The company, Gift Card Converter, was created by Allan Brown & Simon Jamieson, who had invested several thousand in building the website. The pair believed that one in five gift cards go unused and therefore hoped their website will allow users to buy, sell, trade and donate their cards to charity. With the gift card market making a huge profit, the duo estimated a potential 8 million customers and compared the movement to the highly lucrative mobile phone recycling business.
Whilst the Dragons understood the idea and the potential market, many were dubious of the long term money making opportunities. For a start, how accurate was the 20% redemption figure they gave? Peter Jones, an expert in the area of gift cards, estimates the redemption rate to be closer to 10%, whilst Duncan Bannatyne was unsure whether customers would change their current habit of storing the card away or spending it to be rid of it. Peter was also quick to point out that the USA market for this business is in strong decline, rather than increased demand.
Theo Paphitis felt uncomfortable with the whole concept, comparing it to ticket touting, but it was Deborah Meaden who finally crushed their pitch by pointing out the lack of legal advice the team had invested in, leaving the business open to attack. Whilst the initial idea sounded like it targeted a large potential market and the pitch appeared to go smoothly, the resulting discussion revealed far too many weak points for the pair to win the £50,000 investment for a 25% stake.
Theo summed up the pitch with some classic common sense advice "Not all good ideas are money-making ideas and the sooner we all start realising, the better our businesspeople will be." Something a number of the entrepreneurs visiting the den should bear in mind before coming up against the dragons.
If you're in the midst of starting up a business, make sure you ask your most honest friends for their opinion, discuss it with a mentor or head to Smarta for a huge selection of advice and tools that will help you identify whether your idea is a money making one, or simply a good one.