I had the pleasure last week of going to Prague for a pan-European investment show. Angel investors from lots of European countries turned up to listen to 20 companies looking for angel investment. The companies were all based in central Europe and as Angel investing is still relatively knew there - it made sense to look across Europe.

In all honesty the businesses which presented were poor and I personally did not get excited about any of them as investable propositions. However the idea is great and what was really good fun for me was meeting lots of other angels and sharing war stories (lots of business angel blogs to come from there!)

From the feedback I get from readers of this blog, it seems that most of the readers are Entrepreneurs. What I have always tried to do with business angel blog is pass on some advice for people wanting to have a go at a start up. It was great to hear from other business angels that essentially I am on the right lines.

As a group, we really do not like what Dragon’s Den is doing in its portrayal of Business Angels. I have to be honest and say I have not met any angel that behaves like the dragons when they invest (but it would make really boring TV). If you work with a group of professional angels - they really will try to ensure that the deal makes sense for everyone.

As an angel explained to me, “if you screw the deal too hard, you may win the battle, but you will lose the war”. As a business angel, you always have to strike a delicate balance between getting a good deal but also a deal that leaves the entrepreneur motivated.

In Europe, Cross border angel investments are set to grow - and if you are a start up looking to do activity across Europe, it makes a lot of sense to seek that type of investment arrangement. Contact your local or national Angel network for information about EASY - or look it up on the BBAA website www.bbaa.org.uk

I am excited about going to North America and seeing if I can start some cross border investing. It also makes a great deal of sense for the angel. It helps diversify your risk but the appeal is wider than that.

Angel investing is an emotion led activity - as a business activity it does not make sense (you are much more likely to lose your money than make any!) So therefore most of us do it because we enjoy it. I love Italy and if I was to invest in Italian Companies, I would have more of a business reason to go there. However, there is no way that I would want to invest in foreign companies unless I knew other locally based angels or networks that were supporting the activity.

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Hello readers. Welcome to the review of the last episode of the current series. I hope you have enjoyed these blogs - what should I write about instead on a weekly basis?

The first presentation was from the founder of “Baby Loves Disco”. The business works very well in the USA and someone wanted to buy the franchise in the UK. I was confused straight away. Why is a successful entrepreneur prepared to give a franchise to someone who needs to go to Dragon’s Den to get funding? Ignoring this, the business had very strong projections going forward. However, the US business has performed very poorly. $50,000 profit for a year after being based in 30 cities is very poor. Then they do the thing that really annoys me as an investor. They talk about “the real revenue coming from sponsorship and brand exploitation”. If that is what you are pitching - then pitch that. I see too many businesses which present one thing, but then say the revenue will come from another area.

The fact that they had got Universal records to sign up for a deal with them was great - but the fact that they had not put any money into the deal suggests that Universal did not value the “brand equity” that highly. To my complete surprise they were made an offer of the full £100,000 but for 40% of the business. They tried to negotiate and they did a good job but eventually they declined - Idiots! (I don’t often say that when people say no to a deal).

This reminded me of a business I really liked about four years ago. It was a food business based in Croydon that had gone nowhere in twelve years. I liked the brand and the food offering and asked to see the founder. We met and I spent a lot of time trying to work out a proposition for him (at great expense I must add) to try and get a roll-out plan going. The person in question turned out to be very greedy and actually just wanted a very high salary. He wanted a ‘consultancy’ fee for every store that opened up on top of a massive equity stake. The deal fell through and I backed Amano instead. I saw the original entrepreneur two months ago and he still had the one store and was lamenting the fact that he has not moved beyond one store. As always, he saw the fault as lying elsewhere and not with his own attitude.

The second proposition was a non-spill water bowl for a pet (dog). It was a great idea and she had already sold 22,000 units. She was looking for money to expand into the USA. (First tip - she should be presenting to US based angels) I liked it a lot and decided in the first 5 minutes that I would like to explore this. My problem is that I would like to see some US management on the board. The US is a very difficult market to crack - a very tough market. It requires a huge amount of cash and expertise. So if you are looking to propose a business plan which requires sales into a particular sector/ region etc - make sure you can demonstrate that expertise on board. She also was going into the US market too soon. I learnt from my experience at Blueback that you have to have strong foundations before you start building expansion plans. This was the reason Theo (one of the dragons) gave for not investing.

The final presentation was from a company that created a waste recycling business focused on the construction sector. The most impressive fact was that in just 15 months, the business had built up a turnover of £350,000. This business was really taking advantage of STEEPL factors. The business environment is going their way and I would have wanted to find out more with a view to backing this business. I would want to know about management expertise and credibility. The great thing was that the business will be taking advantage of changes in the law which will make this a mandatory purchase rather than a discretionary purchase (I love that as it becomes a much easier sell). As the presentation went on, I liked the business more and more. Not surprisingly he was made an offer but I was surprised that he was not made an offer from every dragon. He was made an offer for £200,000 for 40% of the business which he accepted. For a start up in a growing sector with £350,000 of turnover, he was robbed! I wish him the best of luck. If the deal falls through - I hope he contacts me!

