Dragons’ Den: Series 14, Episode 9
Read on to find out why one start-up business declined three offers of investment and how another secured the perfect deal…
This week in the Den, a duo already running a $70m turnover business failed to unlock investment for their security product, and a food-to-go business was unable to whet the Dragons’ appetites.
Meanwhile, a ticket comparison site and a personalised keepsake business both attracted three offers of investment, with the former rejecting all and the latter walking away with the perfect deal.
Read on for a round of the pitches and what you can learn from this instalment of Dragons’ Den…
Roger Willems and Phil Stratford
Concept: Portable personal security device
Investment sought: £80,000 for 15% equity
Investment received: None
First into the den were a waiter and forklift truck driver, Roger Willems and Phil Stratford, who claimed they had together built a multimillion pound transatlantic business. The duo were seeking £80,000 for a new portable personal security product they hoped would become their next big venture.
DoorJammer’s device claims to fit to the bottom of almost any door in the world, providing additional reinforcement and security from the inside. Claiming to have achieved sales in 25 countries, Stratford closed a short, competent pitch with the words: “Come and join us and we’ll scale the sales together”.
The Dragons were keen to test the product's effectiveness. Nick Jenkins was able to get through after a few well placed kicks which raised questions about the necessity of the DoorJammer. Peter Jones wanted to know why you wouldn’t just use a wooden door stopper instead. Stratford's response was that while, the DoorJammer does give way under considerable force, it is designed to stop silent entry – an argument which left Jones unconvinced.
However, Stratford impressed the Dragons when he revealed that the duo’s first business was now turning over $70m, netting $10m a year. “You make more money than me”, Jones proclaimed.
“What are you doing here?” asked Deborah Meaden, leading Willems to explain that they only had experience of the business-to-business route and would use the Dragons’ profile and consumer experience to help them bring the product to market. Meaden was concerned when she discovered that the pair had previously failed to get DoorJammer into a major retailer that she was already selling a product through and announced herself out of investing.
Suleyman shared Meaden's outlook and declared “You don’t need a Dragon, you don’t need my money, and for that reason I’m out”. Jenkins followed, saying he wasn’t “interested in supporting a little tiny sideline of […] your enormous business”.
Willingham also thought she had nothing to offer the pair, while Meaden didn’t think the business seemed “that important to them” because of their previous success.
This left Jones to shut the on the pair's hopes for investment: “I don’t buy into the product, I think it is totally over-engineered, but I don’t think it’s going to affect your lives […] I’m not going to invest in something I don’t think is necessary, so for that reason I’m out”.
Start-up business lesson: Though their previous success showed the duo had business chops, it also left the Dragons wondering why entrepreneurs with a $70m turnover business would need their help. Investors want to know their capital and support will make a big difference to your business and not just be a sideshow.
Angel finance may not be the right choice for your business and different funding options suit different needs.
Company: Go Gafoor Inc
Concept: Food-to-go business
Investment sought: £80,000 for 5% equity
Investment received: None
The Den’s next hopeful was Sunil Kavuri – a man with a career as an investment strategist and a model already behind him.
After sampling the world’s cuisines during a hiatus from working in the city, the entrepreneur was inspired to start Great Grub – a halal sandwich business seeking to bring the excitement of street food to the “boring” to-go food currently found in supermarkets.
Kavuri explained that he was currently trying to get the brand into Asda and Sainsbury’s and was in final talks with suppliers Compass and Sodexo for their football grounds and universities, as well as Easy Jet.
While Kavuri's background at the London School of Economics and a Masters at the University of Cambridge, as well as employment with a number of major banks and a “strong work ethic” and “drive”, impressed, Willingham wasn't entirely convinced. The restaurant entrepreneur was concerned that the halal nature of the product wasn’t obvious enough in the branding and emphasised how competitive and difficult the food market was to enter.
Meanwhile, Jenkins took query with the company name: “Go Gafoor Inc. – is that an American company?”. He was surprised to learn that Kavuri’s partner had chosen the name and neither had any idea that Inc. was specifically a US legal designation. “It’s slightly worrying, this is quite basic”, said the incredulous Dragon, “and you worked in three investment banks – God help us!”.
Valued at £1.5m, Jones was keen to talk figures: “Give me this year’s revenue”. After a year of trading, Kavuri claimed the company had turned over £112,000 and made £20,000 profit. It was clear his valuation was pure fantasy, with the entrepreneur unable to show any contracts that would support the figure.
Meaden was justifiably unimpressed: “You’ve given me nothing, absolutely nothing, I’m really sorry, I won’t go over it, I’m out”. Willingham followed: “You did spend a lot of time giving us the ‘big I am’, and actually all we really want to know is about the sandwiches and how you’re going to get it into the stores, why you love that and what’s great about them”.
Suleyman and Jenkins also declined to invest, with Jones once again left to deliver the final blow: “I think you need to go away, really think about the product […] and then look at how you can go and build a successful business”.
Start-up business lesson: Kavuri thought his impressive employment and education history, as well as demonstrating a strong work ethic, would be enough to secure investment. Unfortunately, in selling himself, he failed to sell his business, leaving the Dragons unable to get excited about his poorly branded product.
Kavuri's failed to express excitement in his product and explain why it would be a money spinner.
Sam Coley and Steve Pearce
Concept: Price comparison website
Investment sought: £75,000 for 5% equity
Investment received: None
The next entrepreneurs into the Den had a very specific idea of which Dragons they wanted help them scale their price comparison site: Jenkins and Willingham.
