Dragons’ Den: Series 12, episode 11
Food, camping and boat safety were the topic of discussion in this week’s Den with a win for Startups 100 company Flavourly...
This week's episode of Dragons' Den saw two food entrepreneurs battle for investment with a slick presentation from Startups 100-listed food subscription service Flavourly and a pitch from a ‘Granny' inspired marmalade business which demonstrated the power of branding.
Elsewhere in the Den, there was a shaky start for a camping business which ended in “disaster” and two plucky boating entrepreneurs had the investor panel debating whether to take a “punt” on investment.
Read on for our review of the pitches from episode 11 and what you, as a start-up entrepreneur, can learn from them…
Concept: Food box subscription service
Investment sought: £75,000 for 5%
Investment received: £75,000 for 20% (Peter Jones and Piers Linney)
With an emphasis on helping small independent businesses, Flavourly founder Ryan O’ Rorke immediately had the Dragons on side as he explained how his food subscription service enabled him to work with producers from across the UK to create packages with “exciting new fine foods” and “carefully created flavour combinations”. With just under 2,000 subscribers and projected turnover of £300,000, it was clear that O'Rorke's business had potential as he confidently asserted his plans to become the number one food and drink discovery platform. But was it a tasty business opportunity?
Piers Linney questioned how the food boxes could be changed to suit different taste preferences but O'Rorke quickly combatted the question by explaining that as a “growing start-up” it would be impossible to have a range of different boxes and said that the concept was something to be considered in the future.
Duncan Bannatyne was keen to find out more about O'Rorke's £1.5m valuation and felt it was a “little steep” but the company's healthy financials with £10,000 profit, £150,000 Angels' Den funding, and projected turnover of £900,000 for 2015 and £3.8m for 2016, soon quashed his doubts.
Despite concerns when O'Rorke revealed he had already given over 50% of his business away over two small seed raises, with Bannatyne worried the business could become a “ship with no captain”, it was O'Rorke's motivation and determination that eventually sealed the deal as he explained that he had only just started giving himself a salary after two years of working on the concept. With that Bannatyne made the first offer of £37,500 for 10% which was quickly followed by the same offer from Deborah Meaden.
Linney followed suit, saying Flavourly's success was “start-up textbook”, and made an offer of £37,500 for 10%. Hoppen was less impressed with the product, declaring herself out, despite saying she would “really like O' Rorke to work for her”. Although Peter Jones was very concerned about future dilution, he was won over by O'Rorke's passion in the business and made an offer of £75,000 for 20%.
After considering his options,it was clear that O'Rorke had two investors in mind and asked Jones and Piers if they would come in together in order to gain their digital expertise and access to contracts, to which the Dragon's accepted.
Start-up business lesson: A near perfect pitch, Flavourly secured investment not only because of its promising proposition but because the founder was highly investable. When raising finance, think about how you present yourself as an entrepreneur – show determination and drive to succeed.
NB: After the show, O'Rorke decided to reject Jones and Linney's investment offer. Find out why here.
Concept: Collapsible camping products
Investment sought: £150,000 for 15%
Investment received: None
A nervous pitch for David Fannin and Shaun Moore as they attempted to win investment for their new company Colapz which specialised in collapsible camping products for glampers, young professionals and “fashion conscious consumers that want style, quality and design”. Despite initial nerves, the product entrepreneurs gauged the attention of the Dragons' when they revealed that they had already achieved £1m in sales with net profit of £40,000 and gross profit of £150,000, coupled with “strong overseas interest”.
However, Colapz' pitch soon did just as its name suggests and collapsed during a tetchy exchange with Meaden which discovered all was not what it seemed. Fannin and Moore revealed the figures were actually those of their existing business SourceIt, a company which helps people turn their ideas into products and get them to market. More importantly, it was uncovered that Fannin and Moore didn't actually own the intellectual property for Collapz and needed to pay £280,000 to a former partner to get the IP back for the business.
