Dragons’ Den: Series 11, episode 10
The Dragons’ hands stayed in their pockets this week, but valuable business lessons were dished out aplenty
This episode saw the second occasion this series in which the Dragons’ cash remained unspent, with no business managing to secure investment in the Den. It wasn’t for Duncan Bannatyne’s lack of trying, however – the Scottish entrepreneur was thwarted in two separate offers, being turned down on one occasion and failing to find a co-investor in another.
Despite the lack of investment, this episode provided a rich reserve of start-up business lessons. Caroline Grass’ tech business, in which e-commerce links are embedded in interactive videos, had market-leading technology behind it and clear potential – but the business’ yearly subscription-based revenue model proved to be the downfall of the pitch, as none of the Dragons were convinced of its viability.
Husband-and-wife team Roger and Leslie’s woollen duvet was another well-received product that was let down by a hole in the business plan, this time due to the entrepreneurs’ shaky grasp of the figures, whilst Phillipe de Foglier and Jessica Wong’s interactive toybox also won plaudits from the investors but was let down by a number of concerns about the business itself.
Concept: Mobile and web app adding monetised interactivity to video content
Investment sought: £100,000 for 10% equity
Investment received: None
Despite the explosion in smartphone use and the growth of the UK tech sector, purely digital businesses have been comparatively rare in the Den – perhaps due to physical products being more television-friendly. Karoline Gross’ start-up, billed as a ‘21st century replacement’ for the traditional shopping catalogue, was one of these rarely-seen businesses, and seemed at first to be a winning proposition.
As the young entrepreneur explained in a confident pitch, Smarter’s technology can add an extra layer of interactivity to video content, putting contextual buttons on videos that link to e-commerce webpages, generating sales for the business’ clients. The technology aspect clearly worked well, and the Dragons were impressed. Gross also revealed a smart business plan that would see the nascent company make money both from commissions on sales generated and licensing the technology to third parties.
So far, so good. But the pitch ran into difficulties when Gross revealed exactly how the revenue model would work in practice – clients would be charged £42,000 per year to license the technology with Smarter taking a further 50% commission on sales generated. This seemed enormously expensive to the Dragons. As Deborah Meaden pointed out, a brand could have similar technology built for them for a one-off fee, avoiding the ongoing costs of Smarter’s business model.
Credit must go to Gross, who displayed unshakeable confidence in her revenue model in the face of the Dragons’ scepticism. But this wasn’t enough to convince them, as all the Dragons turned down the opportunity to invest. After Gross entered the lift with no investment, the Dragons expressed deep regret that a promising entrepreneur with such a strong product was let down by something as simple but fundamental as her revenue model.
Start-up business lesson: If you are a business-to-business start-up, your proposition must make business sense to your clients as well as you – regardless of the strength of your product.
Phillipe de Foglier and Jessica Wong
Company: Roomii Toys
Concept: Multifunctional ride-on toybox with innovative design
Investment sought: £70,000 for 15% equity
Investment received: None
- This Manchester-based couple’s toybox – which can be dragged around on omni-directional castors and functions as a toy in itself – had strong echoes of one of the most famous pitches turned down in the Den, now widely-successful children’s luggage company Trunki.
- It remains to be seen whether Roomii will enjoy similar success, but they now have something else in common with Trunki as another pitch that has failed to gain investment on the show.
- Most of the Dragons were impressed with the product itself, which had won several design awards and looked appealingly and solidly built. This was not a view shared by Deborah Meaden, however, who bowed out after being unable to get to grips with the ‘spooky’ look of the product.
- The couple ran into more difficulty when it came to the figures. The business was revealed to be extremely early-stage and although they revealed tentative talks with John Lewis, the complete lack of confirmed orders or solid interest was a major sticking point.
- Despite this, Duncan Bannatyne clearly liked the product, and made the entrepreneurial pair a typically hard-line offer of £35,000 – half the money – for 20% of the business, meaning another Dragon would have to co-invest if the pair were to secure backing.
- None of the other Dragons felt able to make the same offer, however, so de Foglier and Wong will have to go it alone with Roomii.
Start-up business lesson: When pitching a product, make sure it is backed up by confirmed interest from customers or your investors’ interest will quickly wane
Roger and Leslie Payne
Concept: 100% natural wool duvets
Investment sought: £130,000 for 15% equity
Investment received: None
- In an ambitious pitch, another husband-and-wife team revealed an intention to ‘reinvent the duvet’, espousing the numerous benefits of their wool-based ‘Baavet’ in comparison to the ubiquitous feather and down varieties normally used, which included wool’s natural breathability and resistance to bacteria, amongst other benefits.
- It was another strong product, with good design and appealing branding. The Dragons were further impressed by the way the couple had grown the business, taking turnover from just £1,000 in the first year of trading to £120,000 two years later, with net profit of £27,000.
- However, the couple were confusing the Dragons with strangely flippant responses to serious questions. When asked what the £130,000 investment would be used for, Roger revealed it would be spent on new production machinery for the Baavets, which would cut down on waste and costs – but he was ‘not too sure’ how much they would actually save by doing this.
- Further problems arose around their £850,000 valuation of the business when Peter Jones asked whether they would walk away if they were given £750,000, to which the response was ‘probably’. They acknowledged that they had probably overvalued their business, and whilst their honesty was commendable, it was not exactly convincing the Dragons of their investment potential.
- Despite the shaky grasp of the figures they did receive an offer, but on less than appealing terms. A joint offer came from Peter Jones and Duncan Bannatyne for all the money – but for a vastly inflated 50% of the business.
- An entrepreneur turning down a Dragons’ offer is a rare occurrence in the pressure-cooker environment of the Den, but it happened here, as the couple decided 50% was too much equity to give away and entered the lift empty-handed.
Start-up business lesson: When seeking investment, make sure you can actually show how your backers’ money could benefit the business