Dragon's Den Ep2

I had fun writing about this last week, so here's a brief rundown of the second episode. If you don't know about the show, it puts entrepreneurs in front of potential investors (the dragons) so they can pitch their ideas and hopefully walk away with the funding they wanted. It's great train-wreck TV, you get to see pitches fall apart and crazy ideas brutally dissected. If you're in the UK, you can watch it here on the BBC's website.

First up were Lee and Howard with Kardoctor. The idea here was to have a premium rate phone service which people could call to get advice on problems with their cars, a take on PC support and medical support lines. The pitch went off track when Lee was thrown by the negative comments, and got worse when he was asked for figures. It wasn't helped when the investors gave two sample problems (one vague, one very specific), and the advice in both cases was to take it to a garage. The investors were skeptical about the amount of help that could be given over the phone. In most cases it was felt that the operators would be drawn into messy problems, conflicting advice and trouble with garages, and that there would be no way to recoup the costs for the time taken to sort everything out.

Takeaway: Time isn't free, understand all the costs of the business you're taking on, and how it relates to the potential return. These guys didn't seem to have a good grasp of the cost of their staff time, and seemed prepared to take on problems that would cost them more to solve than they could ever hope to recoup.

A quick pitch for some crude novelty figurines didn't go well. It made everyone laugh for a moment, but no-one was interested in investing, or wanted to be involved with the project.

Takeaway: Just because people laugh when they first see the product, it doesn't mean it's a good business idea.

The next one Empty Me, came from a strange pain. Apparently the pitcher's hatred for picnics had driven her to invent a new picnic basket (unless I misheard). Anyway, this was the first good product of the show: a waterproof bag that unfolds to a soft blanket with a tray. She was only looking for a £50,000 investment, and was prepared to give up 25% of the business. The bag was already selling in various retail outlets, it wasn't setting the world on fire, but it was selling.

This was the only one of the night that made me want to scream at the TV. The product seemed to have plenty of potential, but the entrepreneur had very little ambition, and was more interested in creating more products and building a brand, than in trying to maximise the sales and potential of the picnic basket. It was infuriating viewing. None of the investors wanted to work with her, because it seemed unlikely that she would have the drive or ability to see the thing through and make it work. Despite all that, she was offered the £50,000 in return for 51% of the company. She turned it down... I think it was a bad move.

Takeaway: This business needed a business/marketing geek, the entrepreneur was a product design geek in the same way many of us Micro ISV types are tech geeks. It's nice to believe we can do it all, but sometimes we just can't.

A stone hotplate for cooking steaks followed. The problem here was that although they liked the taste of the steak, they didn't think the product had potential. The most interesting part of this one was the market research. Apparently this guy invited people round for dinner and cooked them great steaks on his hotplate. Unsurprisingly, the market research was entirely positive.

Takeaway: If you're going to do market research, make sure it's real, relevant and appropriate. Don't just ask your friends.

No interest at all in a kids-only hairdressing brand.

The best pitch of the show was from Peter, with his crazy easy exercise chair. This was a lot of fun, Peter reminded me of an eccentric inventor from a million old movies. The chair basically had a multi-gym built into it, and had all kind of extensions and addons for different exercises. The investors all liked the pitch, but couldn't really see the market, and Peter's understanding of the market seemed flawed. I'm sure I remember a lie from a Guy Kawasaki post which said the market is xxx million, so if we just get 1% we'll be laughing. This guy used the exact line, about the leisure industry. On national TV.

It didn't help that the chair looked silly as an exercise machine, and ugly as a chair. Still, a great guy, entertaining pitch, I hope he has fun with it.

Takeaway: Know who is going to buy your product, don't just assume you can grab x% of some wider market.

A mobile scaffolding platform seemed to fail mostly because they'd been trying to sell it for 10 years without much success, and just wanted the money to keep trying.

Takeaway: I'm not saying give up, but looking for investors to keep trying something that doesn't seem to be working probably isn't the best plan.

A big floor sized board game to help kids get fit was too boring, an a glue based hair removal product failed to attract interest.

Last up was a solid proposition from Gary of Alpine Cleaning. They had contracts with service stations to install Truck Washes, and needed the money to move them forward as quickly as possible.

This was a great example of knowing what you're talking about, and having all the numbers ready. The investors were skeptical about the passing trade and compared to concept to car washing. Here the entrepreneur could have been bullied, but instead just explained the differences, and how hauliers tended to have a budget for regular truck cleaning, and that the drivers had to stop in the services anyway by law to take a break. His numbers were challenged, the utilization figures he used for his profiforecaststs seemed unreasonable. Again, he stayed fairly calm, and he had a very favorable sounding break even utilization figure ready when he needed it.

He was left with 4 of the 5 dragons arguing over the opportunity, although they wanted 40% for £200K, rather than the 20% he was offering. He did his best to haggle them down, and ended up with an offer of 35% from two investors and one of 40% from the other two. In the end he took the 40% deal based on who he thought he would like to work with.

Takeaways: Be confident and know your numbers. The best investors will also bring their time, experience and contacts. If you're going to have to work closely with someone choose wisely, it's not all about the money.

So there you go, great TV. Obviously I might have misjudged some of the participants and their businesses, but I'm only basing my opinions on the highly edited segments in the show.

Tags: dragon's den entrepreneurship micro isv