This week’s Dragons’ Den was a strange one, with controversy, questionable decisions, excellent products leaving with nothing and bizarre products securing investment. What kind of lessons can be learnt from an episode like this?
Business over products
The show’s last two pitches were similar in many ways, but Alison Grieve left with nothing for her ergonomic tablet holders, G-Hold, whilst Jamie Lawlor left with £40,000 for his slightly ridiculous Kids Flush: a “button for a button” that encourages children to flush the toilet. Both products seemed too limited to support investment, so why did Lawlor succeed where Grieve failed?
The Dragons all had a problem with the business decisions that Grieve had made. Before developing G-Hold, her business had made Safe Tray, a non-slip tray holder for restaurants. Despite having licensed the product successfully and brought in over £300,000 revenue, the company decided to focus on the unproven G-Hold instead. The Dragons simply could not understand why the entrepreneur had abandoned the money-making product for something else and because of this failure to understand the business decision all five pulled out.
The next entrepreneur, Lawlor, fought through the Dragons’ skepticism to win over Touker Suleyman, despite the fact that his product seemed just as limited as Grieve’s G-Hold. The Dragons had greater faith in his business skills and Suleyman, in particular, liked the inventive spark that promised more products in the future. In the end, Suleyman felt like he was investing in a business, not just a product.
Whose help do you need?
When Dan Hubert opened the show with the bold request of £200,000 for 2% of his business, Appy Parking, he certainly raised a few eyebrows. Such a high valuation of the company is almost unheard of in the Den, and it’s even more unheard of for such a pitch to succeed.
Hubert did receive an offer - a joint offer, in fact - with Peter Jones and Nick Jenkins offering half the money each in return for 20% equity between them. Although the Dragons came down to 15%, Hubert could not be persuaded to part with that much equity and he turned down the offer to leave with nothing.
The lesson here is that you need a clear idea of who you need to invest and help you with your business. Hubert’s pitch was very different from many entrepreneurs in the Den, and he was asking for a very different sort of investment. His product, whilst being undoubtedly brilliant, just wouldn’t work with a typical Den investment, where the Dragon would look for a reasonable share in the company and bring a lot of clout along with that investment. Hubert may have been better served by looking elsewhere.
Get your USP right
A perfect example of a pitch that rapidly slipped away from the entrepreneur is Mustafa Mehmet’s attempt from this episode. Asking for £70,000 in exchange for 35% of his nail polish business, Well Gel London, the former car-sprayer started very strongly, but fell down as his product turned out to be missing the distinguishing features that he claimed it possessed.
His assertion that the product was faster than other gel nail polishes was dismissed by Sarah Willingham and Deborah Meaden discovered from his paperwork that the product was not as non-toxic and natural as he claimed. With these claims debunked, there was nothing to make his product stand out in a very crowded market and the Dragons swiftly backed away from any potential deal.
This demonstrates the importance of your products having distinct, demonstrable USPs, especially if there’s a lot of competition around. If there is nothing distinctive about the product, or if your claims turn out to be false, then customers are going to run away as quickly as the Dragons did.