Dragons’ Den: Series 14, Episode 4
A marking tool for DIY was the only business to secure funding this week, while Deborah Meaden suffered through her “most frustrating ever pitch”…
Amongst the impressive range of products on display in the Den this week, only one had the potential to woo the Dragons, while a food business left a bad taste in the mouth after an extremely confusing pitch.
After her success with GripIt Fixings, Deborah Meaden was the only Dragon to make an investment in episode four by adding another tool business to her portfolio.
From dodgy branding to lack of longevity, read on for an account of what went down in the Den and what business lessons you can learn from this week’s pitches…
Concept: Eco friendly outdoor tap and shower for camping
Investment sought: £65,000 for 20% equity
Investment received: None
First to face the Dragons this week was Stuart Mason, who’d returned from his adopted home of Australia to try his luck in the Den with an eco friendly outdoor tap and shower for camping.
Mason claimed the pocket size silicon device could connect to any bottle to create a “flow controllable” tap or shower, with a litre bottle dispensing water over eight minutes and 30 seconds.
In 18 months of trading, SpaTap had hit turnover of £29,000 through the sale of more than 4,500 units at £14.95 in the UK and a wholesale value of between £4.50 to £8.50. The entrepreneur was also keen to point out its humanitarian and water saving applications, revealing the product had beaten 470 global entrants to take first prize in Standard Bank’s Water for Africa competition.
The Dragons seemed impressed with the product and Meaden – who made her first millions in British holiday parks – was first to ascertain its potential in the UK market asking what the 5.4 million camping families in Britain “currently do for water”.
“I’m just trying to understand the driver behind why you would buy this in the camping fraternity”, she said, pointing out that most campsites have running water and shower blocks “unless they’re completely wild”. She was left unimpressed by his suggestions of the sports and dog walking communities as possible markets: “I don’t want this to go wrong for you but you’re going to have to come up with something stronger than that”.
Nick Jenkins steered it back to the humanitarian angle but stressed that £4.00 was a lot for that environment: “You’d have to produce it at a price that was affordable in that market, which would mean your margin per item is tiny, which would mean it’s not going to be a huge business”.
Peter Jones had an even bigger concern: “Isn’t this going to pass on potential disease though?” – raising the possibility of shared taps outside latrines breeding cross-contamination in communities in the developing world.
Sarah Willingham thought it was a “really cool product”, seeing its potential for festivals, but worried it would be “too niche” for the consumer market. Alongside the sanitation issues raised by Jones, she was the first Dragon to exit the deal.
Meaden followed: “It’s quite a tight market, the camping market and you’re going to know really, really quickly if you’ve got something but I’m not convinced you have”.
Jones and Touker Suleyman were next to wash their hands of the deal, echoing Willingham’s points, leaving Jenkins as Mason’s only hope for investment.
However, he too was unable to put aside concerns about the potential spread of disease: “I hope you carry on with that and it doesn’t have any cross-contamination issues – I just can’t quite get past it and I’m afraid I can’t invest”.
Start-up business lesson: Although the Dragons clearly liked his idea, Mason did not have any evidence to disprove the enormous potential flaw of cross-contamination with his product, undermining what would have been it’s biggest selling point.
Concept: Franchise grill restaurant and range of sauces
Investment sought: £130,000 for 10% equity
Investment received: None
Next into the Den was an entrepreneur with a wholesale food business who knew exactly which Dragons were his best chance for investment: Jones and Willingham.
Faheem Badur, director of food product supplier Direct Wholesale and Investment Group, explained that in 2012 his business had got “a little bit adventurous” and launched a “fast casual restaurant concept” based around “flavours of the world”.
Peri’os, a chain of five franchised restaurants and one company owned, had also developed its own range of sauces, currently only available in restaurants but aiming to break into the retail sector. Last year the wholesale side turned over £1.5m and Badur aired his ambition of turning Peri’os into a global brand with the Dragons help.
