Unlike last week, episode six of Dragons' Den had no real
'winners'. Yes, a couple of entrepreneurs walked away with
investments, but no one had a stand out pitch that blew the Dragons
away. In fact, all successful entrepreneurs had moments before
received a good ear bashing from the other Dragons! Why was this? A
mix of unclear business plans and ridiculous figures.
The first entrepreneurs to tentatively enter the Den were Faizal
Khan and Gary Hilman of Peel Engineering, who wanted £80,000 for 10%
equity and "a little piece of history". Faizal and Gary had created
the smallest cars of all time, and had already sold 14 to the
museum chain, Ripleys Believe it or Not, with the aim to sell
more. They hoped that with thousands of children viewing the cars
each day, they could develop toys and board games to sell as part
of the brand.
Theo, Duncan, and Peter all had a ride in the cars, and then it
was time to talk business. Peter discovered that Faizal and Gary
had a two year deal with Ripleys, meaning they couldn't sell the
cars anywhere else. The entrepreneurs stood firm, though, stating
that the cars were only part of their business: their ambitions lie
with selling the merchandise. Unfortunately neither Fiazal nor Gary
seemed particularly sure about how they'd go about doing this. This
annoyed Peter, who asked "So you want me to make a business plan
for you?"
Deborah also found issue with the apparent lack of business
plan, stating that the men seemed "completely half-cocked."
Faizal and Gary looked to be out of luck, as the Dragons quickly
began declaring themselves out. Their one ray of hope lay with the
only remaining Dragon, James Caan, who'd remained quiet throughout
the interrogation. Whether James was feeling charitable, really saw
an opportunity for profit in the business, or just has a weakness
for tiny cars, he made an offer. All the money they needed, but for
a whopping 50% of the business!
After quiet deliberation, Gary and Faizal suggested a creative
alternative: 30% equity, two of the cars, and the promise that if
he doesn't recoup his investment within two years, they'll return
it. This was a shrewd negotiation tactic: and James quickly
accepted their proposal.
Faizal and Gary definitely got lucky that James saw the
potential in their business: without a clear business plan they
seemed doomed to fail.
Of course, no episode of Dragons' Den would be complete without
the traditional 'it started so well, but then rapidly went downhill
until you were covering your eyes' pitch. This came in the form of
Jacqueline McKay, founder of Angel Cot. She wanted £150,000 for a
40% stake in her suitcase-come-baby cot and changing station.
Everything seemed to make sense, and soon it was time to crunch the
numbers…Oh, no actually it was time for Jacqueline to sing a song
about her product.
Once that was over, I mean, finished, Deborah began her
questions. It seemed that Jacqueline had a very unsteady
understanding of estimated turnover. This wasn't the only thing to
annoy the Dragons, as none of them actually liked her product as a
whole, thinking it didn't really solve a problem, and tried to do
too much.
The Dragons all declared themselves out, and while several
offered words of advice, Duncan was quick to give his own opinion.
He told Jacqueline that her product was "ugly" and "ridiculous",
and that she should give up. She dejectedly left the Den.
Jacqueline had tried to do too much with her product, and had no
real business plan. As Deborah said, "Sometimes the answer isn't to
bundle everything together." If you can do one thing well, just do
that!
The last contestant to enter the Den this week was Ralf Klinnert
of Funky
Moves. He needed £120,000 for a 20% share in his electronic
interactive sports cone game. Ralf's pitch was strong, but ended
awkwardly when all Dragons declined to try his product.
Things didn't go well after that. When asked how he'd spend the
money, Ralf shocked the Dragons by revealing the staggeringly high
quotes he'd been given to mass produce his product. The disclosure
that he'd received a government grant for £148,000 also worked
against him, making Duncan very angry. Duncan stated he was "sick
and tired of government grants that are given out to worthless
businesses". He said only an idiot would invest, and declared
himself out, alongside Deborah and James.
Peter, however, liked that Ralf had already expanded his target
market from primary schools into football clubs, and his suggestion
that production costs could be lowered. Peter soon offered £60,000
for 25%, quickly matched by Theo.
Ralf seemed unsure, and unconfidently asked if the Dragons would
negotiate, however after some words of advice from Peter, happily
accepted the deal.
This episode demonstrated quite obviously the importance of a
clear business plan. If you're looking for investment, you've got
to be able to actually explain both what your business is, and how
it's going to make money. If you don't have that, then unless
you're very lucky, you'll be turned away regardless of how great
your product is.
If you missed this episode of Dragons' Den, catch up here!