In this week’s installment of Dragons’ Den we see more hopeful entrepreneurs go head to head with merciless investors who will hold nothing back in the face of a bad business pitch.
But what is it that they are looking for; passion, innovation or just straight up business brains? In previous episodes we’ve seen poor finances, bad ideas and outright confusion ruin the possibility of a deal but this time it was market size and profitability that had the Dragons blowing fire at three of the four pitches that came their way.
The business: FoamAroma UK ltd asking for £80k in return for 15% equity
Inventor Craig Bailey tries his first cappuccino and is completely inspired by the taste and aroma. Next time he has it in a takeaway cup and is thoroughly disappointed by the experience noting that the lid holes are too small to drink and smell through (also they prevent you from getting those cute little foam mustaches). One pen stab through a plastic lid and the prototype for the FoamAroma is made. Four years later the FoamAroma is doing coffee conventions where salesman Tom Bell joins the team. FoamAroma’s uniqueness comes from a bigger vent and drink hole so you can really wake up and smell the coffee.
Hospitality Dragon, Sarah Willingham, is first to admit she has “a problem with the product” explaining that since most Brits put milk in their coffee they can’t smell the aroma anyway. Completely abandoning his earlier cappuccino story Bailey tries to sway Willingham with FoamAroma’s other feature: Bruxism relief. “How was your feel around the mouth? Were you relaxed in your jaw, kind of tension free?” During the question period it also comes to light that the offer is only to invest in the UK market as FoamAroma UK is split 70/30 between Bell and Bailey and FoamAroma global belongs to Bailey alone and is off the table.
After Willingham attests that “the tension in my jaw was no different drinking from this lid than drinking from every other lid I’ve ever drunk from,” the nail in the coffin comes when the Dragons agree that the UK market is too small and the idea is not profitable.
The business: Little Belters asking £45k for 15% of the business
Two opera singing sisters, Tina and Claire O’Brien, started a singing program for kids aged 5-11 in the Manchester area. They started with one group and are now up to seven with a target of 100. They create lesson plans and recruit and train the teachers. Think Girl Guides or Boy Scouts model but for pop singers in red t shirts.
It was a nice try by the sisters getting a group of small children singing to the Dragons but they seemed impervious to their cuteness. The Dragons go straight for the financial questions and while the the O’Briens hold their own for a little while it becomes clear that the Dragons have picked their business plan apart.
None. Once again the business fails due to market size and margins. “There’s a big gap between talent and a business,” doles out Touker Suleyman. “I don’t believe that if you go down the route of making 100 groups that you won’t make any money. I think you will make less money than you do now because your overheads will grow.” And so the fat lady has sung on Little Belters.
The business: DAIO asking £75k for 20% equity
David Audsley, a hairstylist from Yorkshire, was in the perfect place to witness the damage that hair appliances can have in the home and to children. He invented the DAIO which is two silicon holders that are heat proof and will stop children from getting a hold of the scorching hot appliances preventing burns and house fires. DAIO was also on ITV’s This Morning in conjunction with Child Safety Week’s products to keep your kids safe.
The Dragons give a warm response to DAIO and recognise the need for it but call it over engineered and costly. After Audsley explains that £171k of his and his partner’s money has been put into development Peter Jones (aka Mr. Obvious) tells Audsley “Wow David, you’re in a tough position.” Dragon Deborah Meaden says she’s cautious because Audsley is likely to go into more debt as “that’s the place you come from.”
None of the Dragons believe that there isn’t something simpler on the market that does the same thing. They recommend that he sells the rest of his stock and move on.
The business: Cocofina asking £75,000 for 5% equity
Self proclaimed “Chief Nut” Jacob Thundil comes from Kerala which means “land of coconuts” in Sanskrit. Thundil has had a lifelong obsession with the billion dollar food trend saying “imagine liking chocolate and getting paid to eat it. That’s how I feel.” Cocofina makes coconut products for you to eat, drink and cook with. They are currently being sold in Harrods, Clinique, and 700 Holland & Barret stores to name a few.
If the Dragons were cartoon characters they would have dollar signs for eyes at this point. The coconut water industry alone is worth over a billion dollars and Cocofina’s turnover over in the last three years was £1m, £600,000 and £300,000 resulting in net profit of £70,000, £50,000 and £12,000.
They all make offers. Meaden, Jenkins and Willingham offer all the money for 20% initially. While Suleyman offers £100K for 25% but will return 5% once he’s made his money back.
Jones joins in with an offer of all the money for 20% but split with another Dragon. Jenkins and Willingham counter offer for a split.
The Chief Nut goes with Jenkins and Willingham’s offer of all the money for 20% dropping down to 10% after 12 months.