Dragons’ Den: Series 14, Episode 1
The series return saw mixed reactions for two family businesses, writing on the wall for a stationery start-up, and it was bottom's up for a gin company
The BBC's long-running entrepreneurial show Dragon's Den is open for business once more.
This week's series return saw a number of start-up hopefuls enter the Den to pitch to investors Peter Jones, Deborah Meaden, Sarah Willingham, Nick Jenkins, and Touker Suleyman.
Among the businesses looking for investment was an alcohol subscription company which recently featured in the Startups 100 2016 index, a family-run beanbag business, a shoe-cleaning device invented by a 15 year-old budding entrepreneur, and a children's stationery business dubbed a mixture of “bonkers and brilliance”.
This latest Dragons' Den series also sees the addition of a Big Brother-esque “live action room” where family members and friends can watch the pitch as it takes place and share their commentary.
Despite the show's updated format, there were still business lessons aplenty with valuable insights on business valuation, the need for proof of market potential, and some tips on intellectual property (IP).
Whether you're looking to raise finance now or in the future, we've rounded up the key business lessons from each pitch to help you win over investors…
Jon Hulme and John Burke
Company: Craft Gin Club (Craft Club)
Concept: Craft gin subscription business
Investment sought: £75,000 for 3%
Investment received: £75,000 for 15% (Sarah Willingham)
The first entrepreneurs to enter the Den were business school-graduates Jon Hulme and John Burke who, after spending “a lot of time in gin and tonic bars in Spain”, had mixed business with pleasure to launch the Craft Gin Club – an alcohol-based subscription start-up.
Ranked as one of the top UK start-ups of 2016, Hulme and Burke explained that they had launched the Craft Club on the back of the growth of the home drinks market and the increasing number of people seeking out new products.
Referencing gin as a hot sector, the duo said that they expected their subscription box venture – which delivers a bottle of gin, mixers, a magazine and “special treats” – to generate £2m in net profits within the next five years and said their goal was to give their dragon investor a ten times return on investment.
While the alcohol entrepreneurs appeared to be off to a good start, Jones queried the valuation and said that it was “crazy and delusional” because, while ther pair were projecting multi-million revenues, their business wasn't there yet.
Jones' concerns weren't shared by Suleyman who made an audacious offer of £75,000 for 35% which would include the free use of his office. Meaden also said she was interested in making an offer but the pair then declared that they would only be willing to give away 5% equity maximum. After a pause, Meaden decided to make an offer of 10% but said she wouldn't go any lower than that.
Willingham – the dragon that both Hulme and Berke had initially said they wanted – was next to give her verdict: “I've got to make a confession, I'm actually one of your customers! […] I think the craft alcohol market is massive but your valuation is so far for me, I'm going to go in at 15% and at that rate I'd be excited”.
The valuation was a sticking point for Jenkinsand he announced that, while he wouldn't be investing, the duo might find him becoming their next customer.
Jones shared Jenkins' apprehensions about the business valuation but decided to look past that, going head to head with Meaden with an offer of the full £75,000 for 10%: “I like this kind of market and I can add a lot of value”. Keen to not be outbid, Willingham then dropped her offer from 15% to 12.5%.
After some deliberation, the duo asked Willingham whether she would consider dropping her offer again to 10% but this request came much to the dismay of Meaden and Jones who announced themselves “out” on the basis that the pair appeared to favour Willingham.
Drinks expert Willingham refused to budge on her offer of 12.5% and gin lovers Hulme and Burke decided to accept the deal, leaving the Den in the knowledge that while they “didn't get the valuation they wanted, they paid for the expertise”.
Start-up business lesson: Business valuation is a common stumbling block in the Den – value your company too ambitiously and investors will think your “delusional”, value it too modestly and investors won't think you have enough ambition.
Ross Williams and Surlender Pendress
Company: Write Size
Concept: Pencils and pens to help children learn to write
Investment sought: £50,000 for 25%
Investment received: None
Next up to face the investor panel was a business “combining math and logic”; Write Size. Created by West Midlands inventor Ross Williams and his business partner Surlender Pendress, Write Size specialises in children's stationery – specifically pens and pencils that are half the size of a normal pen or pencil – and are designed to help kids learn to write more efficiently.
From the get-go, the dragons appeared baffled by the business proposition. Jones said he didn't believe there was a need for the product as all of five of his children had learnt to write with standard-sized pens and pencils while Willingham was quick to declare that she couldn't work out whether it was “bonkers or brilliance”.
Jenkins wasn't convinced by Williams' and Pendress' offering either and said that he felt someone had probably looked at creating a similar product before and decided it wasn't worth it.
Willingham then acknowledged that she could be convinced by the product if there was evidence to back up the product; “Where's the research that shows children learn to write quicker with smaller pens?” yet Williams revealed the product was unproven, explaining that “there is no research, it hasn't been tested […] but schools and teachers have loved them.”
The next inquiry came from Meaden who wanted to know about retail interest, Williams said they were in talks with Rymans but that the deal was small and this left Meaden unconvinced of the business' growth potential.
