Adam Gore, managing director of online retailer www.find-me-a-gift.co.uk, gives his opinion on the final episode in series 10 of Dragons' Den and the lessons to be learnt in the art of pitching.
With only a short amount of time to convince the Dragons to invest, first impressions really count. Impressing multi-million pound investors however is no easy task. Being well prepared for the Den and any questions you might get asked is essential to prove to the Dragons that you and your idea is worthy of their time and investment; pitch it perfectly and you have a great chance of securing that all important investment.
First up in the Den this week was Naomi Kimble and Helen McAvoy, co- owners of frozen cocktails business, Rocktails. There was some doubt over the product’s scalability but confidence and knowledge of their market made this pitch a tempting one for the Dragons. It was negotiating which clinched a deal the entrepreneurs were happy with. By doing this, the owners of Rocktails got 10% back once they make £500,000 profit.
The entrepreneurs demonstrated that it’s important to have a maximum and minimum percentage in mind when pitching. If the Dragons won’t reduce their equity demand then offer a percentage trade back once the investor gets a return.
Next up was Geoff Meers who was looking for a £100,000 investment for a 20% share in his baby car seat business. The entrepreneur confused some of the Dragons with his business model and uncertain plans for the future. Their questions also revealed the entrepreneur had severely underestimated the cost of developing and testing the product.
Geoff’s pitch taught us some valuable lessons: listen to the Dragons’ questions and answer them honestly and with confidence; they can see through lies, flannel and uncertainty. Also, be certain of the costs of bringing a product to market. Products that are required to meet safety standards require extra money to test and develop for every major international market, especially products for babies, children or motor vehicles.
As Deborah said, it is crucial to convince the investor that the business is worth investing in. They want to be assured the investment will recoup five to 10 times their investment within two to five years. Their enthusiasm to invest is directly related to the amount of money they get back and the speed they can get it. Here Geoff failed to convince the panel so the investment opportunity slipped through his fingers.
Mark Tilley brought his roof rack that doubled up as a boat into the Den next. He was clear about the number of products he had sold so far and demonstrated a sound knowledge of his business, market and figures. It was important for him to demonstrate strong sales figures, and potential sales, to convince the Dragons to invest. They after all expecting a return on their investment!
It was Theo Paphitis’ passion for boating that presented an opportunity for the entrepreneur to take advantage of. If you know that your product fits with a Dragon’s hobby or interest, make sure you really sell the idea to them in your pitch, as it will significantly increase your chances of investment.
Last up was John Spence, managing director of Megaflatables. The company had adapted the idea of an Air Dancer for promotional business use and made the proposition an attractive one for the Dragons. If you can take a good idea and improve it in a way that cannot be copied but sell it at the same price or cheaper, this will grab the attention of a potential investor as last night showed.
The entrepreneurs didn’t fall into the common trap of asking for too much money or overvaluing their business. They pitched it just right so they could increase their initial offer to the sort of percentage usually asked for e.g. between 30 and 40%, without drastically overestimating the value of their business. Remember the Dragons only accept less than 20% if the business has amazing profit generating opportunities.
Despite securing the investment, however, there were still lessons to be learnt in the art of pitching. One of the shareholders was absent from the initial pitch: he needed to be in front of the Dragons from the start so they could see who they would be working with.
Remembering your figures, researching the market and understanding your business all help in the Den. Making your pitch clear, asking for a sensible equity and not being afraid to negotiate should help you succeed and take your business to the next level. Being likeable and using a little humour doesn’t go amiss either. After all, the Dragons have to work with you so it is much better if they warm to you!