Dragons' Den is one of the more popular business programmes on the BBC. Average viewer figures stand in excess of three million.
The format is pretty simple - entrepreneurs pitch their business plans to the Dragons. They are usually looking for investment (as well as advice) in return for an equity share in the business. Now in its 9th series, the show has been going from strength to strength. However, what is not always evident is that many of the so-called "successes" often represent bad deals for the entrepreneurs, where they give away too much equity in return for modest investments.
This is typically the case in instances where the proposition has already been de-risked by way of existing trading history, letters of intent, sales, or where the cash is needed to fulfil larger orders, or to expand.
If you have a serious business proposition (and I use this phrase deliberately, as some entrepreneurs are clearly selected based on entertainment potential), you should adapt a very different strategy in the Den.
You should use the opportunity primarily as a marketing exercise where you are in effect pitching your product or service to the British public at large. In many cases it is likely that appearances on the show will result in significant interest afterwards. (Given the BBC recognises this, it is likely they will try and dumb down any overt marketing). Here are some tips as to activities you need to undertake prior to appearing on the show so that you can maximise your return.
1. Ensure your website is up-to-date (and can deal with a traffic spike) and that the phone lines are well staffed. The increase in profile from the TV coverage will result in a significant increase in interest in the days following the show.
2. Unless you get an offer from the Dragon you target (and on your terms), walk away. While there is definitely a premium to their money in terms of media interest, they are exceptionally busy investors and may not have the time to spare, just the cash.
3. After the show, it is important to use your new-found fame (which may be short-lived) to engage with more suitable investors who can provide smart money on more attractive terms (i.e., the cash you need at the equity share you want to give up) as well as access to distributors/ retailers or to key contacts.
4. Use PR to leverage your appearance on the show. All media like an angle, and given the importance of popular culture, an appearance on a "reality" TV show should open many doors. It is good to work on a number of stories to help you gain additional exposure after the show.
5. Undertaking an analysis of the appearance by Ling Valentine (who "entered the Den" in February, 2007) would be a worthwhile investment of your time. Ling gives a detailed summary of her appearance on the show on her website and also demonstrates that she is an extremely shrewd business person as well as a great marketer. Explaining her decision (not to take investment), Ling says the following:
"All I could think about was that I could get that cash in 30 seconds from the bank for no equity stake, and that I could not face giving away a third of my business for that. I had a proven business and they had no risk! After the Den I had some regrets, mainly wondering if I had lost out from not working with Duncan and what I had potentially lost from Richard's end-game expertise, but since my episode aired I have been incredibly busy."
Indeed, her appearance sparked immediate interest:
"Web visits on the night of the broadcast were over 5,000 people, and the next day it was over 10,000. I spent the whole night trying to stop my server crashing"
In summary, if you have a serious business proposition, where external parties (ideally, customers) have validated it as being serious, you will be better served using the opportunity as a means to raise your profile rather than as a means to raise finance.
Read more by Alan Gleeson:
Alan Gleeson is the General Manager of Palo Alto Software, Ltd, creators of Business Plan Pro®. He holds an MBA from Oxford University and an MSc from University College, Cork, Ireland. For further information on writing a business plan, visit www.paloalto.com