Well we saw a range of different pitches in the Den last night from shoes to cleaning materials to an online recipe community. As always, there was a lot of learning points.
Nerves can either get in the way or drive us on. The first lady who secured investment was nervous but she held her nerve despite some intense scrutiny. By contrast another business owner who was offering wine in a sealed plastic glass seemed overcome by nerves.
The issue of pricing comes up week after week. Price too high and you run the risk of being viewed as unrealistic. Price too low and you probably have a business model that is not attractive to an investor. I am sure pricing is an area that challenges most businesses.
Don’t over value your business
While there are many variations and models out there for valuing a business, what is clear is that it is important to do a sense check. I am sure that if more businesses that were seeking funding from the Dragons’ stood back and asked themselves if the valuation made sense, there would be a greater probability of investment.
Be willing to engage in a sensible negotiation
Last night we saw a common situation where a business (the infection busting cleaning products) is growing, knows that the help of a Dragon could make a huge difference but was inflexible when it came to negotiations.
You need to demonstrate your belief that you will deliver
The infection busting cleaning products business was a classic example of this. The business wanted to give the investor a 5% stake, had clear growth profit targets and was willing to offer a 10% stake.
James Caan made an offer for all of the money but for a 30% stake. He did however, offer to return 10% back to the owner if the promised profit targets were met.
Essentially he was offering a risk sharing agreement. You deliver what you said you can and I will reduce my stake. The business owner for whatever reason decided not to accept the offer.
If you want someone else to risk their money you need to be willing to show that you will take some risk.
So what did you learn from this weeks Dragons’ Den? Leave your comments with your insights.
I did think it was odd that the infection busting man turned down James Caan’s offer. Was it that he was unwilling to take a risk? Did he not have the authority to make the deal (as he had a 50% share partner)? or was there another reason?
I thought the woman’s shoe idea was brilliant. I would definitely want a pair of those but she almost lost it due to the pricing.
Also, I thought the wine glass man kind of undersold his product. He briefly mentioned that he’d sold his product at a red hot chilli concert so there was evidence that it would sell. I thought that he could have researched other venues like music festivals? – maybe he did but he didn’t mention them . And also maybe he’d gone to the Den too soon without first securing a proper confirmation of an order.
Thought it was a really good episode this week.