Well I hope you have enjoyed reading these reviews.  Before the next series there will no doubt be other business programs to review. Please let me know of any great business programs that catch your attention!

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Here we go again - and welcome!

The first business pitching last night was a company from North London with a business which provided instant paper blinds which required no tools for assembly. The pitch was simply great (Elevator pitch 10/10). They knew their market brilliantly and were able to convince me within the first two minutes that their was a demand for this (and it is large). The question is always about the detail and profitability.

The first issue was one on the patent on the product. It is always dangerous for an investor to go into a business which cannot be protected. Barriers to entry are a key requirement for ensuring a business is able to generate good products. As a result of the lack of protection they lost many of the potential investors. (This is a good topic for a future blog!)

The second issue was that the business team (three people) had only achieved one sales meeting with a major retailer in five months. This meant that they got crucified on valuation (they were offered £40,000 for 50% of the business). I felt for them. Had they just spent a bit more time selling the idea, they would have achieved a far higher valuation. I cannot stress this enough - you need to demonstrate to an investor that people want your product. (Incidentally, that is how I got into angel investing. I helped a few start ups get their first sales and then realized what had happened to their valuation as a result of my help! I then started investing.)

The second presentation was a low calorie and zero cholesterol curry sauce. It was a good presentation but because of my earlier experience of selling low calorie cakes I was very skeptical. The great thing is that she had actually sold the product. She sold a lot of jars after appearing on QVC. Brilliant, but you only make money out of selling food lots of times - the repeat purchase is very important and this has not yet been proven.

It was all going well but then she dropped a bombshell….

She was trying to transfer assets from one company to another whilst leaving the debts in the original business. This is too sharp for me as a practice. However, the Dragon’s all came out one by one. I disagreed with the reasons the Dragon’s gave for not investing but would not have invested in her because of my skepticism about the appeal of fat free food!

We then had a presentation from an investor looking for £150,000 for 10% of an energy efficiency business. I am sorry to appear slow but after the presentation; I still did not understand what the business actually was. The entrepreneur was honest, hardworking and passed that critical test of putting his own money (substantial) into the business. Having lost money on investing in businesses I haven’t understood - I was never going to invest in this one and nor did any of the dragons.

The final business pitching tonight was a ‘green’ business which made packaging from recycling materials. They had great customers and it is a business in the moment. I would have invested in this business as unlike the dragon’s I liked the fact that the entrepreneurs had a bigger vision. My only concern would have been that it seemed that the entrepreneurs needed a lot of help on the business. I was delighted to see that at the very end they managed to secure the investment and got one dragon to change his mind!

All the best until the next one!

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I hope you have enjoyed the last few weeks of the reviews of this program. As you may know, I have my criticisms of the program but I am grateful as it has really increased the amount of interest that now exists in being an angel. This has got to be a good thing. The more angels there are, the more support hopefully there will be for would be entrepreneurs and society as a whole will benefit. This is my take on the program on the 25^th of August (my birthday!)

The first solution presented was a tool box which would fit on any ladder. As someone who hates DIY with a passion - this was never one for me but I really liked the father and son team who were presenting. They had a great sense of humour and I liked them. I did not understand the problem and the fact that they had not sold all of the units they had in ten months. They used the excuse that they were really busy with another business they run. The moment they said this, even if I was interested, I would have walked away at this point. I need to back entrepreneurs who are 100% focused on my investment.

Another fatal flaw in their pitch was their inability to listen fully to questions and answer questions. There is a fine line between enthusiasm and being over the top. This did remind me of pitches I have had where entrepreneurs believed they could badger me into seeing their point of view. This was a pitch where the entrepreneurs managed to snatch defeat from the jaws of victory! When pitching, please don’t forget to breathe, stop and listen to your audience. You are more likely to answer a question properly if you have listened to the question in the first place.

There was an unusual presentation from a sculptor looking for investment to complete his icon collection. He was very good and I liked the work he had prepared. His work was topical having just completed an image of Amy Winehouse.  The offer the entrepreneur made was also very compelling it was almost too good to be true! Upon questioning, the offer began to unravel but the entrepreneur knew his facts and was able to keep the interest going. Before the Dragon’s made their decision I had decided that I would back him. He ended up getting an auction going - brilliant. And he was smart enough to turn down a higher offer from one investor to take an offer from three combined investors. Brilliant - he decided to take smart money which would really add value to his business than dumb money.

It would not be fair for me to comment on a business which was seeking investment for an online furniture business as I am an investor in a competitor. www.mydeco.com I believe this offering to be superior and therefore my comments would be unfair. I will often do this at the beginning of a pitch before I hear too much. I think it is the ethical thing to do. There is nothing more disheartening than to say no after an entire pitch process when you knew the reason for saying no at the outset of the process.

