dragons' den

www.northwestbusinessinsider.com4 insider MAY 2015

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ARE THE DRAGONSGOOD FOR BUSINESS?

ENTREPRENEURS HAVE BEEN TRYING THEIR LUCK IN FRONT OF THE TV DRAGONS FOR A DECADE. JENNY BROOKFIELD

LOOKS AT HOW NORTH WEST BUSINESSES FARED, AND ASKS WHAT HAPPENED WHEN THE CAMERAS STOPPED ROLLING

Surrounded by wads of crisp bank notes, the impression on Dragons’ Den is that money is no object. For ten years view-

ers have watched multi-millionaires invest their own cash in businesses for a share of the equity.

With filming on the 13th series taking place at Salford’s MediaCityUK, Insiderdecided to ask how much have the Dragons actually invested? The answer is surprisingly little and research has found that only half the money pledged on the TV actually goes to the companies pitching for it.

According to our investigation, £14.8m has been pledged during the 12 series completed so far – which equates to £1.2m per series – a drop in the ocean considering Peter Jones’ wealth alone is estimated at £475m. Clearly he is shrewd about which businesses he should or should not invest in.

More surprising is the discovery that not all the deals seen on TV go ahead, although there’s no suggestion of fault on either side. The rules listed on the BBC’s website state that the deal agreed on the day is an unwrit-ten agreement, which neither party is legally

obliged to complete, following standard due diligence checks and additional meetings.

According to telecoms company Tiger Mobiles, less than half of all pledges became investments. The Leeds-based business, which unsuccessfully applied to be on the show in 2008, carried out research into all investments made in the first 11 series. It found that 76 out of the 143 investments agreed (53 per cent) never went through. In monetary terms, of the £13m pledged during the first 11 series, just £5.8m was invested.

The BBC failed to provide a comment, but

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THE BIG QUESTION





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INSIDER CAUGHT UP WITH SOME NORTH WEST ENTREPRENEURSWHO GOT GRILLED ON DRAGONS’ DEN AND ASKED: WAS IT WORTH IT?

experienced former Dragon Theo Paphitis spoke to Insider during a visit to Manchester Grammar School. “Don’t forget it’s a TV show,” he said. “It engages, stimulates and inspires people. You’ve got the magic of TV, and PR. It’s done as an entertainment show but it’s also educational and makes business simple. People complicate business.”

Paphitis invested in 29 companies during his nine years in the den. “I’ve had the good, the bad and the ugly,” he said. “I’ve lost my money on some pretty quickly. I came in for the second series, invested in some stuff and very quickly got some real good lessons.”

Viewers watched the entrepreneur pledge £250,000 into trading hub Zapper in ex-change for a 30 per cent stake. “He declined to take my money in the end,” recalled Paphitis. “I thought it was a brilliant idea but it needed a lot of money. It was a tough nego-tiation. When he got home he wasn’t happy. That didn’t go through.”

He had more success with Bog in a Bag, which consisted of a stool that transformed into a toilet with the help of a hole and a degradable bag. It wasn’t to everyone’s taste but Paphitis was won over by Kate Castle’s excellent pitch and bought 30 per cent for a £50,000 investment. “I’m still in that investment and I love it,” said Paphitis. “That epitomises the difference in my investment criteria. I started investing in the people rather than the product.”

One of his best investments was in Magic Whiteboard, alongside Deborah Meaden. The founders accepted £100,000 for 40 per cent equity in their business. “They have done brilliantly,” said Paphitis. “Last summer [man-aging director] Neil Westwood came to see us and said we’ve been great but he bought us both out. It made up for all the rubbish investments I made. It was a big multiple.” n

PRIMAL PARKING“A lot of people say they don’t pay the money and sometimes don’t follow through, but you have to remember they don’t even know who’s going down the stairs,” says Harrison Woods, who appeared on the programme in April 2012. “They have to make a snap de-cision on your character and how believable you are in a short space of time, and then a lot more goes on afterwards.”

Woods, at the time the youngest person to enter the Den at the age of 22, cannot speak highly enough of the TV show. The Bury-born entrepreneur left with £60,000 from Theo Paphitis and Peter Jones for 40 per cent of Primal Parking, a business that allowed people to rent out their unused parking spaces. Thousands of users flooded the website after the broad-

cast, although talks with advisers led to him selling the business without the investment going ahead. But Woods, who had agreed to double the 20 per cent equity he offered, be-lieves he left with something more valuable.

“Theo and Peter knew that by shaking my hand on national TV would give me so much credibility,” says Woods, who was in his second year at university. “Looking back I don’t believe I was really ready to go into it and I think they knew that I needed to focus on university, but they knew how beneficial their backing could be to me.”

