Dragons' Den

I wasn't really sure what to think of the final decission of guy with the big lorry wash. He had his own business, and had already started selling this machinery, and he could afford the 200K if he put his house up for another mortgage, yet he gave away 40% of his business. I wasn't sure wether to think of that as a good decission or a bad one.

He has gained the experience of these people, which will help his business along, but was it really worth giving up a 40% steak in his business? After all he did have experience in business himself, and has been quite successful I believe.
 
well it depends shifty...

if giving up a 40% equity stake means that he doesnt have to put any money on the line... well... wouldnt you do the same too?

putting your house up to finance a project when you can obtain financing elsewhere is.. to me anyway.. an unnecessary risk.. he still owns 60% remember.. all presumably for putting nothing on the line ...

to me the first rule of money is not to lose any :p
 
Hehe, yeah :)

I was thinking that if he still owned that 40%, he could potentially earn a lot more money, and not have to end up buying investors out just to own 100% of his business. I agree though, the fact that he's not having to put his own money on the line is important. His return could be far greater though, if the business was successful...Which again is another factor, as the business might go bust, I suppose he doesn't need to worry as it's not his cash :p

The idea sounded as if it had some potential, I'm not sure how much potential though.
 
Efour2 said:
I remember a pair of guys that had an inflatable shelter or something, the dragons wanted a huge share, but the guys were resoloute they could only give something piddly like 14%. I think they went home empty handed

Intense viewing eheheh
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And they did a whole lot better for not dealing: http://business.timesonline.co.uk/article/0,,8213-2022224,00.html

Is that annoying little *****, Theo, still on the panel?
 
Dragons Den, and The Apprentice are the only programs I will ALWAYS watch.

They are educational, but entertaining, you learn a lot about how business works and what the Dragons look for.

The Australian guy is probably the most down to earth one on there now, I did prefer the old Dragons, but at least Peter Jones & Duncan Bannatyne are still on there (Duncans new hairstyle is particularly dodgy though!) :D
 
Just think how much you would have to pay one of the Dragons to give you advice and access to their assets.

40% of a company is not a lot.
 
Rosbif said:
well it depends shifty...

if giving up a 40% equity stake means that he doesnt have to put any money on the line... well... wouldnt you do the same too?

putting your house up to finance a project when you can obtain financing elsewhere is.. to me anyway.. an unnecessary risk.. he still owns 60% remember.. all presumably for putting nothing on the line ...

to me the first rule of money is not to lose any :p
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That tells me you're not an entrepreneur. The first rule of business is 'speculate to accumulate' ... or to put it another way, 'there's no gain without pain'. Starting ANY business is about judging risk versus return, and cost versus gain. If you aren't prepared to take the risk, don't bother doing it. Just be sure to objectively assess the risk.

Bar said:
Just think how much you would have to pay one of the Dragons to give you advice and access to their assets.

40% of a company is not a lot.
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On the contrary - it's 40% of an entrepreneur's dreams and aspirations. On a speculative project, 40% would probably be justified, simply on the basis of an assessment of risk versus return, but if the facts, the whole facts and nothing but the facts had come out on that program, that project was far from speculative. I wasn't paying close attention, but wasn't a projected income of £23k, per site, per month mentioned? And they had one site alreading running, and two more going in in the next few weeks?

If the contracts that were claimed to exist existed, and said what they were implied to say, then personally, I would not be prepared to give up 40% of my dreams and aspirations for £200k short-term finance, and I would be seriously worried about the commitment of any entrepreneur that would, if any alternative existed and, in that case, it did. If that bloke sold 40% of a very good bet for £200k, rather than put his house on the line, it tells me he either isn't telling everything or he has NO confidence in himself or the business. In either case, I wouldn't be interested in investing, because that kind of investment is at least as much (if not much more) about the person as the business.

If, on the other hand, that bloke said he was prepared to pay 40% of his business for the expertise and contacts of two highly experienced VC's, that's understadable and, while expensive, quite possibly a shewd move for someone who thinks the business could be VERY big. But to sell 40% for £200k? That's another thing altogether.

We never really got a categoric answer to that, but given that he could have got the £200k from the other two Dragons for 35%, it does rather suggest that he wasn't giving up 40% because he wanted the money, but because he wanted one or both of the Dragons he got. That is a ballsy move and while I don't know enough about the project or Dragons to agree or disagree with the decision, I can respect the mind and acumen that took it.
 
da_mic_1530 said:
yeah i remember the thread, wonder what episode it is

he said he would mention ocuk or throw in a

O RLY or kill it with fire or some other ocuk phrase
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Is he not in the youth workshop thing or is he actually in the main program?

I'd have to say Peter Jones is my favourite from the panel, it's especially funny when he reaches a deal and stands up and dwarfs everyone in the room. lol

The new Australian guy is good as well.
 
I think they really exploit them sometimes, remember, they aren't only investors, they are salesmen, so if they see a really god idea, thats when they will put an ofer in for 40%, because they *want* the maximum share.

So basically, as soon as you see someone wanting 40%, I lose interest, because I think its taking the mick. The investor might be gambling a lot of money, but the guy doing it is (usually) gambling as much, or more money, plus his entire idea, so 40% doesn't entirely seem fair tbh.

I was happy when a couple of them walked away from 40%. Its not only an opportunity for the applicant...
 
Shoseki said:
...

So basically, as soon as you see someone wanting 40%, I lose interest, because I think its taking the mick. The investor might be gambling a lot of money, but the guy doing it is (usually) gambling as much, or more money, plus his entire idea, so 40% doesn't entirely seem fair tbh......
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But don't forget that there's a good chance that many of these investments will turn into 0%, because 40% of a busted flush is zilch.