Jenkins was confused: “We’ve got a business that is several businesses all meshed into one […] I’m still struggling to understand what I’m investing in. Am I investing in a restaurant supply business or am I investing in a restaurant chain?”
“You’re investing in both”, Badur explained.
Restaurant entrepreneur Willingham was keen to pick apart his franchise model: “I’m trying desperately hard to understand this. You opened a restaurant and somebody came along and said ‘Wow this is amazing I want to franchise it’”.
Badur’s explanation did nothing to unpick the confusing business model, exasperating Meaden: “I’m confused – would you just explain turnover, gross margin, overheads, net profit”.
Badur: “Turnover last year £1.5m, net profit £65,000”. But Meaden had to work extremely hard to get Badur to say he would produce £500,000 profit next year with his franchise.
Jones was not impressed with the menu: “I think this is something my kids could have put together. You’ve got about 12 products there, you’ve come up with the sauce and you’ve bottled it with a pretty average label. The most impressive thing is when you say you’ve turned over £1.5m I think that’s when everybody’s saying ‘Wow’. You’ve got us at that point.”
Jenkins didn’t understand the brand: “What does it mean? […] Brand relies on authenticity […] I just don’t really get the story, I don’t understand what this is.” Totally confused by the numbers and “mish-mash” branding, he became the first to exit the deal.
“This has been one of the most frustrating pitches I’ve ever sat through”, said Meaden. Badur tried to salvage it by offering a personal guarantee to double her money but could only offer his house. “Really, you think I’d turf somebody out of their house […] You’re not going to get an investment from me”.
Suleyman followed: “I think you’ve done great coming to where you are today […] but what worries me is you’re all over the place […] I can’t invest in you. I’m out.”
Before Badur’s double investment dream team of Willingham and Jones put his hopes to rest. Willingham explained: “You’ve done £1.5m turnover. I think that’s bloody brilliant. But I have no concept of where you make your money within the business […] no concept of how this could get rolled out and I have no choice but to say I’m out”.
Start-up business lesson: Badur’s pitch was confusing from the start – he struggled to succinctly explain what the Dragons would be investing in and how his business model worked. His “mish-mash” branding did nothing to persuade them and any confidence in the concept was lost.
Rachel De Caux and Paula Short
Company: Beauty Boulevard
Concept: Glittery lipstick
Investment sought: £65,000 for 5% equity
Investment received: None
Next up were a beautician and hairdresser team Rachel De Caux and Paula Short with a red carpet demonstration of their glitter lip product Glitter Lips.
“Drink proof, kiss proof and party proof”, the entrepreneurs said their products had appeared in the pages of Elle, Cosmopolitan, Grazia and Vogue, as well as on ITV’s This Morning, Ant and Dec’s Saturday Night Takeaway and Strictly Come Dancing.
Despite only turning over £367 in their first month of trading, the duo wowed by revealing that six months later they had a monthly turnover of £39,000, hitting £250,000 in total for the previous year.
Surprisingly it was the male Dragons that were first to offer their opinions. Bachelor Suleyman admitted he would be taken aback if he were to pick up a partner for a date wearing their product and Jenkins said the sparkly lips reminded him of Jaws from Moonraker.
Jones, having applied the pink glitter to his own lips, wanted to get “more serious” about profit. They claimed to have achieved gross profit of £225,000 and net profit of £104,000 from the sale of 38,000 units – 55,000 in total since they started. “That’s quite a lot”, said Jones.
Their margins impressed further at a retail value of £12.50, costing just 78p to produce, with £5.99 for distributors.
“You’re numbers are much better than I thought”, admitted Willingham, “the problem is when you value a business at a multiple of your profits […] you’re kind of investing in the future quite far down the line […] if you’re taking that much turnover and proving that market, why won’t Rimmel and everybody else come out with the same?”
