Dragons’ Den: Series 13, Episode 6
While a husband and wife team secured investment from their dream Dragon Peter Jones, another's lack of basic business terms saw them come unstuck
Recalling the Den’s most famous alumni Levi Roots, there was success for cooking sauce entrepreneurs and husband and wife duo Ben Ansah and Sue Youn this week, while a young entrepreneur from Manchester bounced back from a dramatic dizzy spell to secure investment for her range of super fruit toiletries for children.
The importance of knowing your financials was highlighted when a Liverpool-based couple and a multi millionaire tech entrepreneur both came unstuck over misunderstandings with important figures.
Read on to find out more about how this week’s hopeful entrepreneurs fared in the Den, with lessons in how intelligent branding and a carefully considered business plan can make all the difference when it comes to securing investment…
Company: Good Bubble
Concept: Super fruit toiletries for children
Investment sought: £60,000 for 15% equity
Investment received: £60,000 for 40% (Meaden)
After plenty of summers spent “screwing on bottle tops” on the production line of her parents soap and shampoo factory, Amy Wordsworth decided it was time to stand on her “own two feet” and launch her unique range of children’s super fruit toiletries.
The young entrepreneur started the business after research led her to discover there were “increasing concerns about the safety of ingredients in personal care products”.
The pitch was confident and to the point, selling the toiletries “real fruit extracts” and “98% natural ingredients”, Wordsworth also revealed the range was listed with Ocado and had “a high level of interest from overseas”.
Mum of four Sarah Willingham said that there was “a big need for this in her house”, but was curious about whether the product was suitable for children with eczema. The entrepreneur explained that “it’s not been clinically tested, it’s been dermatologically tested”. Ultimately though, the Dragon thought that £60,000 wouldn’t be enough to compete with “the big boys” in the international market and became the first to drop out.
Deborah Meaden raised serious concerns about the branding, asking: “How do I know quickly and easily how it’s good for me?”. The family holiday entrepreneur explained that you shouldn’t have to “commit too long” to reading good branding: “it should shout at you”.
Nick Jenkins was uncertain why the entrepreneur wanted to use the finance for international expansion before she’d made strong progress in the UK. He advised her to “choose one thing and do it well” before dropping out. Touker Suleyman followed on the grounds that it was “too small to invest in”.
A moment of drama in the Den then unfolded as Wordsworth became faint and had to take a moment to sit down and recover.
It seemed the pressure of the Den had become too much, but the determined entrepreneur soldiered on – and after agreeing with Meaden that the branding was something they “could change”, received an offer of all the money for 40% of the business. With Jones not seeing potential in the business, Wordsworth decided she “didn’t want to walk away without an investment” and accepted Meaden’s offer.
Start-up business lesson: Branding isn’t just about aesthetics; make sure it prominently displays the strengths of your business and conveys your USP succinctly.
Tony and Jaimie Smith
Company: City Tuk Tuks
Concept: A tuk tuk taxi and tour service in Liverpool
Investment sought: £65,000 for 20% equity
Investment received: None
It started off promisingly for husband and wife team Tony and Jaimie, who had decided to bring tuk tuks to their home city after their son exclaimed: “wouldn’t these be great in Liverpool” during a family holiday to Beijing.
The 100% electric tuk tuk operation – which offers tours in the day time and shuttle services at night – aimed to capitalise on Albert Docks five million yearly visitors. The mood was lifted by a short ride round the studio, before Jones’ question about revenue was met with blank stares.
It quickly became apparent that neither understood the term, until Meaden offered sales as an alternative – to which Smith’s only response was that they’d made “in the region of about £8,000” in the last five months. Jones was seriously concerned that they didn’t “understand the financial side of the business at all”, and the duo were forced to bring in their advocate, and general manager, Linda Collins.
However, the situation didn’t improve much as it took several miscalculations and miscommunications before Collins was able to explain the correct price of running one tuk tuk for a year as £36,000, with an estimate of each producing £40,000.
Suleyman was keen to get past financials and put himself in the mind of a tourist, asking: “I’ve arrived in Liverpool, how would I find you?”. The team’s 880 Facebook followers and 1,000 Twitter followers failed to impress.
Jenkins was the first to drop out on the basis that they’re “essentially a taxi business that is unable to pick up people from the street”. Meaden followed, concluding that the business was “uninvestable”. Willingham said it “would be a nice business for you and your family”, but was “too seasonal” as an investment opportunity. Jones claimed that “if you’re out at night you’re far more likely to book a taxi” and said he couldn’t invest.
Suleyman said he’d been “on a little dream” during the pitch and had even thought about whether it could be “the next Uber” – but all of a sudden “woke up” and saw its restrictions, forcing the Smiths to leave without investment.
Start-up business lesson: If you’re going to start a business and pitch to investors make sure you understand all the correct terms or your investors could quickly lose faith in your professionalism.
