Dragons’ Den: Series 13, Episode 13
There were four offers this week for one ambitious baked bean entrepreneur, while fashion photography, self tanning and air drumming failed to impress
There was only one investment in the Den this week for a young entrepreneur boldly taking on one of Britain’s most established food brands, while a self tan start-up failed to shine.
Elsewhere, Dragons and entrepreneurs locked horns over valuations and the size of potential markets. Read on to find out the key business lessons you can take away from this week’s pitches in the Den…
Company: uSHoot Studios
Concept: Fashion product photography
Investment sought:£50,000 in exchange for 20% equity
Investment received: None
First into the den this week was professional singer Dan Luxon with uShoot Studios: “A product photography business that doesn’t need a photographer”.
In an exuberant and confident pitch Luxon explained that his business makes StyleShoots technology – a fashion photography machine that automatically takes high quality images – available to small and medium-sized companies that can’t afford to buy their own machine.
Despite the pitch from the “loud” and “excitable” entrepreneur, Peter Jones was left confused: “What is the business?” and Luxon replied by laying out his plans for a “string of photographic studios where [small businesses] could come in and use the machinery on a frequent basis”.
Jenkins pointed out a better bet would be “two or three of these: Manchester, Birmingham, London – within regional centres, people would drive in”. Fashion entrepreneur Suleyman agreed that there was “a big demand” for the service but that he’d just buy his own.
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Luxon explained that Suleyman wasn’t his target market: “I’m aiming for the other 98% who are trading and have to trade online now”. But it wasn’t enough to win over the Dragon who left the deal: “You’ve become a big PR for the machine, but you haven’t got a business. On that basis, I can’t invest in you”.
Jones couldn’t see eBay resellers paying to come and use his service when they could opt for the more convenient and cost effective option of doing it themselves and also declined to make an offer. While Sarah Willingham could also see the need for the service among small businesses she didn’t think Luxon had “solved that need”, and Deborah Meaden couldn’t get on board with the business without “exclusive rights to the technology”.
This just left e-commerce entrepreneur Jenkins, who again could see the value of a good photography service for small internet retailers, but didn’t think Luxman was “offering anything exceptional”.
Start-up business lesson: If you haven’t got exclusive rights to the technology your business relies on, potential investors are unlikely to be reassured about the security of their investment.
Company: Mason’s Beans
Concept: Fresh baked beans
Investment sought:£50,000 for 10% equity
Investment received: £50,000 for 20% (Nick Jenkins)
Next to face the Dragons was an ambitious young entrepreneur looking to do battle in the supermarkets with one of Britain’s most established food brands: Heinz Baked Beans.
Ben Mason set the scene by telling the story of Henry Heinz, who 129 years ago had marched in Fortnum & Mason in London with a suitcase of baked beans and sold the lot. Mason revealed that seven years ago he’d done the same with a suitcase of his own hand cooked, one-pot baked bean meals and also sold the lot.
After a taste test of the beans proved he had a worthy product, it was time to get down to business. Jones was doubtful that his “vision of £10m in sales” in three years time would come to fruition upon hearing that his revenue so far had been £25,000 in seven months.
Willingham struggled to see where the product would fit in the shops, placing them next to the ready made sandwiches and “little pots of cous cous”, rather than alongside the “premium ready meals” envisioned by their creator. On those grounds she was the first to exit the deal.
At £3.95 per pot, Suleyman was concerned that supermarkets would want to retail them for £2.99 to “keep in line with their other products but Mason assured the Dragon that there were “huge cost savings to be made at scale where” he could bring production costs down. He also explained that he wasn’t trying to be a direct competitor to Heinz, “but from a story point of view” it gives him something to push against.
Suleyman was suitably placated to make an offer: all the money but for 40%. Meaden was impressed by the “branding and positioning” and matched Suleyman’s offer. Jenkins thought that the business was “going to need further dilution at some point because it’s going to require further fundraising”, but undercut his fellow Dragons with an offer of all the money for 25%.
Jones didn’t think Mason’s Beans was going to be a successful business but was very impressed by the entrepreneur himself: “You’re an entrepreneur of the future. So I’m investing in you. I’m going to offer you all of the money for 35%”.
