Dragons’ Den: Series 11, episode 9
Two investments this episode – although on very different terms...
This episode marked another reasonably successful one for entrepreneurs entering the Den, as two businesses managed to secure investment – although on very different terms.
Undoubtedly the happier of the two would have been Carrie Bates, who witnessed the rare spectacle of the Dragons outlining concrete business plans on air as they competed for a share of her teabag-style instant coffee product.
In contrast, curry sauce entrepreneurs Vinni and Bal Orjler were persuaded to accept what appeared a less than advantageous deal from Piers Linney after the senior Dragons once again shied away from entering the congested prepared foods market, with concerns over market viability.
Elsewhere, Christian and Caroline van Outester impressed with their established, successful ‘glamping’ business, but failed to secure investment having failed to appreciate the potentially disastrous implications of a key business decision.
Company: The Little Coffee Bag Company
Concept: Instant coffee in tea-style teabags
Investment sought: £100,000 for 25% equity
Investment received: £100,000 for 33.3% equity (joint investment from Peter Jones and Deborah Meaden)
Often, entrepreneurs spend the majority of their two-minute pitch to the Dragons trying to explain how a convoluted or obscure product works. This was not the case for Shropshire-based Carrie Bates, who had come up with the deceptively simple idea of putting instant coffee in tea-style bags; avoiding the spilled grounds and mess usually associated with making coffee.
Bates’ product was so simple and useful it was hard to grasp why nobody had done it before. The entrepreneur further piqued the Dragons’ interest with a clear plan to target high-end department stores and hotels; already having landed supply deals with Harvey Nichols and a number of luxury hotels across the UK, she had also been approached by a major distributor for exclusive import rights to the United Arab Emirates.
In a clear (but successful) effort to earn extra brownie points, Bates had even left a copy of Peter Jones’ Tycoon on the presentation table, saying she used it as inspiration for the business. It was a canny move by the entrepreneur, and a demonstration that even the simplest forms of flattery can sometimes work wonders in business.
The product and branding were clearly impressive, but the pitch ran into difficulties when Bates revealed a wholesale price point of 16p per sachet, a figure she acknowledged was a ‘bit steep’ for some hotels. Further consternation was caused when the facially impressive Harvey Nichols deal she had alluded to turned out to amount to just £400 in sales for the business, with no further supply contract forthcoming – this seemed to substantiate the Dragons’ concerns about the size of the potential market. Bates’ pitch received a major blow when Kelly Hoppen and Deborah Meaden pulled out at this point, both unconvinced of the product’s potential to deliver major returns.
Despite the issues around pricing and market size, The Coffee Bag Company’s proposition was just too good to resist for the remaining Dragons. All made Bates exactly the same offer – all of the money but for a third of her business. As there was nothing to choose between them financially, viewers were treated to a rare glimpse of the inner workings of a Dragon investment as the tycoons competed for the pitch by explaining their plans for the business.
Deborah Meaden revealed a clear plan to target the hotel market, branching out after establishing market dominance. Piers Linney played up his connections in the retail industry, citing a friendship with a board director at Marks and Spencer who could get Bates’ product stocked in stores. Peter Jones then outlined a rather different plan to target pre-packaged hamper companies, with rapid international expansion to follow.
Carrie Bates clearly favoured the senior Dragons’ credentials, and managed to get two for the price of one, when Jones and Meaden agreed to co-invest and take the business forward.
Start-up business lesson: Sometimes a product has such clear potential that investors will overlook practical difficulties – so don’t be disheartened if you experience a slow start
Vinni and Bal Orjler
Company: Vinni and Bal’s Rustic Indian
Concept: Fresh pre-packaged traditional Indian cooking sauces
Investment sought: £50,000 for 15% equity
Investment received: £50,000 for 30% equity (Piers Linney)
- As an entrepreneur, when you hit upon a fresh approach to an existing sector it can be tempting to think that nobody has seen the opportunity before. However, as Vinni and Bal Orjler discovered, often the reason major players in an industry are not doing something is not because they haven’t thought of the idea, but because it doesn’t make business sense.
- The husband-and-wife team thought they had hit upon a revolutionary approach with their traditional, gluten-free, fresh Indian cooking sauces; while canned and dehydrated curry sauces are rife in major supermarkets, fresh versions are virtually non-existent. The pair hoped to emulate the success of fresh Italian sauces with their range, which all had a short shelf life of just 12 weeks.
- The nervous entrepreneurs impressed the Dragons when they detailed an enormously successful PR campaign around their sauces, having been mentioned in The Guardian, The Observer, The Mail on Sunday and Masterchef despite a shoestring budget.
- The excellent exposure, however, had failed to translate into actual sales, and retail veteran Peter Jones said he knew why; giants of the prepared food industry had so far stayed away from fresh Indian sauces because of their short shelf life in supermarkets and consequent high level of wastage.
- The other Dragons agreed. All were of the opinion that the pair would need substantially more than £50,000 to make such an ambitious project work, and it looked like the pitch was destined to fail when all but Piers Linney ruled out a deal.
- Piers Linney did like the product, however, and made them an offer – but it is fair to say that it wasn’t the most tempting the Den has ever seen. He asked for 30% of the business, double what they were originally seeking, and 5% more than the maximum they planned to give away. This also came with his own admission that the prepared food sector was one the cloud computing entrepreneur had little knowledge of or connections in, and hence the value he could add to the business was limited.
- After a hurried conference, the Orjlers felt they had little choice but to accept, and walked away with £50,000 to grow their business but having given away a substantial amount of equity.
Start-up business lesson: When you think you’ve found a gap in the market, it’s essential to find out the real reason why someone else isn’t doing it
Christian and Caroline van Outester
Company: Jolly Days
Concept: Year-round luxury camping
Investment sought: £200,000 for 20% equity
Investment received: None
- Unusually for a business seeking Dragons’ Den investment, husband-and-wife team Christian and Caroline van Outester’s ‘glamping’ business was already enjoying significant success. The four-year old operation, which offers customers a luxury camping experience with all the mod cons, had been in profit since day one and was the recipient of numerous industry awards.
- Already with a large and successful site near York, the pair planned to use the £200,000 investment alongside a £300,000 bank loan to open a new permanent site in a Yorkshire woodland, with 50 private ‘woodland suites’ helping to generate an anticipated £4m profit.
- The figures were all there, and the pitch looked to be heading for success until a seemingly innocuous question from Duncan Bannatyne undermined it entirely.
- Bannatyne had asked whether they had actually bought the land which they were planning to open a new site on – the duo admitted they had not actually bought the land but simply secured it on a 15-year lease.
- This fact was enough to overshadow all the positive elements of the pitch. As Peter Jones pointed out, any potential buyer of the business would have to contend with the looming challenge of having to re-negotiate the lease, with the very real possibility that they could lose the land entirely. This meant the business’ value would rapidly plummet as the 15-year mark approached.
- This was the fatal blow for the pair’s hopes, and they entered the lift having secured good wishes but no investment.
Start-up business lesson: It’s vital to have the long term in mind when writing a business plan – experienced investors will quickly see the flaws in a business plan focused on short-term goals