If you invest expecting, say, 1 in 4 such investments to actually work, then you're only getting a return on 1 in 4 lots of funding, so it's the equivalent of £800k you're risking for that 40% of whatever the company proves to be worth, not £200k.

And, while an investor will provide some help and assistance, and maybe open some doors, they are typically not going to be involved on a day-to-day basis, so you're not only betting on the idea, and the state of the market, but on the ability of the investee to carry it through and make it work.

The percentage you go for will depend on your assessment of the risk AND, of course, on what you can get away with.

And for the investee, it isn't just about the money. That expertise, advice and door-opening may be the difference between the venture succeeding and failing. Would you rather own 60% of a £20 million business, or 90% of a £500k business?

Don't get stuck on the 40% as being excessive. There's a a lot more to it than that. In fact, there's sufficiently more to it that I find it hard to believe any serious investor would put up funding based on the presentation we see on the program. There has to be more to it than that, and a caveat that any fundning will depend on due diligence being okay. What we see on the program is, I'm sure, just the entertaining bits the editor decides to let us see. It's the bits we don't see that would ne illuminating. If those dragons are actually providing finance based on the information we see them get, then I have to conclude they're doing it because they want to be on telly, and because the funding they're providing is pin money to them.
 
To simplify what Sequoia said you can either have 100% of nothing or 60% of a very big pie.

I know what I'd go for as most of the stuff that goes on this show would be doomed without the dragons' retail connections. Example from last series was a game of some sort that was selling quite well in a local outlet and the the time was approaching Christmas. The point they made was that the 40% share she would lose in her product would mean that her game would be in 20 different major stores for the Christmas rush and to quote one of the dragons "would fly off the shelves". They walked away from it arguing over 5% which was foolish IMO.

Don't forget if you get the opportunity to work with someone that high up not only do you glean MASSIVE ammounts of good quality advice and practice but in the future they are A PHONE CALL AWAY for any of your future projects.

£40K suddenly sounds pretty cheap for lifelong business connections at the top I hope you'll agree.
 
That egg cooker was a great idea. Don't know what the hell that woman was on about when she said "I can't see how this makes the process any easier" :confused:, or words to that effect.

I'd definitely buy one of those if it actually worked :D
 
Sequoia said:
That tells me you're not an entrepreneur. The first rule of business is 'speculate to accumulate' ... or to put it another way, 'there's no gain without pain'. Starting ANY business is about judging risk versus return, and cost versus gain. If you aren't prepared to take the risk, don't bother doing it. Just be sure to objectively assess the risk.
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nice to see you back again mate..

i agree with everything you have said... absolutely all of it... but it is because i come from a view of scarcity (of capital) that the first question i ask is 'how much money can i get back if this all goes **** up?'

youre right, im not an entrepreneur... will be one day, but not yet... this is why protecting my capital when assessing the risks is my first priority... if i were coming from a position of established cashflows then i could perhaps be more liberal with the risks i take... (for instance my first business is highly unlikely to be a startup)

hope that explains my thinking ...
 
Rosbif said:
nice to see you back again mate..

i agree with everything you have said... absolutely all of it... but it is because i come from a view of scarcity (of capital) that the first question i ask is 'how much money can i get back if this all goes **** up?'

youre right, im not an entrepreneur... will be one day, but not yet... this is why protecting my capital when assessing the risks is my first priority... if i were coming from a position of established cashflows then i could perhaps be more liberal with the risks i take... (for instance my first business is highly unlikely to be a startup)

hope that explains my thinking ...
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Oh, it explains it, and I understand the rationale. But you'll probably have to change your view if/when if you become an entrepreneur, because risk-taking is central to it. Certainly, if you approach a VC, one question (which they'll be thinking, even if they don't ask it) is "why should I risk my money on him if he's not prepared to risk his own on himself?"

Obviously, some of this depends on your background. If you come from a background when capital is "scarce" it makes reluctance to risk it understandable. Part of that is circimstance i.e. a single young man is risking much less than a married person with a young family to support.

But, ultimately, if you scratch any entrepreneur (at least, I can't think of an exception) you'll find a risk-taker not far under the surface. The art of it is knowing what risks to take .... and even foreseeing what the risks actually are. In that, experience counts for a LOT. I've come across a number of wealthy, successful individuals that fell flat on their face a few times, by taking risks they shouldn't have. But they picked themselves up, dusted themselves off and started again. Seeing as I seem to be an aphorism machine today, here's another .... "nothing ventured, nothing gained". And yet another ... "you have to be in it to win it".

Sure, you always have half an eye on what you can extract if things go wrong, but there comes a point with most startups, and turning most small businesses into medium ones, where you have to grit your teeth, hang on for the ride and go for "Monte Carlo .... or bust". It often comes at the point where you need to commit to significant expansion with no guarantee it'll pay off. You can grow most small businesses to a point, but eventually you come to a crux .... you won't get that tasty, lucrative BIG order (or customer) unless you can fulfil it, and on time. That means a commitment that isn't easily reversible ..... such a much larger premises. You can put it off for a while (extra staff, sub it out, or whatever) but sooner or later, it comes time to pee or get off the potty. I can't think of any businesses off-hand where that hasn't been an issue to one extent or another, sooner or later .... unless you're prepared to sit on your laurels with a business as it is, or maybe grow very slowly .... and risk getting buried by your competitors.

And the risk isn't always what it first looks to be. If you decide to expand, and take that risk to get that big new contract, you can find yourself with too many eggs in one basket and as a result, too dependant on one customer. And if they find out you are .... :( It could be the dependancy that does for you, not the expansion itself.

Oh, and thanks for the welcome back, but I've only been away a few days. And thank goodness the return flight wasn't scheduled. :)
 
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