Pitching in the Dragons’ Den

Pitching in the Dragons’ Den

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This episode of Dragons’ Den was all about a good investor/investee fit. How do you best present your business idea – and have you chosen the right investors to pitch it to?

When pitching your business to potential investors, there are three things to bear in mind:

  • What is the value of your pitch?
  • Do you have a value proposition?
  • Do your numbers work?

This week we saw a variety of investors pitching diverse businesses ranging from a word game to an online funeral planning service. But most of them had one thing in common – they failed to tick all of these boxes.

Clever idea not enough

The first entrepreneur before the Dragons was Crystal Rose. She was hoping that they would invest £80 000 in her Scrabble television show, which will be supported by a board game and mobile phone apps. After an entertaining demonstration of how the game would work, Crystal went on to explain her idea to the Dragons. However, not clearly enough, as the Dragons felt that they didn’t have sufficient knowledge of the television industry to add value to her venture.

Despite Crystal having done her homework and having previous experience in the industry, none of the Dragons wanted to invest in something they knew nothing about.

  • The lesson: Unlike a bank, investors don’t just offer money in return for interest, they usually want to have a say in the business, so it’s important to choose investors who have some experience in your chosen industry so that you can benefit from their business acumen.

Your idea has to be viable

When pitching your business idea to investors you need to be able to show that it is a viable proposition that will provide them with a return on their investment. Brothers Tony and Sid Heath wanted £50 000 for their idea for a gadget that would override the automatic cut-off often installed in showers at camping sites and gyms.

 

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However, they failed to show how the idea would provide a return and the Dragons were dubious about the viability of the gadget, bearing in mind that the cut-off system is aimed at water-saving.

Rebecca Jane’s idea for a public relations firm with a difference fell into the same trap. While the basis for PR should be relationships, her business model didn’t emphasis relationships and the Dragons felt that she was taking a shotgun approach to publicity, one that wouldn’t succeed in the long run. She, too, left empty-handed.

Passion and enthusiasm can sway investors

22-year-old student Harrison Woods wanted £60 000 for a 20% stake in his parking bay letting agency. He also sells barriers that prevent people from parking illegally.

The Dragons pointed out that in order to succeed, a business had to meet one of three criteria:

  • It has to have a key differentiator
  • It has to be a new idea
  • It has to have first-mover advantage.

Harrison’s business idea met none of these criteria, however the Dragons liked his enthusiasm as well as the fact that his persistence had seen him sell an impressive number of parking bay barriers. As a result they invested in his business, albeit for a far greater stake than he initially offered.

  • The lesson: It’s not always about the business. Sometimes an investor will take a chance on you, as the entrepreneur, as was clearly the case with Harrison. The Dragon’s saw potential in the young entrepreneur, and wanted to be a part of his journey. Passion and a willingness to work, and take advice, will go a long way.

It’s not just about the money

Harrison’s pitch also proved that sometimes you need to be prepared to give up a far bigger stake than you initially wanted in exchange for the investment and wisdom that the investor can bring. A lesson hard learnt by gardening duo Michael and Joe Smith, who had a brilliant business concept but proved so hard headed that the Dragons decided not to invest in the business.

Investors need to know that you will take their advice on board and implement it to grow your business and they questioned Michael and Joe’s ability – and willingness – to do this, as the duo were unable to even negotiate a stake in their business with the Dragons. Investors want an open-minded and willing business partner and unfortunately these two proved to be neither.

Know your numbers

Final Fling businesswoman Barbara Charmers presented a quirky funeral planning website business idea. While the idea ticked all of the three criteria for a successful business, Barbara’s poor grasp over her numbers (and the belief she could turn a 75% profit in year one) proved to be her undoing, and she left without an investor.

Know your Dragons

When choosing an investor for your business it’s always a good idea to understand their mandate – who they are and what their area of expertise is. As this episode has clearly shown, investors can only add value to industries that they are familiar with. Here is an overview of this season’s Dragons:

  1. Peter Jones – telecommunications giant
  2. Theo Paphitis – retail magnate
  3. Duncan Bannatyne – hotel and health club owner
  4. Hilary Devey – Queen of logistics
  5. Deborah Meaden – leisure industry expert.

Are you an entrepreneur with a viable new idea and an investor-ready business? Could you handle the heat in the Dragons’ Den? Enter BBC Entertainment and Entrepreneur Magazine’s exclusive Dragons’ Den Series 10 competition and you could win a business makeover worth R140 000 with business guru Pavlo Phitidis and Aurik Business Accelerator.

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