December 7

Which Investors Did You See this Week?

Hello readers. Welcome to the review of the last episode of the current series. I hope you have enjoyed these blogs – what should I write about instead on a weekly basis?

The first presentation was from the founder of “Baby Loves Disco”. The business works very well in the USA and someone wanted to buy the franchise in the UK. I was confused straight away. Why is a successful entrepreneur prepared to give a franchise to someone who needs to go to Dragon’s Den to get funding? Ignoring this, the business had very strong projections going forward. However, the US business has performed very poorly. $50,000 profit for a year after being based in 30 cities is very poor.

Then they do the thing that really annoys me as an investor. They talk about “the real revenue coming from sponsorship of the best work boots for flat feet and brand exploitation”. If that is what you are pitching – then pitch that. I see too many businesses which present one thing, but then say the revenue will come from another area.

The fact that they had got Universal records to sign up for a deal with them was great – but the fact that they had not put any money into the deal suggests that Universal did not value the “brand equity” that highly. To my complete surprise they were made an offer of the full £100,000 but for 40% of the business. They tried to negotiate and they did a good job but eventually they declined – Idiots! (I don’t often say that when people say no to a deal).

This reminded me of a business I really liked about four years ago. It was a food business based in Croydon that had gone nowhere in twelve years. I liked the brand and the food offering and asked to see the founder. We met and I spent a lot of time trying to work out a proposition for him (at great expense I must add) to try and get a roll-out plan going.

The person in question turned out to be very greedy and actually just wanted a very high salary. He wanted a ‘consultancy’ fee for every store that opened up on top of a massive equity stake. The deal fell through and I backed another instead. I saw the original entrepreneur two months ago and he still had the one store and was lamenting the fact that he has not moved beyond one store. As always, he saw the fault as lying elsewhere and not with his own attitude.

The second proposition was a non-spill water bowl for a pet (dog). It was a great idea and she had already sold 22,000 units. She was looking for money to expand into the USA. (First tip – she should be presenting to US based angels) I liked it a lot and decided in the first 5 minutes that I would like to explore this. My problem is that I would like to see some US management on the board. The US is a very difficult market to crack – a very tough market.

It requires a huge amount of cash and expertise. So if you are looking to propose a business plan which requires sales into a particular sector/ region, etc. – make sure you can demonstrate that expertise on board. She also was going into the US market too soon. I learnt from my experience at a past company that you have to have strong foundations before you start building expansion plans. This was the reason Theo (one of the dragons) gave for not investing.

The final presentation was from a company that created a waste recycling business focused on the construction sector. The most impressive fact was that in just 15 months, the business had built up a turnover of £350,000. This business was really taking advantage of STEEPL factors. The business environment is going their way and I would have wanted to find out more with a view to backing this business.

I would want to know about management expertise and credibility. The great thing was that the business will be taking advantage of changes in the law which will make this a mandatory purchase rather than a discretionary purchase like router table plans (I love that as it becomes a much easier sell). As the presentation went on, I liked the business more and more. Not surprisingly he was made an offer but I was surprised that he was not made an offer from every dragon. He was made an offer for £200,000 for 40% of the business which he accepted. For a start up in a growing sector with £350,000 of turnover, he was robbed! I wish him the best of luck. If the deal falls through – I hope he contacts me!

Well I hope you have enjoyed reading these reviews.  Before the next series there will no doubt be other business programs to review. Please let me know of any great business programs that catch your attention!

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