The best investment opportunities, contrary to popular belief, aren’t always the ones in the most innovative new technology, the super-niches that absolutely no one can fill, or the fresh ideas so wrapped up in Fort-Knox-worthy protection that the merest whiff of competition could be instantly crushed by copyright law.
Sometimes, angels and venture capitalists are so impressed by what someone has done with a relatively basic concept, they’re happy to invest in a business even when the foundations it’s based on are nothing particularly new, and nothing particularly safe from copy-cat companies.
So it was in the Den last night. When Jane walked in with her detachable-straps flip-flops, we scoffed. We almost choked when she said they were retailing at £120 (hadn’t she heard of Primark?). And the Dragons weren’t too enthused, either, when she said the cost per unit was £45. Sure, she had a patent on a little bead that pulled up to click the strap of your choice into place (you could change the straps at the top to alter the look of the sandal), but, as was pointed out to her, the design could easily be copied without infringing the IP.
But then Jane pulled a little something out the bag. She had business savvy. She explained what every last thousand pounds of the £75,000 she was asking for would be going towards – and James Caan and Theo Paphitis liked it. Plans to take the manufacturing to India and reduce the unit cost by a third meant she would be able to drop the RRP and sell in bulk (having already shifted an impressive 37,000 of the things), or even keep the cost to the consumer the same and take a much larger slice of profit.
The Dragons swooped, and before we could blink Jane had received all the money she wanted with both James and Theo walking away with a pleasing 20% each – twice the equity she had originally wanted to give away.
After a few half-baked attempts that ruffled the Dragons’ scales (thanks to a determinedness not to negotiate on equity by even 1%, a great concept that let itself down by misleading them over how many orders in had lined up, and, of course, a sprinkling of dog-biscuits, novelty face masks and bra-wire fixers to accompany some jazzy music in-between the serious pitches), we met this episode’s last entrepreneur.
Like Jane’s, Carol’s idea was not particularly unique. In essence, MyDish.com was a recipe sharing website. Again, we felt the show’s researchers had sold themselves short and would be facing the wrath of some very unamused and unimpressed investors after the show. But as it turns out, Carol had had enough ideas around the basic concept, including canny partnership deals that built on innovative functionality – for example, when someone indicated they were going to be cooking a recipe for a dinner party, the site could automatically send an order to Ocado for all the ingredients needed to be delivered in time for cooking – that she began gaining serious interest.
She then started ticking off all the numbers an investor wants to hear, calmly justifying any figure they challenged her on. She certainly did, as Deborah put it, know her business very well. Which is of course essential if you’re going to have any luck at all at pitching successfully.
Carol also knew where her business' strengths lay. She had four clear streams of revenue, with more planned, and explained that the strongest of these was a white-labelling of the site’s software that BT and Axa were already spending £10,000-£20,000 on.
Deborah was convinced. In fact, so was Theo, but Carol was reluctant to give away more than 15% equity so she stuck with Deborah’s offer for the original £100,000 she’d asked for (rather than going with Theo’s offer to double that amount for double the equity) and walked away happy. Neatly proving that when it comes to investment opportunities, execution can be far more important than idea – and for someone who’s running a company, business acumen is the most important asset of all.