he could go to China, “find someone that makes steamers and in less than two weeks be in the steaming business” himself. Fridja was quick to respond and referred to GHD hair straighteners as an example of his plans to become a brand leader in a competitive marketplace. The argument was a convincing one with Touker making Fridja an offer £30,000 more than his original request in exchange for 30% equity.
Jenkins was also keen to take a piece of the pie and said that, as he felt he could help Fridja “become a a bigger brand”, he would make an offer of £70,000 for 20% equity – 10% more than the asking – to help get the product into certain retailers.
Meaden also promised retail contacts and offered half the money for 12.5% of the business which saw Jenkins change his offer to match Meaden's. This alliance appeared to be an attractive one for Fridja and, while he said it was a “tough call”, he chose to go with Jenkins and Meaden.
Start-up business lesson: Think big, have ambition and outline ways you could maximise and develop your business idea – you need to convince investors that they should back your business over the competition.
Company: Fit Britches
Investment sought: £75,000 for 5% equity
Investment received: None
Next up was an appearance from 2014 Startups 100 company Fit Britches, whose founder Farnaz Khan had created a range of slimming shapewear clinically proven to reduce the appearance of cellulite and “create a firmer waistline”.
All of the Dragons were in agreement that it was an impressive pitch as Khan detailed how she had started the company with “big knickers and clingfilm” and gone on to secure a range of celebrity clients including Khloe Kardashian and Jessie J.
Suleyman was the first to question Khan and he expressed concerns on the ability to patent the product – “you could go to retails exhibitions and buy shapewear all day long”. However it was Meaden's questioning that saw the pitch begin to unravel as Khan struggled to remember key financial details.
Meaden pressed her on her margin, revenues and profit for 2014 and an emotional Khan admitted she had a “brain freeze” which led Meaden to assert: “I don't think you know how to run a business” and Willingham decided she was out as it “was very heard to invest”.
Jenkins felt that a business partner, as aside from an investor, would help Khan but recognised that he wasn't in the position to invest as he couldn't help her “get into the retail side”. Jones echoed Jenkins thoughts and said that he was out on the grounda that it felt like Khan “was looking for a business mentor and not just an investor”.
Meaden followed suit and said she wouldn't be investing as Khan didn't get “the mechanics of business” and Touker confirmed that he too “wouldn't be investing”. Presenter Evan Davis declared the company had been deemed “unfit for investment”.
Start-up business lesson: Know your figures inside out and make sure you can demonstrate that you know the “mechanics of business”. While pitching for investment is stressful, don’t let the pressure get to you.
Concept: Property crowdfunding
Investment sought: £1m for 5% equity
Investment received: None
Dubbed the “most ridiculous valution ever in the Den” by Jones, Fraser Fearnhead was asking for £1m in return for 5% equity (valuing his company at £20m) for his property crowdfunding platform HouseCrowd which allows investors to club together to buy properties.
Fearnhead said that the platform was the “world’s first” and had raised £11m to date but, despite growth figures of 149% and 211% in its first two years of trading, Jones and Touker found the high valuation difficult to comprehend.
Responding to Touker's question as to how he reached the valuation, Fearnhead explained that he had spoken to venture capitalists who had given him the £20m valuation. Touker then asked “Why don't you take investment from them?” and Fearnhead revealed “It's an option and I'm considering it” – a response which produced a series of frowns from the panel. There was ever more dismay among the panel when Fearnhead revealed that the company had revenue of £375,000 and hadn't “made a profit yet”.
Meaden and Jenkins were the first to decline the opportunity to invest as they felt their reputation would be on the line if they backed the business; “the problem with property and investing in this way is that it’s extremely high risk”.
Willingham, however, was much more outspoken and said the pitch was “utterly disrespectful” and that Fearnhead had “wasted their time” by stating that the Dragons were just an option for investment. Jones was similarly “disappointed” and Touker concluded Fearnhead's time in the Den by declining to invest.
Start-up business lesson: Be realistic when valuing your company and think about what it’s worth today based on your revenue figures and profits. When it comes to making an impression with investors, make sure you get in their good books – think ego stroking!
Company: BeamBlock Yoga
Concept: Yoga apparatus and classes
Investment sought: £50,000 for 50%
Investment received: £50,000 for 50% (Jones and Suleyman)
The final pitch of the episode was from yoga instructor Thierry Giunta who was looking for investment for his “new way of doing yoga” with a step for better balance and precision – the “BeamBlock”. Giunta said he was on a “mission to get BeamBlocks in every yoga class across the country” and wanted to follow a business model of selling the blocks to gyms with a licence fee for Beamblock classes.
Despite coming across as a “great guy”, the Dragons questioned Giunta's business acumen. Meaden said she felt he “didn't have a clue about how business works” and Jones was keen to find out more about the market opportunity – figures and research that Giunta didn't know.
Claiming there was “not enough evidence for investment”, Jenkins said he was out and Meaden followed; “I haven't got the time you need so I'm not going to be investing”.
Yet Giunta's determination maintained the curiousity of the remaining Dragpms as he revealed that he had put £100,000 of his own money into the business and had become jobless and penniless in the process.
On a “punt”, Suleyman declared an offer of £25,000 for 25% equity if Giunta was willing to pivot the business to a retail model, selling the boxes in department stores with training videos, rather than pitching to the gym industry.
Having been “impressed by [Giunta's] determination”, Jones matched Suleyman's offer and Willingham also made an offer for £25,000 for 25% equity but only if the stake was to be shared with Jones as she didn't agree with the direction Suleyman wanted to take the business in.
Giunta chose to accept the offer from Jones and Suleyman and on leaving the Den emotionally declared”this is the beginning of my new life”.
Start-up business lesson: Market research and knowledge of your market opportunity is essential. Likewise, determination and passion should be abundant when pitching to investors as Giunta clearly demonstrates.
Find out more about the new Dragons here.