Dragons’ Den: Series 14, Episode 2

Success for a former singer who had "the key and the secret" to unlocking investment, while a self-assured foodie entrepreneur's pitch got the chop...

The Dragons were back on our screens this week hearing out pitches from four businesses each looking for a cash injection to help scale their companies.

Ranging from personalised maps to healthy eating, pitches from two of the cash-hungry entrepreneurs served up lessons in how NOT to seek out angel investment – namely make sure you understand key legal documentation and aren’t wholly unrealistic – while two emotional pitches successfully saw the investors part with their money.

Whether you’re looking to raise angel finance or just want some tips on what makes a business an attractive investment proposition, we’ve summed up the business lessons from each pitch to help you…

Marco Hajikyp

Company: Professional Gains
Concept: Diet meal delivery company bring pre-prepared high-protein meals to your door
Investment sought: £125,000 for 5% equity
Investment received: None

Self-assured entrepreneur Marco Hajikyp entered the Den on the premise that he would be able to make his a business a “success”: “I’m hard-working and I have suffered to get where I am today, I’ve slept in my car, I’ve gone without a wash for four days because I was so busy and didn’t have anywhere to stay.”

The business that Hajikyp had suffered for? “Tailor made nutrition” business Pro-Gains, a food businesses delivering weekly pre-prepared high-protein, healthy meals with over 420 meal choices to choose from.

Hajikyp started trading in August 2015 and had already achieved £250,000 turnover with a kitchen able to handle almost 20,000 units and in Hajikyp’s opinion he felt the dragons’ investing in his business was a “no-brainer”. However, Hajikyp’s view wasn’t shared by the Dragons who quickly unpicked his pitch.

Deborah Meaden wanted to know whether the Pro-Gains name was trademarked and Hajikyp then dealt the blow that his trademark was being disputed by Maxi-Muscle which has a product of the same name. On closer inspection of the documents, it became clear that the business hadn’t actually been trademarked – rather the application had been accepted and was pending.

There was then a question as to Hajikyp’s business acumen as he came clean to Meaden that he hadn’t actually reviwed the trademark document and had left it to this dad (his accountant) to read the document. Jones then questioned Hajikyp’s business valuation and didn’t understand how the company could be worth £2.5m. Much to the disbelief of the investor panel, Hajikyp admitted that he felt the company was actually worth £1m today but would be worth £2.5m “on the basis of progression of the business.”

Meaden: “So if you think the company is worth £1m today that means you should be changing your equity ask to 12.5%. Are you going to change your ask?”

Hajikyp replied with a firm “No”  which was met with laughter from Sarah Willingham and an alarmed response:”Have you ever watched anyone come in to the Den before and say ‘my business is worth half of what I’m asking you to invest in’?” but Hajikyp was again quick to retort “Have you ever met someone who’s got that ambitions that he wants to be free from life and be a billionaire?’ – a comment which left the panel dumbfounded for all the wrong reasons.

While Meaden noted that Hajikyp’s story of going from living in his car to creating a £250,000 turnover business was “admirable”, she felt he didn’t understand the mechanics of business and she inevitably withdrew from investing: “It’s not good enough to say that you don’t know that you have a trademark, it’s not good enough to say that your value is half the value you’ve asked us so I’m really sorry but I won’t be investing.”

Suleyman, Willingham, Jenkins, and Jones all shared Meaden’s concerns and declared themselves out of investing while Jones left Hajikyp with some parting words of wisdom:

“I know what it’s like to sleep on the floor. I spent eight months of my life in a warehouse and I didn’t have any warm water. You do have something, you do have a business that has turned over a quarter of a million revenue. However you’re coming across as frankly ridiculous […] with your statements about your aspirations and your dreams when it’s not backed up with business sense.”

While Haikyp’s time in the Den hadn’t proved to be a recipe for success, he remained defiant and on leaving the Den asserted “I think they [the investors] feared me and my dominance.”

NB: On leaving the Den, Hajikyp’s trademark application was rejected and he’s since given the company a new name – Professional Gains.

