Dragons’ Den: Series 12, episode 10
This week saw success for an artisan ice cream start-up and mixed opinions over Startups 100 Mallzee, while it was sink or swim time for an anti-piracy entrepreneur...
An episode of twists and turns this week as an Asian-inspired ice cream start-up won backing from Deborah Meaden, a maritime entrepreneur created controversy in the Den and Startups 100-listed start-up Mallzee had Peter Jones in two minds, resulting in a surprise outcome.
The show also illustrated the importance of ‘pitch protocol' when it comes to attracting investment and the importance of actually watching the show and “understanding how it works”. Here we review the pitches from episode 10 and highlight the key lessons to take from them….
Company: Matrix RS Ltd
Concept: Anti-piracy device for sailors
Investment sought: £195,000 for 25% equity
Investment received: None
With piracy acts costing an estimated £6bn a year to the shipping industry, entrepreneur Michael Jay Scott believed he had come up with a solution to tackle piracy having spent six years and almost £250,000 developing an anti-piracy product. Having experienced piracy first hand when his boat was plundered and later sold for scrap, Scott intended to use the funding to take his device into production. The device connected to cameras and equipment on a ship and then transmitted data via satellite to a location on land. If a pirate attack was imminent, the technology would enable the person at the central desk to launch a drone which then emits a gas cloud to temporarily disable pirates for up to an hour, leaving time for a ship to get away.
A former Navy man, Duncan Bannatyne was initially intrigued by the proposition of an “affordable anti-piracy solution which could look out 24/7” but Piers Linney was less impressed and said that regardless of the technology, the responsibility lies in the hands of the person watching the footage – “what if they go to the toilet or nod off?!”. Scott maintained a resolve that, using similar principles to air traffic control by sending an alert if a person is absent, the technology would not be compromised.
More pressing concerns came to the effectiveness of the technology itself when Deborah Meaden, Peter Jones and Bannatyne pointed to potential flaws of identifying harmless holidaymakers. Jones also saw other issues with the technology and felt that it was “bit archaic” while Bannatyne remained unconvinced that the technology would save a ship from being taken. Kelly Hoppen had a bigger problem with Scott's “pitch protocol” and was concerned about his inability to engage with the investors. Scott then revealed that he didn't have a television and had never watched the show before apart from excerpts, much to Meaden and Hoppen's dismay.
Ultimately, Scott failed to rouse investor interest as it was felt that he wasn't “going to solve anything”. Meaden confirmed that it was not all plain sailing in her final comment that it “will not stop one act of piracy” and “you would be really difficult to work with”.
Start-up business lesson: When it comes to providing a “solution” to a problem, make sure you have a convincing argument and one that either improves upon or supports existing innovations. ‘Pitch protocol' is also a necessity – make it your priority to engage investors and get them on side.
Concept: Artisan ice creams and sorbets with flavours inspired by the Far East
Investment sought:£50,000 for 20% equity stake
Investment received: £50,000 for 30% equity (Deborah Meaden)
Yee Kwan Chan, a South Yorkshire-based entrepreneur entered the Den hoping to make an impact with her range of distinctive luxury ice creams with flavours including green tea, black sesame seed and lychee. With an impressive back story having already listed her products in Harvey Nichols, wholefoods markets and Chinese supermarkets and Korean restaurants, and with three distributors delivering to over 200 food service customers nationwide, Chan gave a confident pitch.
Although Bannatyne wasn't “100% sure about the taste of the product”, all of the Dragons were impressed especially when Chan revealed that the company had achieved turnover of £75,000, gross profit of £48,000, and loss of £2,000 – Meaden said it wasn't a bad start to “almost break even in your first year”. Good profit margins also helped to butter the investors up; Chan explained that it cost her 4p to make a tub but she sold it for £2.00.
While all in agreement that it was a great product, retail investor Peter Jones said that he couldn't back the company having tried and failed to scale previous Dragon alumni Kirsty Henshaw's ice cream sorbet business and and “with so much knowledge of the sector” he had to politely decline to make an offer. Bannatyne followed suit with claims that it was a “difficult market”, Linney's lack of market expertise also meant he was also out.
Hoppen was wary about investing but Chan then pleasantly surprised the interior designer by saying that she planned to match the £50,000 investment to which Hoppen made an offer of £50,000 for a 35% stake. Meaden was equally swayed and made an offer of £50,000 for a 30% stake. Chan was keen to see if the Dragons would partner together but Meaden made it clear that she wanted to be the sole investor.
When it came to it, Meaden's retail connections and reduced equity stake won out as Chan scooped up Meaden's offer of investment.
Start-up business lesson: Confidence is key when it comes to pitching your business; be clear on your figures, have an impressive back-story and show ambition – winning investment is as much about your company as it is about you as an entrepreneur.
Concept: Online recommendation fashion engine
Investment sought: £75,000 for 5% equity
Investment received: None – Peter Jones offer was rejected
The final investment in the Den came from Cally Russell, founder and CEO of Startups 100-listed Mallzee – the Tinder for fashion shopping. An app which looks to change the way people shop, Mallzee pulls together over 100 retailers into one app using technology which remembers your tastes and aggregates content to make recommendations. Russell explained that you can also share items with your your friends and peers to get their thoughts and” start conversations”. Russell demonstrated potential, sharing details that the start-up had already raised £465,000 and had been picked as one of Yahoo's top six ‘game changing' apps.
Russell intrigued the Dragons; Linney wanted to know more about the app's USP while Jones trialled the app for himself but noted a flaw in that you couldn't necessarily source an item straight away to which Russell responded that “he was working on it”. Despite giving confident answers, Meaden was unconvinced that clothes shopping via smartphone had a future and Hoppen was also wary stating that the excitement for many young people is in discovering new items at bricks and mortar stores. At that point Hoppen declared she was out and Meaden and Bannatyne also walked away from the deal as they didn't share Russell's vision for the app.Linney also felt he was unable to invest on the ground that the data from the app was “hit and miss” which left Jones to weigh up his options.
Jones confirmed that by investing in the business he would be taking a “punt” and that “you have to be ballsy to invest in Mallzee”. He then explained how he believed the app could have all the makings to become the next Twitter or Facebook and would be upset if it sold for £100m in a year or two and he wasn't part of it. On that comment, there was an unexpected development as Jones declared that he would be making an offer but wanted all the money for 20%; moving down to 15% once he had received his £75,000 investment back.
Although pleased to have received an offer, Russell seemed hesitant to accept and challenged the Dragon to see if there was any way he would bring down the equity stake, Jones stuck with his 20% offer and in a surprise move, Russell decided he wasn't willing to shake on the deal – “it was too big a chunk to give away”.
Start-up business lesson: Even when it comes to securing a multimillionaire Dragon, giving up equity can make the investment undesirable. When pitching for investment, know what you're willing to give away and stick to that.