They explained that they have a non-disclosure agreement with the formula that they’ve created but their biggest problem was getting in front of buyers. Having had major exposure, Meaden said: “that worries me more than it encourages me”.
Suleyman was the first to walk away from the deal: “I’m not going to be the investor in this because I think it’s very limited. It’s a fad. For that reason, I’m out”.
Jenkins and Jones both agreed that there was nothing they could bring to the business and declined to make an offer, though Jenkins was very impressed by what they’d achieved so far.
Meaden cited her concerns over the lack of interest from buyers and followed suit, leaving just Willingham, the entrepreneurs favoured Dragon, to make a decision.
“I actually don’t think it’s peaked yet, I do think you’ll do those numbers this year, but I don’t think next year it will be a bigger number […] It’s quick cash now and it’s not enough cash to justify the multiple of profit that you’re asking for in terms of the investment. I’m going to use it, but I’m not going to invest.”
Start-up business lesson: De Caux and Short had built a business with very impressive margins and profitability that will generate a decent income. Unfortunately, the Dragons couldn’t see any longevity in the business that would provide them with a good return on their investment.
Martin Chard and Jenny David
Concept: Marking pen for drilling holes
Investment sought: £50,000 for 20%
Investment received: £50,000 for 30%
Last into the Den were husband and wife team Martin Chard and Jenny David. Chard, who has Asperger’s and dyslexia, has been working for many years as a building maintenance engineer. Spending his days putting up shelves, fixtures and fittings, he found it frustrating marking where to drill the holes.
He developed the Marxman Marking Tool, a device that sprays a burst of green chalk through holes of various depths and diameters to mark where you need to drill. The pair revealed they have a patent granted in the UK, Europe, China and the US pending. Marxman launched into Wicked stores nationwide in March with an initial order of 500,760 units, receiving re-orders of 2,500 units within the first month.
Jones asked what “the difference would be of using a Sharpie for something like this” that costs less than a pound. Despite Chard’s explanation that his product could write on and reach surfaces that Sharpie’s couldn’t, Jones was sceptical that every plumber in the country would want to spend £10 on something that’s previously cost them only 20p.
Chard continued to stand his ground against Jones: “For every four stores, they’re selling one. Do you think that’s good?” Jones asked. Chard replied: “I think that’s excellent considering that people won’t go into a store looking for this. People aren’t aware of this product yet. We haven’t put the advertising in so they’re pretty good odds for an impulse buy”.
The pair told Suleyman they’d sold 13,300 units, but weren’t able to say what that equated to in turnover. They shocked all the Dragons by admitting that they’d already invested £100,000 of savings and inheritance into the business, admitting: “We’re not business people”.
This obvious lack of business acumen caused some alarm bells to ring. Jenkins: “I would expect that with business, I would give them a helping hand and in a year or two they’re flying on their own. I think this is different. I think this would need ongoing support. That would be quite a big commitment on my part”.
Meaden said the product was “too expensive at the moment. You don’t want people to think, you want people to be at that till and think: ‘that’s good’ […] I certainly think we could get that made at a much better price”. She concluded by asking: “How would you feel about someone running the business for you while you develop the products?” Chard said that would be “a dream”. This was enough for her to make an offer of all the money for 30% of the business.
This also swayed Jenkins who matched Meaden’s offer. Suleyman said they might need “two Dragons for this”, saying he would put up half the money for 15% if another Dragon was willing to come on board.
Willingham couldn’t “not make an offer” and also offered to go 50/50 with another Dragon. Despite the concerns he raised earlier, Jones undercut his peers to offer all of the money for a 25% stake in the business.
However, Chard and David were won over by their first offer from Meaden who jumped up with joy and said she’d ben sitting there trying not to let the other Dragons see how excited she was about the product.
Start-up business lesson: Chard and David’s understated but quietly confident pitch was enough to win five offers from the Dragons. Although they lacked the business savvy of other entrepreneurs, a strong product and good sales figures proved their idea was worth investment.