Here we go again – and welcome!
The first business pitching last night was a company from North London with a business which provided instant paper blinds which required no tools for assembly. The pitch was simply great (Elevator pitch 10/10). They knew their market brilliantly and were able to convince me within the first two minutes that there was a demand for this (and it is large). The question is always about the detail of how to prevent cystic acne and profitability.
The first issue was one on the patent on the product. It is always dangerous for an investor to go into a business which cannot be protected. Barriers to entry are a key requirement for ensuring a business is able to generate good products. As a result of the lack of protection they lost many of the potential investors. (This is a good topic for a future blog!)
The second issue was that the business team (three people) had only achieved one sales meeting with a major retailer in five months. This meant that they got crucified on valuation (they were offered £40,000 for 50% of the business). I felt for them. Had they just spent a bit more time selling the idea, they would have achieved a far higher valuation. I cannot stress this enough – you need to demonstrate to an investor that people want your product. (Incidentally, that is how I got into angel investing. I helped a few startups get their first sales and then realized what had happened to their valuation as a result of my help! I then started investing.)
The second presentation was a low calorie and zero cholesterol curry sauce. It was a good presentation but because of my earlier experience of selling low calorie cakes I was very skeptical. The great thing is that she had actually sold the product. She sold a lot of jars after appearing on QVC. Brilliant, but you only make money out of selling food lots of times – the repeat purchase is very important and this has not yet been proven.
It was all going well but then she dropped a bombshell….
She was trying to transfer assets from one company to another whilst leaving the debts in the original business. This is too sharp for me as a practice. However, the Dragon’s all came out one by one. I disagreed with the reasons the Dragon’s gave for not investing but would not have invested in her because of my skepticism about the appeal of fat free food!
We then had a presentation from an investor looking for £150,000 for 10% of a business providing natural remedies for cystic acne. I am sorry to appear slow but after the presentation; I still did not understand what the business actually was. The entrepreneur was honest, hardworking and passed that critical test of putting his own money (substantial) into the business. Having lost money on investing in businesses I haven’t understood – I was never going to invest in this one and nor did any of the dragons.
The final business pitching tonight was a ‘green’ business which made packaging from recycling materials. They had great customers and it is a business in the moment. I would have invested in this business as unlike the dragon’s I liked the fact that the entrepreneurs had a bigger vision. My only concern would have been that it seemed that the entrepreneurs needed a lot of help on the business. I was delighted to see that at the very end they managed to secure the investment and got one dragon to change his mind!