Dragons’ Den: Series 14, Episode 6
A lighting business failed to spark interest while a "canine Fitbit" set the Dragons' tails' wagging. Read all the latest business lessons from the Den...
This week’s Dragons’ Den episode failed to disappoint with pitches for a wearable tech device for dogs and a pitch for a lighting device which Nick Jenkins felt resembled a sex toy.
While only one business was successful in securing investment, there were plenty of lessons to be learnt from the entrepreneurs who walked away with nothing.
Here’s our round-up of pitches and the advice you can take-away…
Company: Magi LED UK Ltd
Concept: A silicon housing device for LED lighting
Investment sought: £50,000 for 15%
Investment received: None
A retired college lecturer and self-proclaimed”workaholic”, Ranjit Sohal was the first entrepreneur to face the Dragons with his “simpler than simple” pitch for a “fuss-free” silicon housing product for LED down-lights.
Having argued that traditional down lights are “bulky with serious installation issues” including springs to keep down lights in place that “tend to fly off”, Sohal explained that his product was a “near perfect” design alternative that could be easily fitted and removed.
On first review, Nick Jenkins wasn’t convinced by the product’s appearance, particularly when it came to the bright colours used in the range: “When’s the last time you saw a luminous pink light fitting? It’s made from silicon and pink, it would be more at home in somewhere like Ann Summers!”
Did you know? You're eligible for a fantastic marketing package if you start crowdfunding through Startups.co.uk. See how we can help your business on our Crowdfunding Launch Page
Aesthetics were also an issue for Peter Jones: “I think your product is innovative, I like it but there’s a problem – it doesn’t have a flush fit to the wall, you can see gaps”. Jones than asked Sohal why he hadn’t given a demonstration of what the product looked like on plasterboard; “When you’re demonstrating a product, you need to demonstrate it in the environment in which it’s going to be installed.”
Deborah Meaden also had concerns about the product and didn’t believe there was an actual need for the device to replace traditional LED light fittings and also raised the point that long-lasting LED bulbs could reduce the need for consumers to change their bulbs. Likewise, Sarah Willingham shared a dim view of the product and announced she wouldn’t be investing.
Jenkins then uncovered an issue with Sohal’s product packaging. It came to light that Sohal had falsely claimed the business manufactured the products when it had no capacity do so. When questioned by Jenkins on why he had made the claim, Sohal was only able to come back with the response of “I’m not a marketeer” to which Jenkins retorted; “this business is just not invest-able, I’m out.”
A double rejection followed as both Meaden and Jones announced they were out of investing. It was left to Touker Suleyman to decide Sohal’s funding fate but, having failed to outline any retail interest or market opportunities for the product, Sohal was unable to win Suleyman over; “I can’t afford to take the risk, I’m out.”
Start-up business lesson: There were a number of reasons why Sohal failed to convince the dragons that his business was fit for investment including flaws with the product design, aesthetics and false allegations. Sohal also failed to find customers for the product which is crucial for any new business looking to impress investors; in the words of RefME founder Tom Hatton “choose your early adopters and focus on them”.
Lauren and Mark Taylor
Company: Kokoso Skin Ltd
Concept: Coconut oil-based baby skincare products
Investment sought: £50,000 for 10% equity
Investment received: £50,000 for 30% equity (dropping to 25% once initial investment has been recouped)
Tapping into the burgeoning baby market, husband-and-wife duo Mark and Lauren Taylor were keen to get the dragons on board with their premium quality, natural and organic coconut oil skin products for babies.
As a new mum, Lauren explained that she had been cautious of harmful chemicals in mainstream baby toiletries and had discovered that raw virgin coconut oil had many benefits for babies which in turn saw her and partner Mark launch Kokoso Skin Ltd.
Currently selling online, in Boots stores across the UK, and in independent baby boutiques, Nick Jenkins appeared impressed by the pair and wanted to know more about the Boots deal to which Lauren replied: “We’re stocked in 200 Boots stores and they’re going to be expanding to 400 stores. We’ve sold 9,000 units which equates to around £20,000 sales since June 2015.”
However, the moderate sales figures scuppered Jenkins’ initial enthusiasm – “I was expecting that figure to be a lot higher” – and also set alarm bells ringing for Jones: “You’ve sold less than one product, per store, per week. You’d think that a spot in a high street retailer would attract more custom!” Yet co-founder Mark was quick to defend the product; “Boots don’t seem to see it that way […] they’re expanding our store numbers.”
As the pitch continued, there was an unprecedented turn of events as four out of the five dragons – Meaden, Jones, Jenkins and Willingham – all announced they had conflicting investments in other baby businesses and coconut oil-based offerings so were unable to invest.
But these conflicting investments worked in the Taylors’ favour; giving remaining investor Suleyman confidence that there must be “something in this if the dragons are interested”:
“As a business, there’s not much there at the moment but I admire what you’ve done. As a brand, I love it and I’m going to make you an offer of the full £50,000 for 30% equity.”
A successful negotiation attempt from the Taylors saw Suleyman agree to drop his equity share to 25% once he recouped his initial investment; leaving the parenting entrepreneurs to walk away with the investment they wanted albeit by giving up 15% more of their business.
