Dragons’ Den: Series 11, episode 7
The second half of series 11 kicked off with a Startups 100 company nailing the third most valuable deal ever in the Den
As the popular BBC series enters the second half of series 11, the drama shows no signs of abating – if the inaugural episode was anything to go by.
The first episode was one of highs and lows. Startups 100-listed festival tour operator Mainstage Travel took the headlines with a huge £100,000 investment from Piers Linney – the third most valuable deal ever concluded on the show. Young whizkid Oliver Murphy also walked away with a £50,000 investment from Kelly Hoppen after demonstrating his do-it-yourself kit for rescuing smartphones from water damage. And of course, it wouldn’t be Dragon’s Den without the customary smattering of bad pitches, which were once again delivered in abundance.
Rob Tominey and Aden Levin
Company: Mainstage Travel
Concept: Low-cost package holidays to major European music festivals
Investment sought: £100,000 for 10% equity
Investment received: £100,000 for 15% equity (Piers Linney)
As an established company with a fair degree of success already, Startups 100 winner Mainstage Travel impressed all the Dragons. Established in 2011, the travel company specialises in ‘once in a lifetime’ clubbing and festival holidays for the 18-21 market, claiming to offer them a cheaper deal than if tickets, flights and accommodation were booked individually.
As the pair explained to the Dragons in a no-nonsense pitch, the concept has proved wildly popular – Mainstage Travel took around 5,000 people on holiday across 2013, generating an estimated £247,000 turnover in the process. The Dragons were particularly impressed with the company’s 20% profit margin on these figures, significantly higher than the 10% generated by most other mainstream package holiday operators. Tominey and Levin revealed that Mainstage generated these generous profits through bulk deals on fixed-price elements such as ski passes and event tickets. The sole Dragon to turn down the chance to invest, Hoppen, did so at this point – claiming the business model was just too risky in the event of cancellations.
Often, entrepreneurs come unstuck when faced with the question of what the Dragons’ investment will actually be used for, but the pair revealed a clear plan for Mainstage which would see them run all-summer versions of their existing packages, in addition to a new ski holiday package.
The exciting proposition proved irresistible for the Dragons, and the Den saw a rare four-way tussle as Peter Jones, Duncan Bannatyne, Linney and Deborah Meaden all made offers. Bannatyne and Jones offered half the money each for a combined 25% of the business, whilst Meaden made the same offer on her own account. New dragon Linney saw his chance and sprung to life – undercutting the experienced Dragons with an offer of the whole £100,000 for just 15% equity.
Tominey and Levin accepted, and entered the lift having secured the major investment they were looking for. However, Meaden ruefully reflected that the pair were in a very strong bargaining position – and could have negotiated the Dragons down on the equity they were offering.
Start-up business lesson – If you have a great investment proposition, your backers will want it as much as you – don’t be afraid to negotiate when the offer comes
Concept: Do-it-yourself kits for reviving phones from water damage
Investment sought: £50,000 for 15% equity
Investment received: £50,000 for 25% equity (Kelly Hoppen)
- We live in the age of the smartphone, and as the devices approach ubiquity more and more are falling victim to accidental water damage. Young entrepreneur Oliver Murphy claimed that there is a post every minute on Twitter from someone bemoaning the loss of their phone after it fell into the toilet, in a pool, a lake or a puddle.
- Many dedicated phone repairers offer a water damage recovery service and there are various do-it-yourself solutions floating around on the Internet, but Murphy claimed to have developed the first solution targeted at consumers.
- It is a proposition with huge potential, and this was backed up by impressive figures – started on a budget of just £400 from his mum’s airing cupboard, the young entrepreneur had generated £20,000 turnover and an impressive £3,000 net profit from sales.
- The early-stage nature of the business nearly killed his pitch entirely. Piers Linney spoke for most of the Dragons when he remarked that since his idea was not protected, existing companies with much larger manufacturing capacity would quickly cotton on and undercut him. This was enough to see all but Kelly Hoppen refusing to invest.
- Hoppen did eventually invest, but reflected her caution by demanding a full quarter of Murphy’s business.
Start-up business lesson – The greatest idea in the world isn’t worth much if it’s not protected, so get your intellectual property protection in early
Company: Unique Automation
Concept: Automated bathtub control system that ‘remembers’ users’ preferences
Investment sought: £1m for 20% equity
Investment received: None
- Dragons’ Den producers decided to start this second instalment with a cautionary tale, showing what happens when an entrepreneur cannot back up his hubris with answers.
- Bulgarian entrepreneur Freddie Vasilev strutted into the Den with a pitch that made some American TV evangelicals seem almost muted by comparison. He declared his bathtub control system ‘revolutionary’ and asked for £1m investment.
- Faced with what they saw as a display of arrogance, the Dragons tore the pitch to pieces. First in the firing line was Vasilev’s claim that the system was completely unique – Peter Jones revealed he had an almost identical system already, with Hoppen claiming the concept was ‘ridiculous’.
- Next up was Vasilev’s claim that he was a ‘serial’ inventor. Bannatyne asked him what other inventions he had taken to market, and Vasilev’s inventions turned out to be fabrications.
- The final straw came when Bannatyne asked what the £1m was to be used for. Vasilev said he would use £300,000 on marketing, then revealed a plan to rent an office in the iconic Shard, one of the most expensive pieces of business real estate in London. Needless to say, no offer was forthcoming.
Start-up business lesson – Be realistic with your valuation and don’t try and wing it with half-truths – experienced investors will see right through you and tear your pitch to shreds