In quick succession, Jenkins, Jones, Meaden and Suleyman all declared themselves out of investing. With the writing on the wall, Willingham ended the stationery entrepreneurs' time in the Den by stating that there needed to be concrete research “and you need to a lot of marketing and a lot of PR so I'm out”.
Start-up business lesson: Williams and Pendress came under fire for their inability to prove the growth potential of their business. By failing to undertake comprehensive market research and studies to evidence their claims, the entrepreneurs weren't taken seriously.
Company: Big Boy Beanbags
Concept: Waterproof beanbags that hold their shape and are machine-washable
Investment sought: £75,000 for 15%
Investment received: None
Essex entrepreneur and former market trader Mark Newman entered the Den looking for investment his family-run beanbag business; Big Boy Beanbags. The beanbags are waterproof, can be machine-washable, hold their shape and are UV-protected.
With his two children (his employees) watching him pitch in the live action room, Newman explained that he was looking for £75,000 investment and the Dragons' expertise in order to take his business to the next level – having already sold 20,000 units in the eight years of running the business: “I'm a dyslexic Barrow boy, I can't really take it much further than that so I need your help.”
Meaden was first to interrogate Newman and wanted to dig a little deeper on the company figures. Newman explaiend that the company generated turnover of £500,000 in 2015 but in the same breath said he “wasn't worried about money, I have a nice home, great family, drive a nice car […]”.
This statement wasn't received well by the Dragons; as narrator Evan Davis explained “an entrepreneur unmotivated by money is like a red flag to a bull for an investor”.
Jenkins made his feelings clear and announced that he was “out” on the grounds that he felt Newman would “take a laid back approach” and expected investors to run his business for him. Willingham also felt the investment “wasn't for her”.
It was the family business element of Big Boy Beanbags that was the sticking point for Jones though and the dragon admitted that he was “certainly going to be a customer” but “investing in a family business didn't work for him”.
Suleyman wasn't won over by Newman's pitch either and noted that it felt like Newman wanted “a magic wand to just grow the business”. The fashion toucan offered up some “Touker Time” and suggested that Newman would be better off hiring someone who could work for him to grow the business, as opposed to giving away equity.
Newman's laid-back approach proved to be the investment barrier for Meaden too who said she was out on the basis that “there doesn't seem to be an end game”.
Start-up business lesson: Before you look for investment for your business, you really need to consider what you want the investment for and whether you really need it. Unmotivated by money and with a relaxed approach to finances, Newman was unable to convince the Dragons that he deserved their backing.
The Dhillon family
Company: Bootbuddy ltd.
Concept: Cleaning device for muddy shoes and boots
Investment sought: £60,000 for 10% equity
Investment received: £60,000 for 30% equity (Peter Jones, Deborah Meaden and Touker Suleyman)
The second family business of the episode and the last to pitch was Bootbuddy; a cleaning device invented by 15 year-old Arminder Dhillon as a solution to help him clean his muddy football boots. The device – intended to “leave the outdoors outside” – consists of a long brush, scraper and bottle container that you fill with water and then scrub to clean.
While Arminder was the inventor, it was his mother Rashpal and brother Gurminder (the main shareholders) that led the pitch and outlined the headline stats: the Bootbuddy had generated revenue of £100,000 in 2015 with over 6,000 sales at a retail price of £12.99.
On first glance, Jones wasn't overly impressed by the product: “I'm in shock because it's literally a water bottle with a brush on the end! There's also a defect with the product as you have to continue to refill it.”
Yet the real shock came when Rashpal revealed she had invested £250,000 in the company via a director's loan Suleyman almost fell out of his chair and asked Rashpal to break down the funding to which she replied that she had spent the majority on IP and registering the Bootbuddy in 22 countries. This big reveal left Jenkins questioning the family's business-savvy as he believed they could have registered IP “for a fraction of the cost.”
Rashpal was able to recover the pitch somewhat when she said she would waive the loan if it would help the business grow but this wasn't enough to win Jenkins over and he said he was out because he didn't think they'd be able to sell enough.
Willingham agreed with Jenkins and said that she didn't see the market potential: “I'm surrounded by muddy boots at home and I still think I'd use the outside tap and scrubbing brush to clean”.
But the other dragon investors shared different views; Suleyman made an offer of 35% for all of the money and Meaden followed up an offer with an offer of the full £60,000 for 12.5% after … explained that there was the potential to scale the business by changing the bristles for different requirements such as tarmac for builder's boots.
Having been the first to question the product, Jones appeared to have changed his mind and said that he could see the potential and he suggested that he, Meaden and Suleyman should all pitch in £20,000 in exchange for a 10% equity stake each.
It didn't take long for the Dylan family to deliberate and they accepted the offer. On exiting the Den, 15 year-old Arminder exclaimed it “would have been amazing to have just one dragon but to have three is overwhelming!”
Start-up business lesson: While there were queries over Bootbuddy's business debts, it was the strength of the product that ultimately won over Meaden, Jones and Suleyman.