Welcome to our weekly Dragons Den blog where a member of Harper Macleod's entrepreneurial team will share their view of the latest episode, give some hints and tips and also explain how we could have helped … and hopefully have a bit of fun along the way. Louise Torr, an Associate in our entrepreneurial team who specialises in advising start ups and high growth companies, is back again this week following on from her last Legal Eagles & the Dragons Den blog on Beware of the known unknowns. Louise is part of a team that has completed more than 90 equity deals in the last three years.
This week's Dragon's Den episode illustrated the benefits that can come from listening to advisers and bringing on board investors who want to have a say in your business, but also the consequences any entrepreneur has to be aware of when they take that step.
A brave face on branding
Starting with the last business into the Den this week, and the piece de resistance in terms of offers made by Dragons, War Paint for Men raised a number of great pointers for businesses attracting attention. All five Dragons wanted in and it was a 'talk with the wall' which led Daniel to his deal with Peter and Tej.
One legal point which was thrown up by the Dragons was in relation to brand protection. The wordmark 'War Paint' was initially rejected by the IPO due to it being 'too descriptive' of the products, with 'war paint' being a widely recognised term for make-up.
However, after instructing lawyers to assist with the application and make a case for this to be registered, the IPO changed its position and allowed it. It is always worth seeking advice in relation to a business' branding, as this will help avoid issues such as having to re-brand due to them not being able to obtain adequate IP protection.
Another point worth comment was Daniel's willingness and ability to negotiate. Investors will often say from the outset that a deal is 'non-negotiable', but it is certainly always worth having a frank conversation with them about an alternative deal if you think that is best for your business. Daniel managed to retain 8% of the shareholding in his company by doing so.
Pivoting isn't a picnic
Environmentally-friendly business BeeBee Wraps appealed to many of the Dragons, with Peter Jones admitting to owning the reusable food wraps himself. However although the Dragons all seemed to love the business concept, they felt that the business was probably not one to invest in.
One admirable trait in this entrepreneur was her willingness to change direction with the business, an issue raised when Deborah Meaden asked if she could tweak the formula to change the scent of the product. Most businesses will 'pivot' at some point in their lives and as an entrepreneur, it is important to recognise this may be necessary in order to allow the business to grow. It can be hard to accept that the business you have nurtured is not quite right and accept that you may not know what's best for 'your' business.
By taking investment, you are accepting that it is no longer just your business and you may need to accept the advice of an investor in adapting the business to suit market needs.
Protection can't be a pipe dream
Product-based business Pipe Easy is designed for the DIY/trade market and managed to secure a deal with Sarah Davies, with £41,000 being secured in return for 30% of the business (double the 15% shareholding that the business had initially been looking to give in exchange for this amount).
In particular, Pipe Easy was seeking assistance for the 'tooling' element of the business - having the product mould ready to be scaled at volume. Dragon Sara Davies made mention of her own injection moulding business, but whether it was an investors company on another who was carrying out the tooling, any business should give careful consideration to the agreements that they have in place. For a patent-pending product such as this, the IP in the design is important and must be protected when contracting with third parties.
It is important to make sure that your business has robust agreements in place with manufacturers, which will ensure that any Intellectual Property (IP) which belongs to your business remains protected and cannot be copied by the manufacturer. It may be that your manufacturer presents you with an agreement setting this out, but we would always advise that you check the terms prior to signing any such agreement to ensure that they adequately protect your business.
Get in touch
Please get in touch if any of the issues discussed above are things that you might need to take advice on.