Legal Eagles & the Dragon's Den: entrepreneurs. Have you got your investment strategy right?

Our high-growth and investment team has extensive experience helping young, innovative companies secure the necessary investment to fuel their growth. As legal partners of Entrepreneurial Spark, we're also well used to helping them be investor-ready in terms of facing a grilling when pitching for backing.

Each week, we outline how we would the help the businesses coming under fire from the Dragons deal with their potential pain points from a legal perspective.

Dragons Den Lawyer Solicitor Investment Legal Business Entrepreneur

Last night (October 9) Dragon Dens mentioned a lot of hot topics, eco-friendly, social enterprise and cycling, however, with only one business getting an offer on investment I couldn’t help but think a little more investor ready work could have helped the others.

Our high-growth and investment team has extensive experience helping young, innovative companies secure the necessary investment to fuel their growth. As legal partners of Entrepreneurial Spark, we're also well used to helping them be investor-ready in terms of facing a grilling when pitching for backing.

Have you got you investment strategy right?

First into the Den were Mark and Tom from Beeline, a business with a cycling navigation tool. Whilst some of the Dragons had concerns over the product the biggest issue was the company's investment strategy. The had company already raised £560,000 from a mix of friends and family, institutional investors, strategic investors and crowd investors and were planning another round of investment following any Dragon investment. This raised a host of concerns from the Dragons:

  • How did the company manage to spend so much cash?
  • The dilution effect of the subsequent round?
  • The limited negotiation position of the company given the mix of current investors?
  • Why can't the company grow via revenue now?

Taking investment money from a number of different sources has many advantages but it is important to get the mix of investors correct, in addition, a clear and sensible plan for why the investment is needed is critical.

If you are thinking about investment, think about the investment strategy early. Our team will be delighted to help should you have any investment questions.

Can a social enterprise raise investment?

Next into the Den was Lara from CorkYogis, a cork yoga mat business which had social purposes as profits were used to help prevent human trafficking.

The Dragons applauded the social concept however a problem we see often with investing in a social enterprise arose – is it a business where you get your money back or is it a charitable gift?

Lara did get one offer of investment for half the money but was unable to get the other half of the funds as the Dragons felt there were wasn't enough about the business which was correct.

Investment and social purposes are not mutually exclusive, however, as the Dragons flagged in order to get investment it has to be business before social.

Are you investor ready?

Alan from Global Display was next up with an eco-friendly mannequin. The Dragons were concerned about high street retailing being a declining market and about the company structure. It transpired that Global Display was part of a larger group of companies with a diverse range of products. This caused the Dragons concern about Alan's focus on the mannequin business and the more complicated structure was also a deterrent.

Often we see group structures putting investors off as they tend to prefer straight forward structures. In addition, not being to demonstrate you have the time and focus to devote to the business is going to be a potential problem for an investor. As such, before seeking investment it is important to get investor ready and to make the business as attractive as possible to the investors. Our team specialise in getting businesses investor ready so please contact us should you need help getting in shape for investment.

Is your brand protected?

Finally into the Den came Hannah from Tell Tails, a costume animal tails business which Deborah Meadon ended up backing. Currently trading the business was looking for investment to scale up. Views in the Den differed on whether licencing was the way forward or not, however, what was clear was that brand was absolutely vital. As such, Tell Tails needs to ensure it has protected the brand with trade marks.

Get in touch

If you are a growth business seeking investment, or recognise any of the issues we've highlighted as potential concerns for you, please don’t hesitate to contact a member of our team.