Dragons' Den: episode eight, reviewed

Innovation abounded in the Den last night, with three business ideas that instantly enticed the fiery ones. That's not to say they all won investment though - a great pitch can be easily unravelled when the Dragons start looking for holes to pick at. And even the most promising businesses can start to implode when the nitty gritty of enterprise isn't handled correctly... but more on that later.

The first debacle of last night's peak-and-trough episode was the customary total flop. Poor old Diane and Tim had chucked £50,000 at a series of books featuring cheery fruit and veg characters, designed to instill the five-a-day mantra into kids. To their credit, they had sold a fair few copies through Borders before it went into administration - but the numbers weren't really there and they weren't really sure how they'd achieve the three-fold increase in sales they'd forecasted. Oh, and then there was Peter Jones's deliciously sardonic point that the book he read didn't actually instruct children to eat healthily at all - instead it sent out the message that kids' friends wouldn't like them if they ran out of sweets and that they should run away from home. Soon criticisms mushroomed and the fruity duo were kicked out the Den like right lemons.

Next up was Patrick van der Vorst, an ex Sotherby's department head who'd knocked up a nice-and-easy website that let your average punter get any item in their home valued within 48 hours just by uploading a photo of it. Valuemystuffnow.com was more or less Antiques Roadshow 2.0. Patrick has formed a collective of 28 experts (all freelance valuation consultant for the big three auction houses) who get paid £1.80 per valuation, while  customers pay £4.50 per valuation.

A prime idea for the 'age of austerity', Theo Paphitis said, with profit margins that sounded good. But Deborah Meaden was (very rightly) concerned about the online marketing strategy. Patrick was spending only £4,000 - £5,000 per month on pay per click advertising and Google AdWords advertising. He was getting 20,000 unique visitors a month - which is a pretty impressive figure. But he reckoned he'd be able to keep that online ad spend consistent yet manage to up his monthly visitors to 100,000 through word of mouth.

This, of course, set off alarm bells in the Den - because as all investors now know, you need a whopping great amount to splurge on PPC these days if you want even a sniff of a chance of being found online. Peter Jones said Patrick would need more like three or five times the £100,000 investment he was asking for, while James Caan said the mode was 'unsustainable'.

Fortunately for Patrick, Theo Paphitis and Deborah Meaden swooped in to save the day, walking out with 40% for £100,000 - double the amount of equity Patrick had planned to give away but with the huge added value they can bring to his online marketing strategy.

The next pitch caused quite a, ahem, stink in the Den: a cannily-designed extractor fan that drew out odours from toilet bowls more efficiently than the traditional ceiling extractor fan. Builders-by-trade Patrick and Tim seemed to have a fairly thoroughly-thought-out plan, citing the cost-cutting qualities of their extractor, its neat power-saving devices and numerous building regulation standards it had achieved.

But they got pooh-poohed by the Dragons as question-time lingered fatefully on: James Caan said the market was too small and he would never make a return; Duncan Bannatyne said in all his 25 years of building properties and health clubs he had never once received a complaint about a stinking loo so there really was no need for it; and Deborah Meaden came down like a barrister on their backsides to discover the standard they had reached only applied to a very specific type of commercial toilet, ruling out the much bigger market they had laid claim to. The ensuing stink ensured five outs.

Finally, we came to Chris Elsworthy, softly-spoken product engineer extraordinaire who designed what Peter Jones called 'one of the best products we've ever seen in the Den'. The Power8 workbox was a cordless powertool set that converts into eight different tools. It had picked up plenty of attention from DIY fanatics and industry insiders alike, Theo Paphitis called it 'fabulous', and all the Dragons seemed, well, totally bowled over by it.

Ah, but nothing in the Den ever runs so smoothly as it seems. Half-way through questioning, we found out Chris had become entangled in a horrifically complex company and share structure spanning five countries, multiple investors, Hong Kong-based cashflow management and a holding company in the British Virgin Islands that Chris actually owned no part of. Percentages and place-names started flying around the Den faster than a jet set millionaire's convention, and the messy web of Chris's business (or partly- semi- something- owned business) was enough to deter Deborah, Theo and James Caan.

But Peter Jones ploughed on, saying Chris was the 'real value' - and offered the full £150,000 Chris asked for in return for 40% of the holding company, on the condition that all intellectual property rights for the Power8 (currently all owned by the Hong Kong company - do keep up) be transferred to the holding company. Phew.

Then, in an astounding whip of Den audaciousness unlike any counteroffer we'd seen before, Chris replied flatly with: "That values my company extremely lowly. What resources will you put in to make that worthwhile?" A really quite pleasingly flabbergasted Peter Jones replied, "You need sales and you need me to get those sales," but Chris wasn't having any of it. "I'm not prepared to give away 40% of my company," he retorted, then turned to Duncan Bannatyne.

Duncan Bannatyne, looking quite impressed, then offered half the amount for just 15% of the equity, assuming Peter would come in with the other half. Chris, unflappable as a block of concrete, said 'that's still undervaluing my company'. And after some further wrangling by Chris, as cool as several frozen cucumbers, the Den-god walked out with £150,000 for 30% of his company shared by Duncan and Peter - but with their equity shrinking to 20% as soon as he had repaid the money.

Chris's slick bargaining was quite a surprise, but he knew he had a fantastic product, and the Dragons were falling over themselves to get a piece of it. So why take investment at all? The inventor's final words to Evan summed up an important lesson thus: "I know I have to give things away to make things happen, and that's what I'm doing. It's better to have a small piece of something large than a small piece of nothing."