Start-up business lesson: Hajikyp had valued his business with a £2.5m price tag on his assessment of its future potential rather than its current worth. His pitch also came unstuck on trademark licencing and his overly-ambitious attitude rubbed investors up the wrong way. This guide has some sure-fire tips to make sure you pitch your business successfully.

Danielle Barnet and David Holmes

Company: LightLead
Concept: High-end unique analogue optical audio cable
Investment sought:£70,000 for 20% equity
Investment received: £70,000 for 35% equity (Suleyman)

Showbiz entrepreneurs Danielle Barnet, singer of Urban Cookie Collective’s ’90’s classic The Key, The Secret, and band engineer David Holmes, entered the Den to a guitar performance and were quickly off to a ‘rocking’ start with their pitch for fibre-optic guitar lead business LightLead.

The lead, made from high-end optical cable, negates all the typical problems with copper leads such as radio interference while producing good quality sound.

The duo explained that the lead had enjoyed “rave reviews from everyone including Mike Chapman, and Coldplay producer Rick Simpson” with Simpson having used the lead to produce the latest Coldplay album. The pitch brought out the showman in Suleyman who attempted to have a play on the guitar and initially seemed impressed by the pair, telling them that Mike Chapman was a personal friend.

However, Jones seemed less convinced and questioned the business’ potential to generate repeat sales: “If this lead lasts a lifetime, then you’re not going to get any repeat business – have you thought about that?”

Meaden was more interested to know about how the market had reacted to the product: “Are the big tour operators and cable companies aware of you?” Barnet explained that they had generated expressions of interest from some of the high-end tech companies but weren’t able to get anywehre because they only have two working prototypes so couldn’t risk giving these away.

This discovery led Sarah Willingham confused: “I’m trying to work out if this is a great idea or a great business – there’s a massive difference.” and Nick Jenkins shared Willingham’s confusion as he couldn’t understand why they wouldn’t have prioritised making more leads and “getting them into the hands of some of the top guitarists in the world”.

Jenkins then made an early exit from the deal and Willingham followed suit on the grounds that she wasn’t convinced by the product’s popularity  – “If Coldplay have used it they should be putting in lots of orders because they’ve been so impressed. But that hasn’t happened has it?”

Next up was Meaden and, while she felt the pair did have “something”, she declined to invest due to her lack of industry knowledge and contacts. Jones then announced he was out as he didn’t see the product’s potential, leaving Suleyman as the only remaining dragon.

However it appeared Barnet and Holmes ‘rock and roll’ approach had won over Suleyman: “You’ve got so much energy and enthusiasm. I will give you the £70,000 for 35% of the business.” Without any hesitation, Barnet and Holmes immediately accepted the offer leaving Barnet overwhelmed with emotion; “Bless Touker for giving us a chance, because that’s all that we need – a chance”

Start-up business lesson: As Willingham asserted, there’s a huge difference between a great idea and a great business. When pitching to investors, your job is to prove your business can generate sales and has the ability to scale. While Suleyman saw potential in LightLead, Barnet and Holmes could have had more investor interest if they had been able to close deals with big names in the space. Read our guides on how to close deals here.

David Overton

Company: SplashMaps
Concept: Fabric, wearable maps
Investment sought: £60,000 for 15%
Investment received: None

Former innovations director of Ordnance Survey, Hampshire entrepreneur David Overton knows a thing or two about maps and was looking to make a splash in the Den with his washable, wearable maps that you “can stick in your pocket, wear it as a scarf, hold it while running” and so on.

One year into launch, the company had generated £35,000 and Overton said he was confident that “with the right dragon on board we can reach our target of £1.8m turnover in year three”. But the Dragons didn’t share Overton’s enthusiasm.

Jones failed to understand the point of the product: “What is this? I get that it’s a map but what do I do with it? You wouldn’t really wear it as a scarf would you?!’ Willingham echoed Jones’ view and said she felt she would look ridiculous wearing the map.

With an extensive background in fabrics, Suleyman wanted to know how much the maps cost to produce and the materials used. Overton said it cost them £4 to produce and he sold the larger, personalised maps at a price point of £28.99. Suleyman pulled a face and wasn’t convinced about the worth of the fabric.

