Dragons’ Den review: Theo Paphitis breaks show record to invest in Zapper

As online books-for-cash hub gets a huge cash boost, a business pitching technology for busy call centres grabs the attention of Make It Cheaper managing director Jonathan Elliott.

It was a frosty evening in the Den last night, with all four featured pitches involving some kind of squabble about the entrepreneurs' valuations of their fledgling companies and the equity deals on offer. It ended on a high note, however, with Theo Paphitis breaking the record for the highest individual investment in the show's history and backing internet-based trading hub Zapper - which allows people to get cash for unwanted books, CDs and DVDs with minimal fuss - to the tune of £250,000.

Investment had not looked likely earlier in the pitch, when company owner Ben Hardyment revealed that three existing investors each had a 10 per cent share in the company that had cost them just over £16,000 each - a fraction of the £250,000 that Hardyment wanted from the Dragons for a smaller share of just 7.5 per cent.

While Peter Jones claimed he was "insulted" and declared himself out along with three other fuming Dragons, Paphitis cannily used his rivals' collective outrage to negotiate a 30 per cent stake in the company, even though it "hurt" him to spend five times more than the current investors per each percentage share.

Matt King, the first pitcher of the evening, didn't get away quite so lightly. This was mainly because he was offering just one per cent of his company WeQ4U for £130,000, effectively valuing it at £13 million. This was deemed unrealistic because the company posted a net profit of just £40,000 in the last financial year - and the Dragons were in no mood to allow concessions for the fact that the business has naturally incurred huge costs in its early days.

I found King's proposition intriguing because I'm the MD of a company that has a 100-seat call centre. WeQ4U offers a smartphone app and technology solution that allows people who want to get through to a call centre to hang up after dialling, avoid listening to 'Greensleeves' for an indeterminate period and get reconnected once an operator has answered.

Leaving wrangles about equity to one side, Theo Paphitis was on the money again when he correctly observed that there should be no need for this product to exist if businesses run their operations correctly. At Make It Cheaper, we have no need for the product because we answer our inbound calls extremely quickly, but I sympathised with King because he found himself in a "damned if you do, damned if you don't" kind of situation. On the one hand his idea is great because it eases the frustration of disgruntled customers - but on the other its commercial viability is questionable because it gives businesses the opportunity to wave a white flag at an operational issue where corrective action would be hugely preferable.

King came armed with lots of statistics about the number of call centres in the UK, but perhaps didn't provide compelling information about the extent of the queuing problem. We have some insight where energy companies are concerned because we continually monitor the experience they provide their business customers, using various satisfaction metrics to get to grips with the issues customers face. Over the past six months, for example, the number of customers telling us that they've had a problem with their supplier's call response time has dropped from 5% to 3%, which suggests it's not a huge cause for concern. 

Of course, some suppliers will always be better than others but there's more to it than timing hold music when understanding the whole customer experience. Through our membership of the Consumer Forum, we've learnt about the significance of measuring 'Customer Effort Score' and it pleases me to report that we've tracked this improving by 5% among energy companies over the same period of time.

Would Customer Effort Score increase for companies that take up King's technology? It seems unlikely. Would their customers be happier because they don't have to wait in a queue? Possibly not, because their issue hasn't actually been resolved any quicker. Still, I'm sure King's smartphone app got hundreds of downloads at around 10 'o' clock last night - and with such an audacious business deal on the table, perhaps that's all he really wanted.

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