Start-up business lesson: Given that four out of the five dragons already had conflicting investments, it was clear that coconut oil was a hot market opportunity. Many -but not all- investors will often look to invest in ‘hot’, fast-growing sectors; look at on-demand apps and food delivery for instance. When starting a business, you should carefully consider the potential growth of the market and also consider how crowded the market already is.
Company: My Plinth
Concept: A stand device for mobile tablets
Investment sought: £50,000 for 25% share
Investment received: None
Unable to find mobile tablet stands with “everything he was looking for”, Somerset entrepreneur John Bull set out to design his own and came up with the ‘Plinth’; a foldable stand that can be used for any mobile tablet and can be adjusted to various positions to suit the user’s needs.
Bull explained that he had witnessed “considerable success”with sales via Amazon and his own company website, and was now moving into profit.
Initial questioning from Jones saw former military officer Bull go into a discussion about the difficulties he’d had in taking the product to market but Jones made it clear that he wanted to know about the business, not the back-story; “Have you come here for investment or counselling?!”
Suleyman got the pitch back on track by inquiring about sales figures and Bull revealed that he had sold about 1,000 units last month with an RRP of £14.95. Bull then revealed that he didn’t want to share figures relating to his gross margins and these guarded answers didn’t please Jones and Suleyman.
Willingham then had queries about the moderates sales figures: “If you come up on the first page of Google, then why aren’t you making more sales? It doesn’t add up” and later announced herself out of investing.
For Jenkins it wasn’t the business deterring him from investing but rather the entrepreneur; “I think you’re a great designer but I just don’t feel like you’re going to be able to take my advice and run with it so, for that reason, I’m out.” Meaden followed Jenkins’ lead and declared herself out of investing as she didn’t think the business would be able to compete in the market.
Suleyman appeared to show interest in the Plinth device but but Bull would go on to “dig his own grave” by explaining how he’d had problems in the past with too much stock and not being able to make sales. This was an immediate turn-off for retail entrepreneur Suleyman: “You’re looking for investment and all you’ve given me are the things that have gone wrong so I’m out”.
Market opportunity, or lack of, saw Jones end Bull’s time in the Den; “When people purchase an iPad or tablet they normally buy a cover with it and these are often made well enough to be used as a stand, so I don’t think you’re going to get the sales you need.”
Start-up business lesson: Jones summed up My Plinth as a “great product with small potential”. Make sure investors don’t make the same conclusion about your business idea with our guide to sizing up the relevant market.
Concept: Wearable fitness monitor for dogs
Investment sought: £150,000 for 7.5% equity
Investment received: None
Capitalising on the wearable tech trend, engineer and managing director Andrew Nowell entered the Den with a “cute” pitch for PitPat – “essentially a canine Fitbit” – which can be attached to a dogs collar to assess their fitness and levels of activity with the data then sent to free app on your phone. The app can create guidelines for your dog based on their activity levels.
Following a showcase by two pooches, a confident Nowell explained that, alongside him, there were founders in the business who all hold the belief that PitPat “can change pet care forever”.
Nick Jenkins took the lead with questioning and wanted to know more about the technical aspects and practicalities of the device. Nowell: “There’s some incredible innovation which has gone into this. It has a one year battery life whereas most GPS products have to be re-charged, you can press the button on the collar and it then sends the data to your phone via bluetooth. It can record data for up to 10 days a time.”
Despite these tech “innovations” Jones wasn’t convinced – “You’ve come in here with the most ridiculous valuation of £2m, you’ve sold 1,5000 units! What’s your IP that can justify your valuation?” Valuation would prove to be too much of a sticking point for Jones who later announced he was out of investing.
Suleyman couldn’t get his head around the valuation either; “You say you don’t want a passive investor but for 7.5% equity there’s not enough there. I think the valuation is crazy. I’m out.” Willingham also declared that the product wasn’t for her, largely because she didn’t have a dog and couldn’t see herself using the product.
Meaden, on the other hand, didn’t share Suleyman and Willingham’s concerns and felt the product was “great”. Meaden’s view was re-affirmed when Nowell shared details of retail interest for the product:
“We’re talking to Pets at Home, Dixons and Argos have agreed to sell the product online, and we failed with John Lewis at the first product trial but we’re trying again – they want a more premium feel and price. My worry is that we’ve come in here not asking for enough money as there’s a lot we need to do.” But Meaden was quick to reassure Nowell that he had “done the right thing coming here”.
Further questioning from Jenkins uncovered a technical flaw with the device with Nowell having revealed that the business wasn’t yet able to collect consumer data usage of the app. Yet this didn’t deter Jenkins from making an offer. The Moonpig founder threw Nowell a bone with an offer of £75,000 for 10% and this offer was matched by Meaden.
This offer of 20% equity for the full £150,000 proved too much for Nowell who couldn’t allow himself to give up that much equity as he had four shareholders. He suggested a counter offer of 12.5% but Jenkins and Meaden couldn’t accept that company valuation and so Nowell left the Den empty-handed.
Start-up business lesson: Valuations are often a sticking point in the Den and PitPat’s pitch was no exception. Despite interest from Meaden and Jenkins who “loved” the wearable tech product, the investors failed to agree on Nowell’s “crazy” £2m valuation. Read our advice on how to value your business here.