Mason didn’t feel comfortable giving away more than 20% of the business and aksed them to reduce their equity. Meaden, Suleyman and Jones all agreed to make offers that would see their shares drop to 25% dependent on certain targets being met. But Jenkins undercut the others again: “all the money for 20%; on the grounds that they’ll spend a few thousand writing up the papers for the buy back agreement”.
This offer from the Moonpig founder was enough to win the bean entrepreneur over and he accepted the deal.
Start-up business lesson: When pitching for investment, strong branding and a narrative that consumers can buy into can help convince investors that your company has legs.
Company: Summer Solutions
Concept: Spray tan tent
Investment sought:£60,000 for 20% equity
Investment received: None
Heavy sunbed user Lisa Young could see the damage they caused and discovered spray tanning as an alternative way to tan. In 2008 she launched Summer Solutions, but now with a new inflatable, patented tanning tent it was time to secure investment from the Dragons and take on the global £100m self tan market.
It was a shaky start for Young, with nerves getting the better of her at several crucial moments during the pitch. She claimed that her tanning tent was “the first spray tan cubicle of its kind and that it currently had a patent in the UK, USA and Europe”.
Jenkins dropped out of the deal very early on in the proceedings: “My heart always sinks when people say ‘I want your money to go global’ and you haven’t even done Warrington yet […] You’re clearly very capable, but it is small, it is niche, so I’m out”.
Meaden admitted she “doesn’t like tanning products an awful lot” but after her experience using spray tans on Strictly Come Dancing she could see the need for the tent. However, she thought the entrepreneur was “loopy to have stopped conversations” over the patent when she was offered £100,000 for the product instead of the £500,000 she’d valued it at.
On those grounds, Meaden was next to leave the deal, followed by Suleyman and Jones, neither of whom were convinced the business would make money.
Willingham also liked the idea of the tent, but said the opportunity wasn’t big enough to “make it a better route to market” than selling the patent.
Start-up business lesson: Take care to provide a realistic valuation of your business, a significant overvaluation will lose investor confidence.
Yann Morvan and Richard Lee
Concept: Motion tracking drum kit
Investment sought:£75,000 for 5%
Investment received: None
It started out well for founders of Aerodrums; Yann Morvan and Richard Lee, with the Dragons noticeably impressed by a demonstration of their computer-based air drumming kit.
Using motion tracking technology and a high speed camera, Aerodrums replicates the noises of a drum by following the hand and foot movements of the user. The fully patented kit can be easily carried around, “set up in a few minutes”, and at £129 is significantly cheaper than a regular drum kit.
But for Suleyman it was all a gimmick: “I’m amazed you have the audacity to come here today and say this is worth £1.5m when you’ve turned over £100,000”. He became the first Dragon to opt out of investing.
Jones was more interested to find out how the duo could “get a deal away with a mainstream player”. After they pointed out the mass potential of the product within the videogame market, the Dragon made them an offer of all the money for 20%.
Willingham said the duo had created something that “almost looks like magic”, but decided that she wasn’t the right Dragon for the business.
After they were unable to provide an estimate for the number of drum players in the UK, Meaden admitted that she wasn’t convinced by the size of the market: “I genuinely have absolutely no idea. There’s a gaping hole that I’m really sorry you guys didn’t fill for me. I won’t be investing, I’m out”.
Jenkins revealed that he’d done “quite a bit of analysis of the market” as he’d recently started a music education software business. He thought they had an “incomplete management team and an incomplete set of skills”, but made them an offer of £37,500 for 20% of the business.
The duo then attempted to negotiate with Jones and Jenkins by asking them to half their offers to 10% each, but the Dragons were only prepared to go down to 15%. For Morvan and Lee it was too much of an increase on their initial offer of 5% equity and they rejected the deal.
“I think this is something you’re going to live to regret”, concluded a disappointed Jones.
Start-up business lesson: Being able to provide an up to date and reasonable estimate for the size of the potential market will help convince investors that your business is worth investing in. The Aerodrum founders’ decision to leave the Den empty-handed also serves as a lesson in shareholding and equity; you need to feel comfortable with the amount of equity you’re giving away.