Concept: Cloud-based care system
Investment sought: £300,000 for 10% equity
Investment received: None
Having built and exited several businesses – including a FTSE 250 company – it’s safe to say that multimillionaire Steve Purdham has probably done his fair share of pitching.
Flanked by his 84-year-old mother Iris – who “can be very fierce” – Purdham entered the Den seeking £300,000 for a 10% stake in his business, 3rings. Using a plug connected to the kettle, or any appliance, the system sends a message through the cloud to any internet enabled device when the kettle is switched on to assure family members their elderly relative is up and about.
Willingham asked Iris if it had “ever not worked” – to which she replied: “it’s always worked”, recounting a time she’d woken up and been unable to move, and her son had known there was something wrong.
The Dragons dug down into the entrepreneur’s background and were impressed by his history building and selling technology companies. Putting the spotlight on tech giant Jones, Meaden said: “there’s an investor in here who I think is a natural investor for you”, before she added, “If he’s not interested, I’m not interested.”
However, Jones didn’t take the bait, which left Jenkins to step in and quiz Purdham on some confusing investment figures. After it transpired that he’d claimed more of the funding was cash than it was, Jenkins slammed the former FTSE 250 CEO for using “weasel words”.
With faith in Purdham duly shaken, Suleyman raised another concern about the product’s lack of a patent: “any smart kid could pitch into us, and within 48 hours, they’ve made something similar”. He concluded that it’s not a business he “could add value to” and declined to make an offer. Willingham agreed and bowed out with: “it’s just not me”.
Jenkins followed suit, claiming he “certainly couldn’t invest in it at a pre-money valuation of £3m”.
This just left Jones, considered his most natural investor. The Dragon congratulated Purdham on doing “the job he came in to do” but flagged up a major problem with the service: “this hasn’t helped you with the problem that mum’s not ok… you need a first line of response, an immediate call to action. Your product doesn’t provide that”.
For that reason he dropped out, leaving the disappointed multimillionaire to tell his waiting mother that it went “not very well” – “But hey”, he added, “we tried”.
Start-up business lesson: Honesty and clarity are vital when explaining important financials. Even if they don’t catch you out at the pitch stage, business relationships could be soured further down the line.
Ben Ansah and Sue Youn
Concept: Korean cooking sauces
Investment sought: £50,000 for 20% equity
Investment received: £50,000 for 33.3% shared equity
Up next it was time for another husband and wife team to try their luck in the Den with a range of Korean cooking sauces. Vying for the attention of Jones, in light of his involvement with one of the Den’s most famous success stories, Levi Root’s Reggae Reggae sauce, the couple also hoped to impress serial restaurant entrepreneur Willingham.
Claiming to be the UK’s “first Korean cooking range”, Yogiyo takes its name from a Korean expression used to get a waiter’s attention. A hugely successful taste test put the pair on a good footing, especially with Willingham who congratulated them on a “great pitch and great food”.
The Dragon was astounded to learn they could turnover £600 a day from their streetfood van, and there were practically pound signs in her eyes as she said: “this has got a restaurant concept in it”.
All was going well until their biggest hope Jones uncovered a potential flaw in the business – they didn’t secure the dot com domain name. Things got worse as the duo were forced to reveal that Yogiyo.com actually belonged to a “pizza delivery service”.
Suleyman was keen to know where his £50,000 would go and quizzed the entrepreneurs on what the investment would be used for. They explained that it would be used to get the product into supermarkets and to team up with the manufacturers who make the ingredients. Should they achieve that, they added, “the potential for the brand is absolutely huge”.
Having “lived this for years of his life”, Jones hit the pair with some harsh truths: “publicly I know how easy it looks, but I know the reality, and it’s going to be incredibly tough”.
Meaden said she thought that as they grow, their “margins are going to be really, really squeezed”, and became the fist to drop out. Suleyman echoed his statement to the last hopefuls and dropped out on the basis that other Dragons would be better at adding value to the business.
Despite remaining relatively quiet throughout the pitch, Jenkins had decided that “it was a punt, but a reasonably priced punt” and made a surprise offer of £25,000 for 10%.
Having claimed that she “can’t lose this restaurant thing”, Willingham improved on Jenkins deal with an offer of all the money for 25% of the business. It seemed Jones was about to become the third Dragon to drop out when he said it was “too early”, before a turnaround saw him offer all the money for 40% of the company.
After a brief discussion, the husband and wife team returned to Jones with an offer of 33.3%, saying they thought it “would be a really positive way to begin a relationship”.
His reply: “there are times when you need to stick hard and be a Dragon, and there are times when you need to do the right thing… I would be more than happy for us to be equal partners”.
They agreed the deal to a round of applause but left an embittered Willingham, as Jones saw them out of the Den with a cry of “Yogiyo!”.
Start-up business lesson: When choosing a company name and developing a brand, ensure you do your research on competitors and secure the relevant domain names from the off.