I hate being horrible about people who put themselves through the Den. It is too easy to write this Business Angel Blog criticizing others whilst sat on a sofa. However, the person who came up with the solution for ‘soggy’ centers to frozen pizzas was really poor. He came across as dull and boring and failed to ignite any enthusiasm. He also made the fatal flaw of only having an idea. I define an idea as a business concept that has so far failed to establish market research, any proof of demand or have a sales plan. Simply having a patent or a manufacturing deal is not enough. I do not invest in ideas, only businesses. He had no sales strategy at all. Had he done some basic research, he would have realized that although there may be a gap in the market (people who have problem with soggy centers when cooking frozen pizzas), there may not be much of a market in the gap.

However, he was made an offer which he very wisely accepted. The Dragon’s took a punt and believed they could sell the product on the inventors behalf - lets see what happens.

Till next week.

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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.

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Last night’s Dragon’s Den was again very informative as there were lots of lessons to draw out. Here is my take on the decisions taken last night. Again - they are just my view as an Angel Investor and I hope you find it useful.

The very first business presented was a brilliant Entrepreneur who had come up with a number of inventions. The Dragons decided not to back this enterprise as the business woman who presented was all over the place and gave a very bad presentation. I looked at her pitch and just felt that she was not backable. I would imagine an investor would have a horrendous time trying to get information from her. Having said that, I think that someone could work with her as a mentor and get her to a stage where she was investable as she clearly demonstrated business acumen and she was full of honesty and integrity.

The Diamond Geezer (selling jewellery online) business presentation was equally bad. He made a big presentation when a small one with a few facts would have worked. He came across badly. The figures behind his business were staggering and it took Peter Jones to realise just what the business potential was. James Khan also found out that the business had a positive balance sheet and therefore there was a very low risk profile on the business.

He was made an offer for the full amount he wanted (£255,000) but the Dragons had asked for 40%. I was really delighted when he turned the offer down. I am sure some of you will think I am crazy for saying this - especially as an investor myself. I strongly believe in doing the right deal for everyone involved. You are trying to enter a partnership with someone over a long term. Screwing them is not conducive to that objective. In this instance the Dragons were looking to invest in something with a massive upside for them - but very little downside. I felt that the money the entrepreneur had already put in and the fact that he was on Page 1 of a Google search for Diamond Engagement Ring justified a higher valuation than around £600,000. Then when you add the fact that he was throwing in freehold property and writing off a loan for £150,000 - you felt it was daylight robbery.

I have always had a problem with the way sometimes deals are done in the Den. The whole set up works against the Businesses pitching and they are put under enormous pressure to accept a deal.

Despite my comments above, I totally shared the dragons outrage at the businessman who came up with the idea for control TV (limit the amount of TV your children watch through tokens). He already had a great business making a profit of £300,000 and yet wanted the Dragons to put £150,000 into his new business. He had only put in £2,000 himself for 85% of the business. In my opinion this is immoral. Despite having his own money - he was asking someone else to shoulder all the risk - whilst he would take most of the gain. People like him do make me angry!

Finally, the fashion designer - not one I would have backed  but well done Peter Jones. I have to be honest and say it was her charm that won the investment. The business on its own did not stack up. But well done to her - I really hope she succeeds - I liked her.

Your views?

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When I explain to people what I do at social events - the standard response is “so you are a dragon?” Personally, I like to think of myself as an angel!

I thought it would be good to write about my response to the episode last night as a business angel in terms of some of the businesses presented. I really would like to invite your feedback on this to see what you thought. (my apologies to readers outside of the UK )

The first noteworthy business was the band. They were very impressive as they had totally understood the concept of smart money. They were offered a better deal by Duncan, but declined his offer as they believed Peter Jones could do more for them than either Theo and Debra or Duncan. He competed as an angel on what he could bring to the party - not the terms he could offer. The Band decided to ignore the stake they would have in the business and focus on what the business would be worth with his involvement.

Lesson: As an Entrepreneur looking for funding from various sources - always go for the one that can do the most for the business

The guys who presented the water had sadly missed the point. Their solution involved a big capital expenditure (£700) and people are happy with the current solutions of tap water or bottled water - or the hybrid solution of Brita filtered water.

They had also failed to understand that having a door to door sales operation is extremely expensive. The margins would be very tight and the stock management would be a huge issue.

Some hilarity was provided by the fact that the water tasted awful. It reminded me of the time I worked for Fuji film. We were technically a much better product than Kodak - but it did not matter. The consumer perceived Kodak was ‘warmer’ and they bought film to capture ‘warm’ moments. It is not about what is technically better - but what the consumer wants.

Lesson: Does the consumer value the solution? (forget how you know it is better - do they value the difference with the existing solution?)

The Baby seat was a great example of inventing a solution to no problem (along with the pillow you can use on a train and the ‘strike pad’ which counted your calories!

Finally, my favourite was the couple who designed a duvet with a line in the middle. This would ‘help’ couples stick to their side of the bed. It was just crap! I can only assume they have no friends. Any decent friend would have asked them “why?” The fact they have spent money exploring this idea saddens me.

Anyway - that was my take on the pitches - what was yours?

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