I love Dragons’ Den. There, I said it. I know some business folk are a dismissive of the show because it can glamourise the investment process and potentially mislead around the rigor involved in securing funding – but I just love it! You can also accuse the show of sensationalising some of the issues which could literally make or break a young business but we’re all adults here so surely we know what we’re letting ourselves in for?
There are many reasons to love The Den and if it is used correctly it can be the perfect platform to propel a small business to the next level which is a fantastic gift to the small business world. However, I love it for one reason: the business lessons. It’s a marvellous microcosm for the business world and emphasises some of the amazing abilities and frustrating failings of the entrepreneurial world.
I have watched the show all the way through but this series I decided not to be a passive observer and get stuck in to offer my thoughts on any foodie that makes their way passed Evan’s lair in the basement and through those ominous sliding elevator doors. So this series I’m going to pull out some of the business lessons gleaned from any brave foodie to enter The Den. I’d also like to point out that what follows is not a criticism but a critique; even if it goes badly wrong, anyone that demonstrates the stones to go on TV to bare all has my respect!
Season 15: episode 2
Entrepreneur(s): Liam Sheriff and Craig Newbigin
Company: Natural Nutrients UK
Elevator Pitch: high quality supplement brand that offers 100% transparency and doesn’t contain artificial nasties.
Asking For: £100k in exchange for 10% equity
What Went Well?
The Products: not only are the products on trend and relevant but the duo have proliferated sensibly and developed beyond the functional category. This may present some practical issues when working with retailers whose individual buyers may only look after part of their portfolio. However, having a range that differs in volume and margin is a powerful position when managing margin mix.
Reasons to Believe: having Holland & Barrett on board for a business like Natural Nutrients is a massive coup and absolutely the right retailer at this stage. This will have been a fantastic selling point.
Peter Jones’ Empathy: this isn’t something that you can prepare for but this was fundamental to the success of the pitch. The pair were subjected to harsh loan terms to secure previous investment and not many businesses get offered the opportunity to have a business leader support them in improving that situation. How’s that for belief.
What Could Have Gone Better?
The Numbers: margin is an issue that you can’t escape from and this company was walking a tight rope at a really early stage in the business. The retail price point is high and the margin they make is low; it’s a slippery slope from here but not unmanageable.
What Other Lessons Can We Learn?
Maintain Control: Liam Sheriff did a great job in negotiating a way to secure the investment but have an option to maintain more than a 51% share in the business. This will be important to the business going forward and ensures that there is a clear head driving direction. The inability to make a quick decision can be crippling for some small businesses.
Outcome: Success! 40% equity given to Peter Jones and Tej Lalvani with a 5% optional buy back if the business hits 2018 targets.
Would Munkee invest? No, I’m afraid I’m too risk averse for this one. The market is very clustered and dominated by brands backed by huge companies. I’d also have more concern over the terms of the loan and what was agreed in the past, for me that questioned the credibility of the business. However all Dragon’s made an offer so it looks like Munkee may be wrong!