Dragons’ Den: Series 12, episode 8
How the threat of an Apple lawsuit failed to dissuade Bannatyne and the pitch that saw Jones and Meaden accept previous business failings
This week on Dragons’ Den a part time actor failed to draw any investment with his caricatures, while young inventor Rajan Jerath secured a £75,000 investment from Duncan Bannatyne for his iGlove – despite claims from Peter Jones that Apple could sue them out of existence.
Elsewhere a mother and daughter duo received a co-investment from Jones and Deborah Meaden to relaunch their 23-year-old children’s rainwear business, Baggers Originals.
Company: Charlie’s Cartoons
Concept: Bespoke, hand-drawn caricatures
Investment sought: £40,000 for 20% equity
Investment received: None
Trained actor Charlie Anderson was first in the spotlight with a clear passion for his product, but one the Dragons regrettably did not share.
After silently unveiling ‘personalised cartoon portraits’ of all the Dragons, Anderson took centre stage and launched into his pitch with breathless exuberance. Anderson and his team of three cartoonists, trained in the house style, use information and photographs to create personalised caricatures of friends or relatives. In four years he claimed he’d achieved a turnover in excess of £200,000 from selling 1,200 units.
Deborah Meaden was keen to get down details. The actor explained the company also offered cheaper and more simplistic digital prints, but the £140 hand drawn caricatures accounted for 90% of its sales.
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Admitting she’d never liked caricatures, Kelly Hoppen concluded the product was too niche and she could never see it as a big business – a sentiment most of the Dragons seemed to share.
However, Anderson was impervious, and with one final push for the investment claimed that under one art director you could have five artists, producing seven cartoons a week, equating to 35 cartoons a week and producing £300,000 turnover a year. Upon being asked by Piers Linney for his five-year plan, the entrepreneur speculated that by taking the business internationally he could achieve £1.5m turnover.
Meaden was sceptical and first to drop out, signing off with: “you’re very endearing but you drive me mad”.
In response to Linney asking “what if I don’t like it?” Anderson claimed that 95% of his customers are happy at the draught stage. But even that wasn’t enough to convince the trained lawyer who believed the remaining 5% would kill the business.
Duncan Bannatyne thought it would be too labour intensive to maintain, and Hoppen – though impressed by his enthusiasm – just couldn’t see there being a big enough market for it to scale up.
This just left Jones, who initially appeared to take genuine offence at his portrait. He admitted he admired Anderson for juggling an acting career and a business but in the end the product wasn’t for him.
Start-up business lesson: Remember the delivery of your pitch and creating a connection is as important as the content. Take your time, relax and focus on conveying the essential information concisely and clearly.
Concept: Touchscreen gloves for smartphones
Investment sought: £75,000 for 20% equity
Investment received: £75,000 for 40% equity dropping to 30% when targets met
Despite almost coming un-stuck on a potentially fatal trademark issue, Bannatyne was suitably impressed with Rajan Jerath’s quietly confident pitch to make him an offer.
In stark contrast to his theatrical predecessor, Jerath’s delivery was understated and effective. The young entrepreneur remained calm and collected as he explained the history of the company and demonstrated the gloves’ touchscreen capabilities, before rattling off some impressive sales statistics. After starting in 2009 the business sold 15,000 units in the first year, and by the third sold 80,000 achieving a gross profit of £60,000 with a net profit of £45,000. He went on to say the name had a registered trademark in the UK and a patent pending for the technology.
Linney was first to voice his concerns. To his credit, Jerath described in detail how the gloves use a unique 7% silver composition to allow heat transfer to the screen, allowing the tips to stay tonal, where competitors are forced to use different colours. He admitted there are cheaper alternatives but where it has the edge is in name, packaging and quality.
As if he hadn’t impressed enough the precocious businessman revealed a second product in the range – a Bluetooth glove with a microphone in the pinky and a speaker in the thumb. Hoppen volunteered to test the product and during a somewhat awkward demonstration was astonished to find herself in conversation with Jerath, who had stepped out of the den, through the glove.
Despite the novelty factor Hoppen wasn’t convinced the product had a target market. But the ever polite Jerath thanked her for the question and casually explained that House of Fraser – who had previously stocked the product – thought it would be good for ladies pushing prams, people who didn’t want to advertise their expensive phone to potential muggers or even runners and cyclists.
