Legal Eagles & the Dragons Den – meeting with triumph and disaster
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. Following Natalie Wallace’s blog on Keep It Simple to catch a dragon this week Anisha Kaura is back again for the final review of Dragon’s Den Series 17. Anisha is a solicitor in our entrepreneurial team who specialises in advising startups and high growth companies &part of a team that has completed more than 90 equity deals in the last three years.
Some of the most interesting sections of this week’s episode were the businesses which didn’t quite manage to seal a deal – for a variety of reasons – but in which the Dragons still saw considerable potential. At the early stage, every business will still have a few kinks to iron out in their business model and plans. Getting feedback from experienced investors can be worth even more than a premature investment, and the important thing for businesses is to take that advice on board, deal with what could be seen as ‘rejection’ and get yourself investment-ready for the next set of ‘Dragons’ who come along.
Pedalling an accurate valuation of your business
First into the Den were Tony Walker and George Fox of Hedkayse with their latest take on the cycle helmet. They came in looking for £100,000 for just under 4% of their business and with claims that they’ve created the “world’s toughest cycle helmet”, it was up to the Dragons to determine whether it was an investable proposition. The duo had created a new tough material which lined their helmet and which they claimed was less fragile than the polystyrene usually used in cycle helmets. As a result, the helmet could be impacted a number of times without becoming less effective (unlike traditional helmets which become less safe with each impact).
Sara Davies was first up and questioned the duo on the business’s intellectual property. They revealed that the business held patents on the helmet’s design and that they held an exclusive licence to use the chemicals required to make the material for the helmet. However, the licence raised some concerns for Sara as she noted that the material could technically be replicated fairly easily. Additional concerns relating to the company’s valuation of £2,500,000 meant Sara Davies was a firm “I’m out”. Peter Jones also had an issue with the valuation and commented that it was “so far from what the real value of the business is”.
Unfortunately, the duo didn’t have much luck with the rest of the Dragons, but they did manage to secure an offer from Tej Lalwani. He offered £100,000 for 25% of the business (more than six times the percentage the duo entered the Den looking for), but they didn’t feel comfortable parting with more equity than they had anticipated and they left the Den without shaking on a deal.
This example highlights the importance of ensuring that you have carried out an accurate valuation of your business, as this will help you understand where your business’s weaknesses lie so you can address them, make smarter choices to enable you to enhance the value of your business further and give you access to more investors.
Don’t take your brand for granted
Next up was Sally Mansfield of body positive clothes business Manners London. From the start, she impressed the Dragons with her high-quality fashion line with a focus on female empowerment. Sally entered the Den looking for £75,000 for 25% of her business. However, despite growing her business over three years from a market stall to an online business and having a return rate of less than 5%, concerns over her lack of branding and scalability led to no offers of investment from the Dragons.
It’s something which comes up time and time again, but building a brand is crucial to help your business stand out from the crowd. Particularly in a crowded market like retail and the growing body positivity sphere, it is more important than ever to ensure that you’ve taken steps to create a brand to ensure you secure customer recognition, a competitive edge in the market and customer loyalty.
Once you’ve created your signature brand, the next step is to register a trade mark to ensure that no one else has rights to use it. Taking these steps at the beginning of your business journey can save a huge amount of time and money later on down the line, as a complete, costly rebrand will be necessary in the event that someone else already owns the trade mark for your brand. Contrary to popular belief, registering your company with Companies House or registering a domain name will not allow you to prevent others from using your branding if you don’t own a trade mark.
All startups meet with setbacks
The final business pitching was West Yorkshire direct-to-consumer online meat business, Lamb2Ewe. With an aim to transform the way meat is transported from the farm to dinner tables, they entered the Den looking for £30,000 for a 15% share of the business. The business delivers local produce straight to consumers’ doors and offers farmers a fair price while they’re at it. However, low sales, large third party costs and the length of time it takes for the meat to reach the consumer, put the Dragons off.
Deborah Meaden also had concerns over the company’s welfare standards and referred to the company’s strong competition with other meat delivery boxes in the south with a better understanding of these standards. However, the Dragons recognised that many of the issues were a result of the business being in its infancy and that there was still plenty of time for the company to iron these out.
As a result of the business’s teething problems, none of the Dragons made an offer, but encouraged the duo to press ahead with their growth plans, demonstrating that sometimes it’s just not the right time to invest and that “no” doesn’t mean “never”. Rejection is something which startups face on a routine basis, but with the drive to keep going, deliver and grow, the right investors will come along at the right time.
A little bit of Heaven in the den
There was good news for one of the hopeful entrepreneurs though. Stephen Conway of Pure Heavenly Chocolate walked away securing £100,000 from Peter Jones after the Dragon agreed to drop his initial 20% share of the business to 15% if he makes his money back in 18 months time, something Deborah Meaden and Tej Lalvani were reluctant to do. Well done Stephen. To find out more and how it all played out you can find the link to the episode in the useful links section below.
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