Sam Coley and Steve Pearce were seeking £75,000 for 5% equity in their event discovery and price comparison platform TickX, which allows consumers to compare ticket prices and book “in seconds” with no added fees. “Our aim is to become the Skyscanner or GoCompare of event ticketing”, said Pearce. He went on to explain that TickX's aim ios to disrupt the fragmented and crowded events industry by comparing prices from 20 leading ticket sellers and 50,000 events.
The service is free to use for the consumer and makes revenue by charging commission on the sales it generates for sellers.
Willingham, one of the pair’s preferred Dragons, was first to speak up: “I know a reasonable amount about the comparison market […] you’ve got a massive variety of prices for lots of similar products […] with tickets, if I want to go and see Adele, who governs the price of that ticket?”
Coley explained that the artist or promoter sets the price with one seller able to sell out the cheaper band of tickets. TickX enables the consumer to find those cheaper tickets elsewhere without having to go to each website individually. Jenkins: “I think it’s a very good idea, I’m slightly surprised it hasn’t been done so far”.
Willingham raised a challenge: “Why is the consumer going to come to you rather than anywhere else?” Pearce claimed they were in dialogue with Google regarding app and desktop promotion campaigns, but the Dragon was still concerned that they’d be in competition with “guys spending hundreds of millions of pounds […] I’m not saying it’s not possible, I’m just saying it’s immense”.
While the duo were able to say that one of “the biggest music brands in the world” was a major shareholder, he was unable to say the name of the company. Despite saying they could tell them the name off air, Jones was unimpressed: “I’m sorry, you know the deal, you come into the Den, everything is on air”. Upon inspecting the investors name on the forms, Jones proclaimed: “To be fair, I have no problem with The Ministry of Sound at all, I think they’re a good brand […] so that’s ticking a box for me” – so much for confidentiality!
Meaden decided she wouldn't become just “one of a list of great names you’ve got involved in the business” and became the first to drop out of the deal. Willingham was unable to allay her fears that it would be too difficult and expensive to “become the first port of call” and also declined to invest.
However, Jones was prepared to make an offer: half of the money for 10%, on the grounds that Jenkins would also come on board – he did. Suleyman was also keen to invest, offering all the money for 15%.
Pearce and Coley decided they couldn’t drop their valuation and rejected all three offers. The three Dragons weren't prepared to negotiate so Coley and Pearce left the Den empty-handed but, as they explain to Startups.co.uk here, they experience was one they would do all over again.
Start-up business lesson: Pearce and Coley entered the Den with a very specific idea of what they wanted to get out of it – when they didn’t get the offer they were looking for they weren’t afraid to walk away with nothing. Don’t be pressured into giving away more of your company than you think is fair.
Pearce and Coley were brave enough to stick to their guns and reject the Dragons' offer.
Rachel Day and Mary Whitaker
Company: Love Keep Create
Concept: Baby clothes keepsake company
Investment sought: £50,000 for 10% equity
Investment received: £50,000 for 10% equity
The final entrepreneurs to face the Dragons were former army captains Rachel Day and Mary Whitaker, who hoped their experiences at Sandhurst would prepare them to fight fire with fire in the Den.
Their company, Love Keep Create, enables consumers to send children's clothing that they don’t want anymore and the company turns these items into a keepsake by embroidering them with a name and date of birth or other special message. The pair revealed that in 2015 they turned over £190,068 from the production of 2,292 units, netting them £54,783 in profit. For 2016, they were projecting £323,000 turnover.
While the entrepreneurs admitted that their business was seasonal, with 44% of orders coming between September 1 and November 30, Day explained that they had “made relationships with a couple of local textile factories” that could “offer a number of hours per week to enable that rapid increase in orders”.
This seemed to put a number of the Dragons’ fears to rest – “It sounds like you’ve got that cracked” exclaimed Jenkins, “very good”. The entrepreneurs went on to explain that they’d previously done very little marketing, but had had great results with every past campaign: “We’ve worked it out that in terms of net profit, for a £500 spend on Facebook advertising we get about £2,000 net profit”, revealed Whitaker. “My reaction to that would be fill your boots and keep filling your boots until you meet resistance”, suggested Jenkins, “you wouldn’t need us at all”.
Suleyman: “I think you’ve got a great idea, my only reservation would be how far can you grow it?” – casting doubt on the scalability of the business.
However, Meaden was thoroughly impressed: “People always say to me what’s that moment in the Den, when you get a combination of clearly a good product with good people and you’re that. So I am going to make you an offer, and following those words it would be very rude of me not to offer on the basis that you’ve asked”.
Jenkins added: “I think this is one of the best personalised products I’ve seen”, and matched his fellow Dragons offer. Willingham also matched the offer, boasting her experience with Facebook advertising as an added bonus with her involvement.
Jones also loved the business, but thought it was too niche for him to invest, while Suleyman admitted he was “torn” but thought it would take too much of his time to invest in the company.
With three offers on the table, Day and Whitaker decided to accept Meaden’s offer and celebrated a rate moment in the Den; getting the offer they had asked for.
Start-up business lesson: Day and Whitaker’s quietly confident performance outlined promising profitability and evidence of previous success. To top it off, the personal nature of their business warmed the Dragons’ hearts and secured them three offers on exactly their terms – a perfect pitch.
Love Keep Create impressed the Dragons with their seasonal sales strategy in the run up to Christmas. Find out how to deal with seasonal sales here.