The bombshell discovery quickly saw tensions rise in the Den as Meaden shared her frustrations with the founders and said it was “impossible to invest” because of the complex financial structure. Jones agreed and said that the business was “almost worthless” and he, Kelly Hoppen and Duncan Bannatyne refused to give backing.
Frustrations were also evident when the final dragon standing, Linney, criticised the entrepreneurs for not disclosing the information originally; “you've come in with an awkward structure and we shouldn't have had to dig to find out that information”. He also said the pitch could have gone differently had the business owners been honest from the outset.
“A complete disaster” of a pitch saw Linney also declare himself out of the equation.
Start-up business lesson: Complex financial structures make it difficult for investors – transparency and honesty are integral if you want to get investors on board.
Company: Granny Marmalade
Concept: Homemade children's marmalade range
Investment sought: £50,000 for 20%
Investment received: None
Female entrepreneurs Nikki Frith and Lindsey Oldroyd delivered a confident pitch with their range of handmade, award-winning marmalades lovingly named after their granny. Intended to evoke feelings of traditional values and warmth, Granny Marmalade seemed to be off to a good start but this started to slide as both Hoppen and Meaden felt there was a “massive disconnect” between the branding and the modern packaging. Hoppen even went so far as it say it looked like a “cheap chutney” and would not be willing to invest.
Bannatyne was inn agreement with Hoppen – not only did he dislike the branding but he was also not a fan of the taste “having tried several better tasting marmalades”. Meaden's gripes with the branding also saw her back out from investing while Linney felt unable to help the entrepreneurs target a market that “was big and very hard to differentiate”.
In contrast, Jones seemed to have much for faith in the marmalade entrepreneurs and said he loved the taste and thought it would do well regionally. However when it came to national success, Jones felt the business would fail as it looked like an “ASDA product” and was unconvinced by sales figures of 7,600 jars using Reggae Reggae sauce as an example of “getting it right” having sold 107,000 bottles in its first week.
Despite the Dragons' extensive advice on branding, on leaving the Den Frith and Oldroyd asserted that they would not let “the feedback affect them” and that they would not be changing their branding – yet the entrepreneurs have since changed the company name to Granny Cool.
Start-up business lesson: The product world is a competitive market especially when it comes to food and branding is key – your company name, packaging and values all need to work side by side in order to wow investors.
Concept: Boat valve maintenance device
Investment sought: £50,000 for 10% equity
Investment received: £50,000 for 20% equity (Deborah Meaden and Kelly Hoppen)
Father and son team John and Sam Ford delivered an interesting pitch with their innovative device, the Seabung, which acts a boat valve maintenance plug and enables boat owners to stop a leak if their sea cock, the equipment that stops that boat from sinking, fails. The Dragons' ears pricked when the Fords explained how they were in the process of attempting to get certification to get the device listed as a necessary part of safety equipment that every boat had to have.
Linney was first to question the entrepreneurs as he shared their passion for boating but he seemed sceptical as to how far the device would work in a real life situation. Confident answers and a high profit margin appeared to lessen Linney's concerns but Bannatyne was unimpressed and didn't see how the Seabung could be a watertight invention; “it's absolutely bonkers and I won't be investing”. Jones was far less sceptical of the product but felt the addressable market would be a difficult one to target and wouldn't invest as £50,000 “wouldn't scratch the surface”.
The prospect of the device becoming a legal piece of boat safety kit still had Meaden, Linney and Hoppen interested and although Meaden said it was a “punt” she felt she had to make an offer of half the money, £37,500, for 10% equity. Linney remained torn on investment but decided he was out as he couldn't decide whether the Seabung would be the next big invention.
Hoppen shared a similar attitude to Meaden and while she remained unsure as to whether the business would succeed, she also offered half the money for 10%. The Fords then attempted to negotiate Meaden and Hoppen's offers down to 15% but the female business moguls stuck to their guns and, following some deliberation, the father and son duo decided to accept.
Start-up business lesson: While Meaden and Hoppen did invest on a punt, in reality investors will want to be more assured and will want evidence that your business idea is likely to succeed. When pitching, you should be fully prepared to be able to respond to any doubts your prospective investors may have.