Competition was the focus for Jenkins who interrogated Overton on why he would look to take on Ordnance Survey and, after Overton revealed the Ordance Survey had tried to launch it and decided not to go with it, Jenkins asserted “there’s a clue there!”.

In quick succession, the Dragons’ opted out of investing for the following reasons:

  • Valuation – “To say you’ve generated £35,000 in one year, that’s not terrific.” (Meaden)
  • Market – “There’s lots of opportunity for digital printing but I believe what you’re doing is very niche.” (Suleyman)
  • Product potential – “I don’t really get that you’d want a map printed on fabric.” (Willingham
  • Competitors – “Ordnance Survey are the go-to people for maps, I’m out.” (Jenkins)

Jones then sealed Overton’s fate when he announced he was out- “I don’t see how you’re going to make a lot of money” – leaving Overton to exit the Den with his head in his hands.

Start-up business lesson: Overton’s inability to secure investment ultimately came down to the fact that there wasn’t evidence to support demand for the product. Too often, businesses shy away from market research and don’t spend time evaluating the viability of a business idea. Read our guides to market research here.

Andrew Doris

Company: DAD Machining
Concept: Man hole cover lifting key kit
Investment sought: £40,000 in return for 25%
Investment received: £40,000 in return for 35% (Meaden)

Having “hit rock bottom” 10 years ago after his business venture failed, Andrew Doris came to the Den with the intention to secure an investor who would help him take his business to the new level. The business in question being DAD Machining which engineers universal man hole cover lifting key kits to fit the millions of man hole covers across the UK.

Doris outlined that he had sold just under 10,000 kits in three years, alongside his full-time job, and has already sold online with Screwfix having sold 1,800 units via the tool retailer to date.

Meaden was keen to get to grips with the figures and Doris said he had achieved £41,000 turnover in the first year with £35,000 gross profit, £53,000 turnover in year two with gross profit of £43,000, and £61,000 in year three with gross profit of £50,000 and net profit of £37,000.

Yet it became clear that the numbers didn’t add up as Doris then revealed that it cost him £14.50 to manufacture the kits to which Suleyman questioned: “How are you getting those margins then?” Doris became flustered and admitted he had left the financials to an accountant and didn’t think they were correct; “It was not my intention to bring false figures.”

But for Jenkins the damage had been done: “You had plenty of time to check your figures with your accountant! That’s just blown it for me, I can’t invest so I’m out.”

Meaden was still interested to find out more and dug a little deeper into Doris’ back story. An emotional Doris then shared his former business misfortunes; “I first encountered this product 18 years ago so I quit my job and had equity in the house so borrowed heavily and I lost an absolute fortune. When I was down on my luck, my brother stepped in and gave me a job and then three years ago my brother helped me do this again.”

Doris explained that he had now learnt from his previous mistakes and changed the materials he used and the cost pricing to make the kit much more affordable with a price tag of £34.99 as opposed to the original £225.

While Doris appeared to have made somewhat of a pitch recovery, he then told Meaden that his patent had expired which left Meaden “very concerned” but Meaden would go on to give Doris a lifeline: “You’re nowhere in terms of your sales, I’d like to think that there was a lot further to go.  I’m concerned that you’re not necessarily the right person to take this business forward […] and I’m concerned that the patent has lapsed but I am going to make you an offer based on me finding you a business partner that would work with you to run the business – £40,000 for 35%.”

While Willingham didn’t want to compete with Meaden on an offer, Jones was equally impressed by Doris’ “brilliant” product and made an offer for the full £40,000 for 40% or the option to split it with Meaden if she wanted to at 17.5%.

Suleyman then laid out his cards and said he wanted come in with a dragon at 17.5% but Jones and Suleyman’s offers were in vain as Meaden declared she “wasn’t up for sharing”. Suleyman followed up by saying he wouldn’t be investing – leaving Doris to decide between Meadne and Jones.

After a moment of reflection, Doris chose to accept Meaden’s offer; with it gaining her industry knowledge and contacts.

Start-up business lesson: Doris won over Meaden on the back of a strong product and scope of market opportunity yet his failure to get to grips with company finances was a major sticking point for many of the investor panel. Check out our Business Finance Zone for advice on key small business finance questions.

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