How to become a Dragon?

In message , snipped-for-privacy@hotmail.com wrote

Does it matter?

This is the whole point of the program. The producers could send out a one page fact sheet stating what is required - but that wouldn't make entertaining TV..

Especially the one who sits in the end seat.

Surely that investment was about making a fast buck on a toy that would be trendy for a short time?

That investment wasn't in the 'circus' part of the business.

Just send me £100,000

The dragons only seem to invest in companies with a track record of making lots money already - or in a business with a product with a low buy in and high sale price.

"Alan" wrote

Do you mean the one on the left whose company went belly-up (Red Letter Days), or the one on the right who is worth 250million?

Yes, massively, like it or not.

In message , snipped-for-privacy@hotmail.com writes

I actually wonder how they are selected to go on the show. Presumably there is a queue a mile long, and presumably they are interviewed by the shows' producers, (or whoever). I would therefore expect that the producers know who is likely to be attractive to the Dragons, and who is definitely not. Yet we see a bunch of losers.

This suggests a few possibilities:

1) The Dragons have a finite amount they are willing to invest, and they cant afford to use it all up in one or two shows. 2) Part of the attraction of the show is seeing the Dragons tear apart the losers

or both.

In message , Tim writes

But well and truly milked so that she still has the odd hundred thousand to invest on Dragons Den.

As any Dragon might tell you, you learn through your failures. One thing is clear, many people have trouble doing simple maths. They come in, want 150K for 10% of their company and can't make the mental leap that they are valuing their company at 1.5Million while it is still a vague idea.

I think the Dragons do get it partly wrong though. The Yorkshire geezer with his water saving idea for loo?s had a good product, he would have been impossible to work with though. However the Dragons went for the WiFI in Marina?s bloke big-time but surely any Marina just needs to subscribe to ADSL and put up a reasonable antenna to give boat-owners WiFi access?

That said, I think you learn more about business watching Dragons Den, Working Lunch and the Apprentice than you do on an MBA (MBAs will disagree but hey I have run my own business so could probably tell them a thing or three).

The important points seem to be:

1. IP - you'll see this on working lunch too when the cover investments.. You might have a great idea but if you don't at least hold some tangible assets such as patents anyone can rip you off.
2. Someone the investor can trust, and trust to get on with things
3. i. no lying in the pitch ii. if your business is already up and running are you following up on sales, chasing down leads ? basically hungry for success (few are) iii. Are you running after lots of other ideas at the same time?
4. Facts and figures ? do you have sales forecasts, turnover projections, marketing and startup costs, what about competitors?
5. Don't ask for money to pay your wages

Those are just some points, I'm sure you can come up with more.

The sums asked for are not that great - I have trouble seeing how some of the business can get off the ground, although that is part of the game of the vulture capitalist. Keep them on short rations and get them to sell you more of the business for further investment. You want to be looking at owning a lot of the business by IPO time.

Unfortunately missed last night's show - snow on the roof has broken the satellite dish. Is it repeated?

The other thing that surprises me is how arrogant some of the people are

- they are asking for money and yet it is like they are offering these guys some fantastic investment opportunity and they should be grateful.

It is something I see personally a lot in some of the work I do. Chancers who might just cut me in on some of their action for some totally outrageous sum. No thanks mate, I'll pass.

But maybe it works with some people?

If her compant went belly-up then maybe she won't have that sort of money lying around to risk on other people's projects. Perhaps mingling with rich, successful businessmen is a hard habit to break.

"davidof" wrote

Tee hee. Someone complaining about people not "doing simple maths", and getting it wrong themself! Actually, wanting 150K for 10% means they are valuing it at 1.35 Million (not 1.5).

Otherwise, agree all points!

No, if they valued it at £1.35 Million then a 10% share would only cost £135k

I'm afraid it is "Tim" who is wrong here. They are valuing the company at 1.5 million. What they are valuing at 1.35 million is the 90% they would retain after selling 10% of it.

Of course. If you are asking for a five or six figure investment, the least you can do is to look presentable in front of potential investors rather than looking like you've come from the pub. Would you go to a bank manager for a loan in a shell suit?

Why should the producers help with a pitch? Just act like a professional, it's not rocket science.

What investor would view making a "fast buck" as a negative. Corporate raiders do this all the time. Take an undervalued company, strip the assets, slash costs, sell the company for a profit. If these entrpreneurs think that the Dragons have their best interests at heart, they will be in for a nasty sock when they come to sign away their equity

What percentage of your company do I get ;)

snip

All good points. Most pitching is simply a way to show the investor how much money they can make from you. That is all they care about. That woman waffling on about Bollywood films didn't have a clue. When they asked for figures she couldn't answer. What was she expecting?

I haven't seen any repeats but if you Google Dragon's Den then you can view highlights of the show on the BBC website.

"Alec McKenzie" wrote

Oh yes?!

"Alec McKenzie" wrote

You're not thinking straight!

If they *sold* 10% of their own shares (as you suggest above), then the money would go to *them*, not directly to the *company*. They'd be able to go out and buy a Ferrari personally, but the company would not have any extra loot to fund its activities!

So they would actually allot *new* shares to the Dragon(s), so the money goes into the company. The Dragon(s) would be issued with shares numbering one-ninth of those existing beforehand, so that afterwards they have 10% of the new total, and the founders have 90% of the new total...

wrote

Someone else getting it wrong too!

If it was valued at 1.5M and then they paid another 150K into it, then it would be worth 1.65M and so 10% of it would be worth 165K - for which they'd only paid 150K !!

Thats not how it works though, the 150k is paid in, in the expectation that the company *will be* worth 1.5M (at least) None of the people on DD have businesses worth 1.5M to start with! (Or at least, not ones that they want investment in).

"Tumbleweed" wrote

Oh yes it is! [Panto time?!]

"Tumbleweed" wrote

If they thought it might be worth 1.5M in the future, then they certainly wouldn't pay 10% of that now for 10% of the equity, because it might not happen!

Suppose it might be worth 1.5M in the future. Alternatively, it might be worth 0. So based on probabilities, they might value it at (say) 0.5M now.

"Tumbleweed" wrote

... which is why the Dragons say "you are over-valuing your company, at

850K!" when someone wants 150K for 15% of the company. Have you never tried listening to the figures that the Dragons actually say when people offer too little equity for the money?!

Not to that level of detail no, but I will do next time so we can discuss who is right:-)

"Tumbleweed" wrote

I am! ;-))

[Altho' it is true that even the Dragons **used to** get it wrong in the very first episodes. I'm glad to say that they always seem to get it right now!]