Seemingly satisfied with this response, Meaden asked whether it was just a seasonal product. He conceded that yes they were generally a stocking filler but claimed he’d also sold 4,000 to someone in Australia.
With the Dragons quietly impressed it seemed he was headed for victory, until telecommunications expert Jones piped up with what looked like a fatal concern. He claimed the trademark on his name was meaningless, with Apple’s 20-year use of the prefix “I” they could stop him with “one lawyer’s letter”. However, Bannatyne was quick to intervene, rebuffing Jones’ claim and personally looking over the documents detailing the terms of the trademark and patent.
Jones was the first to drop out on those grounds, followed by Hoppen, who though very impressed with his pitch and product, was not willing to take the risk of a lawsuit. Meaden again was impressed, but also concerned over future complications arising from the name. Linney was next though with a different tack; citing the possibility of competitors making small changes to the technology and undermining the business.
Bannatyne described Jerath as “a super entrepreneur” and “exactly what the country needs” before – to the other Dragons gob smacked disbelief – making him an offer for the full £75,000 but for 40% equity.
Jerath looked equally surprised and tentatively suggested he could go down to 30% when the business hits its targets. Bannatyne considered and asked what his targets were. He claimed in three years he’s estimating to have achieved £200,000 in gross profit and £130,000 in net profit. The Scottish businessman seemed pleased with this and confirmed the offer with a brisk handshake and a cool, “no problem”.
Start-up business lesson: Don’t be afraid to negotiate for a better deal on your investment. As long as it’s reasonable, an investor may well agree.
Angela McLean and Jessica McCarthy
Company: Baggers Originals
Concept: Children’s’ Rainwear with an attached bag
Investment sought: £100,000 for 25% equity
Investment received: £50,000 each from Deborah Meaden and Peter Jones for 30% shared equity.
Mother and Daughter duo Angela McLean and Jessica McCarthy entered the den hoping two particular Dragons would team up and help them relaunch their 23-year-old family business. Thanks to a solid pitch, and some impressive statistics they got exactly what they wanted.
Perhaps in an attempt to disarm the ever fierce panel, the entrepreneurs walked on hand in hand with children (and siblings) Josh and Camilla, who modeled the titular product.
The pair went on to explain the fraught history of Baggers originals – begun in the early 1990s with a pair of waterproof trousers made by McLean for her daughter, the business grew too big too quickly and was forced to cease trading. The product – a range of colourful rainwear with an attached pocket to carry the garments when wet and muddy – is copyrighted and the name carried a trademark. They claimed to have sold 300 units to customers and small retailers in Ireland and had secured a trial order with high street retailer Monsoon.
After a flawless pitch, the kids were back in the lift and it was time to get down to business. Linney was curious about the company’s previous life. McLean claimed they achieved a £1.2m turnover in two years, and even Disneyland was interested, but admitted her lack of business experience and cashflow problems proved her undoing. She was keen to add that she’d learnt some valuable lessons from the experience. McCarthy followed with the excellent point that children who wore the clothes back then are now having their own children so there is already a brand awareness.
Hoppen asked if there are any competitors, they said there were but none that have the bag attached. Meaden quizzed them on costs and discovered they were made in China for £6.20 and sold for £24.99 and that they are the first branded product in Monsoon in 40 years. Jones moved the conversation onto the business’ financial affairs and was very impressed when they revealed they had £30,000 worth of stock, £10,000 in the bank and a £100,000 investment from two entrepreneurs in Newcastle who own 13% of the business each.
Bannatyne was the first with any doubts, wondering why they chose the Dragons’ Den instead of the original investors. He subsequently bowed out on the grounds that he didn’t feel he could offer the business anything. Hoppen, with design credentials, followed suggesting it just wasn’t quite exciting enough for her.
Jones was clearly very keen but concerned about the number of similar and cheaper products available. But upon likening the product to a successful range of high quality kids backpacks that he and Meaden had an investment in, hinted at a possible co-investment opportunity.
Meaden jumped on this. She offered £50,000 for 15% equity. Jones said he had been hoping for 20% but eventually agreed to match Meaden’s offer. Linney said he would definitely match their offers but had to admit that with their experience, his peers could do a lot more for the business.
The reserved mother and daughter duo revealed that the pairing was exactly what they’d wanted and without need for further discussion or negotiation wholeheartedly agreed.
Start-up business lesson: A previous business failure does not make you a failure. Use what you’ve learnt to avoid the same mistakes and come back stronger.