Woods is now co-owner and managing director of YourParkingSpace and has

grown the business from generating £1,500 per month to £150,000 per month in a year. Now based in Canary Wharf, London, lead-ing a team of 16 and following an acquisition in Bristol, he

says: “I’d attribute all that to Peter and Theo’s encouragement.

People who come out with a negative experience are quite naïve. They have to make a snap decision on a show, whereas there would usually be six months of due diligence.”

MOUNTAIN TRIKE Tim Morgan made his pitch in 2013, asking for £100,000 in exchange for five per cent of his business Mountain Trike, which designs and manufactures all-terrain wheelchairs. The Nantwich-based downhill mountain bike racer came up with the idea while at Bath University, after witnessing the injuries

“THEO AND PETER KNEW THAT SHAKING MY HAND

WOULD GIVE ME CREDIBILITY.”

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THE BIG QUESTION

incurred by those taking part in the sport, and was described as “incredibly inspiring” by Dragon Kelly Hoppen.

He was offered the full amount in exchange for 15 per cent of the business from Deborah Meaden, but said he could not budge on the five per cent due to the involvement of others in the business. His £2m valuation was branded “bordering on the delusional”.

Morgan says: “I was in there for more than two hours so it was pretty draining, but they were all very positive about the product. A lot of the people you see will be looking for investment to get off the ground. We’d been on the market for three years and I’d already diluted my share to get to that point, so I didn’t have a huge share to give away.”

Though he didn’t walk away with the cash, the impact of being on the show was clear. “On the night of the show we had more than 3,000 hits on the website, we normally got that in a month,” he says. “It would have been fantastic to get a Dragon on board but I had to stick to my guns.”

Morgan is working on adapting the trike for people with limited finger grip, for example those with spinal injuries. “We have something pretty unique in this industry, we sell 100 a year which, for a small team of five of us, is pretty impressive,” he adds. “We’re just cracking into the US as well, and we’re seeing a good increase in sales.”

GARDEN GOPHER On the Wirral, Rachel Price managed to sell her entire stock of 600 products within six weeks of her three-and-a-half hours in the den in 2007, pitching her Garden Gopher trolley after being approached by researchers

Price, who is now marketing manager for Wirral vehicle loader and conveyer manufac-turer Sovex, says: “It gave me the exposureI needed, it was just a shame how it ended.”

REDFOOT SHOESTim Smith, based in Rossendale, had the dis-tinction of asking for what would have been the largest investment in the show’s history in 2011. Pitching for £300,000 in exchange for 10 per cent of Redfoot Shoes, Smith was praised for his “first-class pitch” and “brilliant-ly made” products, which included foldable ladies’ shoes and boots. But the Dragons refused to make him an offer, because the business was part of a group, saying this made the ownership too complicated.

Taken to Pinewood Studios, where the show was then filmed, at 5am on a Thursday, it was 6.30pm the following day when Smith finally got his two-and-a-half hour grilling. “Peter Jones did make me an offer, which they didn’t show on TV, but it was for 50 per cent of the business,” says Smith.

“It was nerve-wracking but it’s a TV programme and they want people to watch it. As long as you know your numbers and products and have researched it well, these people are the ones to help you. I think the Dragons missed a big opportunity, though. We’ve had fantastic growth since the show and profits are strong.”

Redfoot Shoes, which sells through House of Fraser and Irish retailer Avoca, has a turn-over of £4.1m and includes the subsidiary Goodwin Smith. It launched in 2013 to offer classic men’s footwear with a modern twist. The shoes featured on the show sold well “for the novelty factor”, but copied versions have driven the price down, he adds.

“We turned over £140,000 in 2007 and our projected figure for this year is £5.8m,” Smith says. The business has also been approved on crowdfunding site CrowdCube and will be asking for £400,000 for stock and marketing.

following funding from the MerseysideSpecial Investment Fund.

With orders from B&Q, sales through garden centres and talks with Sainsbury’s and Woolworths, several of the Dragons were unsure why their £150,000 for 15 per cent of the business was needed. While they were impressed with her product and success so far, her revelation that the business had debts of £220,000 and her valuation of the compa-ny only led to an offer for the full amount for 50 per cent of the business.

Price, who left with nothing, says: “You get no editing rights, but I was happy with how it came across and I don’t regret not taking the offer. I think once you’ve been on it you don’t worry about presenting to anybody anymore, because nothing can be as bad as going in front of the Dragons.”

As it happened, investment from a Dragon would have been fruitless as Price experi-enced problems with her Chinese manufactur-er and the Garden Gopher business ended.

“IT WOULD HAVE BEEN

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