Dragons’ Den: Series 11, episode 5
Not a single deal concluded in the 5th episode of the series, despite some promising pitches
A frustrating week for the show’s hopefuls as the Dragons failed to conclude a single deal, sending a host of disappointed entrepreneurs back into the lift. This didn’t mean this week’s pitches were entirely devoid of merit; two in particular stood out, with Tim Morgan’s extreme sports wheelchair and Nicky Cooper’s vitamin supplements brand earning praise but, sadly, no financial backing from the five investors.
Tim Morgan (honourable mention)
Company: The Mountain Tribe Company
Concept: Lever-driven ‘extreme sports wheelchair’ designed for mountain biking and other extreme sports
Investment sought: £100,000 for 5% of the business
Investment received: None
Started as a project during Morgan’s final year of university, the Cheshire-based entrepreneur’s patented lever-driven ‘mountain trike’ promised to revolutionise extreme sports for disabled people by offering the world’s first genuinely off-road wheelchair. The young inventor bolstered his pitch by introducing one of his own customers, who demonstrated the chair’s capabilities by speeding around the Den before giving it a glowing and clearly genuine seal of approval.
Morgan’s chair was built well and clearly had the potential to change lives, and his assurance that all three of the trike’s working components were patent-protected initially put the Dragons’ fears about intellectual property to rest. With £360,000 turnover in a year and a half, the fledgling company had recently broken even for the first time and had even attracted the British Army as a client, who had ordered five trikes to aid in the recovery of injured soldiers. Morgan responded well to fierce pressing about the company’s £2m valuation by producing an ambitious plan to crack the US market and the pitch looked on track to provoke a bidding war from the impressed Dragons.
Unfortunately for Morgan, two late but crucial revelations about his company proved fatal to his pitch. When pressed by Linney about the nature of his patents, Morgan admitted he had only obtained UK-wide protection due to budgetary constraints at university, leaving his trike vulnerable to knock-off imitations elsewhere. The entrepreneur then revealed that his company was built on a complex equity-share basis; virtually all of his employees had a stake in the business, with the 5% equity offered on an agreed dilution basis between them. Crucially, this meant that Morgan was unable to budge on the equity he could give away, limiting his ability to settle on a deal unless the Dragons agreed on his £2m business valuation.
Having tested Morgan’s resolve with a rebuffed offer for 15%, Meaden was the first to rule herself out. She was swiftly followed by the other four Dragons who all agreed with Jones’ observation that the valuation of the company, in light of its vulnerability to intellectual property theft outside the UK, was ‘bordering on delusional’.
Start-up business lesson: No matter how good your product is, if it’s not properly protected – your company value will always be limited
Nicky Cooper (honourable mention)
Company: Inner Me
Concept: Supplements brand aimed at health-conscious women
Investment sought: £100,000 for 20% equity
Investment received: None
- Nicky Cooper’s supplements brand aimed at health-conscious women initially seemed to represent an attractive investment for the Dragons; already stocked in Selfridges and Boots with US distribution deals on the horizon, the impressive entrepreneur had an ambitious plan to create the world’s first ‘superbrand’ for supplements.
- However, the pitch was undermined by the veteran investors’ experience of the notoriously congested health and beauty markets; Meaden said that by straddling the divide between a health supplement and a beauty product Inner Me would fail to make an impact in either sector, and Hoppen said the product’s credibility was undermined by not having a qualified nutritionist at the helm.
- Bannatyne was more blunt, admitting he ‘hated’ the beauty industry and wished to avoid it at all costs. Jones agreed with Meaden that the market wasn’t the right size, and Linney also ruled himself out after admitting he had no experience of the industry at all.
Start-up business lesson: Do your research and pitch your product to the right investors, if they’re not interested in your target market, no product – good or bad – will sway them