Dragon’s Den - Series 6 Episode 4
Aug 19
I gave last weeks review a miss - but due to popular demand (well four people at least!) I am back with my review as an angel on last night’s program.
The first presentation was from a business that had got an exclusive distribution right for a presentation ‘tool’. It was a very good pitch but my problem with sales businesses is that they tend to be (but not always) lifestyle businesses. The business is dependent on another company granting them a license. If the company becomes very successful the parent may seek to revoke the license or not renew it. It is effectively a franchise business. I invested in one business like this (Skin Health Spa) and we did lose a big source of revenue when we lost a franchise on a teeth whitening business.
Against my judgment, most of the dragons went in for this. I have a feeling that this will be one of those deals that falls through when due diligence is conducted. (subject for a later blog perhaps!). For example, exclusive product distribution contracts become very hard to police. Nonetheless, I am pleased for the Entrepreneurs who got their money - and I think this is the first time I would not have invested in something most of the Dragons went for.
The second pitch was a business which used the Fantastic Wii (great innovation) to create a dance and music solution. Sadly, he had pitched way too early. He knew nothing about his market or how much money he needed. Cheesy saying I know but please remember - you don’t get a second chance to make a first impression! If you are not ready - don’t pitch.
We then had a hairdresser who had created a glass cutter which eliminated (or claims to) the problem of split hairs. This was a conceptual business as the sales story did not make any sense. I felt sorry for the inventor. He and his team were very weak. The entrepreneur did not know how many units he had sold after appearing on a TV program. His sales ‘advocate’ did not know how much profit he would make per unit - he claimed that the finance guy would know this. This was no Microsoft. A key lesson for entrepreneurs is that if you are running a small start up - you do need to know everything. Know your limits. If you are not an all rounder - that’s OK. Get yourself a bloody good team. Do not recruit people who are weaker than you - as this poor guy had done.
We had a business which was a social community site around food. The idea was that you would get access to hundreds of videos of food being cooked step by step. And access to a website to share recipes etc. The revenue model was a simple advertising model. I like these businesses as I have done well with businesses like this - see www.wooshare.com But I don’t like internet businesses where the sole revenue stream is advertising. I am sick of being told how much online advertising is going to grow year on year. Yes - but so are the number of channels and the number of people going online in the ‘West’. Think this through very carefully. The other thing is that the barrier to entry in a web business can be as little as £30.00. You really need to come up with a compelling point of difference with any web business. There are far too many ‘me-too’ businesses that I am seeing at the moment. They did not succeed but they were a good team. I hope they make it.
The final business to pitch was a couple who invented household gadgets. The inventions were good - they actually made sense. Too many too list but they were good. They had sold 10 million toaster bags over the last ten years - great credibility. But then they blew it by revealing that they had taken a business into administration (bankruptcy). The business fell apart owing £200,000. The day after they went bust, they set themselves in business again. There is nothing wrong with failure (I have commented on this many times in the past) but I like to see evidence of integrity (see posting on Eskudos). They did get an offer from a Dragon, but again I have a feeling that on due diligence this offer will not materialize.
Hi and welcome to my blog. 
Aug 19 at 12:53
How to Successfully Pitch on Dragons Den: 12 steps
Could you pitch on Dragons Den? Well many have failed, but here is a list of the ten areas you’ll need to succeed in to stand a chance of an investment.
http://www.webxact.co.uk/2008/08/how-to-successfully-pitch-on-dragons.html
Sep 09 at 15:16
Hi Permjot. I enjoy your perspectives on Dragon’s Den and early stage investing in general. I found it a bit ironic that you mention your investment in Skin Health Spa in the same post about integrity of Directors when their business is placed into Administration. As you may be aware, there are a number of rumours/accusations in the Medical Aesthetic industry about a Director of Skin Health Spa being a Director of the company that acquired its assets out of Administration at a bargain price, leaving creditors (and indeed investors!)substantially out of pocket. From your closer perspective, is there a lesson that can be drawn from Skin Health Spa?
Thanks and keep up the good blogging!
Bill