How to become a Dragon?


A

alexrpeters

Loving the new series of Dragon's Den. I can't believe the number of
people who are turning up without a suit or able to give any figures on
their businesses? There are some absolute no-hopers on the show.

But there have been some excellent business investment opportunities.
I'm thinking of the man who was offering the Bedlam puzzles game which
I have and is an amazing toy. There have been one or two others as well
(the circus one last night)

My question is, how do you become a business investor (I believe they
are called business angels)? The sums of money being asked for are
between £50,000 and £100,000. Now most people would recommend
investing in property and/or the stock market if you had this kind of
money.

But if you took equity in a company at start-up that went on to become
a target of a rival take-over or listed on the AIM, you could stand to
make a kiling. Of course most companies fail outright so you could
stand to lose all of Granny's inheritance money as well.

Still it seems an interesting proposition. I'm wondering if anyone here
has any experience in investing in local businesses and how it works
with regards to submitting your name as a potential investor?

Regards,

Alex
 
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A

Alan

Loving the new series of Dragon's Den. I can't believe the number of
people who are turning up without a suit
Does it matter?
or able to give any figures on
their businesses?
This is the whole point of the program. The producers could send out a
one page fact sheet stating what is required - but that wouldn't make
entertaining TV..
There are some absolute no-hopers on the show.
Especially the one who sits in the end seat.
But there have been some excellent business investment opportunities.
I'm thinking of the man who was offering the Bedlam puzzles game which
I have and is an amazing toy.
Surely that investment was about making a fast buck on a toy that would
be trendy for a short time?
There have been one or two others as well
(the circus one last night)
That investment wasn't in the 'circus' part of the business.
My question is, how do you become a business investor (I believe they
are called business angels)?
Just send me £100,000
But if you took equity in a company at start-up that went on to become
a target of a rival take-over or listed on the AIM, you could stand to
make a kiling. Of course most companies fail outright so you could
stand to lose all of Granny's inheritance money as well.
The dragons only seem to invest in companies with a track record of
making lots money already - or in a business with a product with a low
buy in and high sale price.
 
T

Tim

(e-mail address removed) wrote
"Alan" wrote
Especially the one who sits in the end seat.
Do you mean the one on the left whose company went belly-up (Red Letter
Days), or the one on the right who is worth £250million?
 
R

Richard Faulkner

In message said:
Loving the new series of Dragon's Den. I can't believe the number of
people who are turning up without a suit or able to give any figures on
their businesses? There are some absolute no-hopers on the show.

I actually wonder how they are selected to go on the show. Presumably
there is a queue a mile long, and presumably they are interviewed by the
shows' producers, (or whoever). I would therefore expect that the
producers know who is likely to be attractive to the Dragons, and who is
definitely not. Yet we see a bunch of losers.

This suggests a few possibilities:

1) The Dragons have a finite amount they are willing to invest, and they
cant afford to use it all up in one or two shows.

2) Part of the attraction of the show is seeing the Dragons tear apart
the losers

or both.
 
R

Richard Faulkner

Tim said:
Do you mean the one on the left whose company went belly-up (Red Letter
Days), or the one on the right who is worth £250million?
But well and truly milked so that she still has the odd hundred thousand
to invest on Dragons Den.
 
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D

davidof

Richard said:
2) Part of the attraction of the show is seeing the Dragons tear apart
the losers

As any Dragon might tell you, you learn through your failures. One thing
is clear, many people have trouble doing simple maths. They come in,
want 150K for 10% of their company and can't make the mental leap that
they are valuing their company at 1.5Million while it is still a vague idea.

I think the Dragons do get it partly wrong though. The Yorkshire geezer
with his water saving idea for loo’s had a good product, he would have
been impossible to work with though. However the Dragons went for the
WiFI in Marina’s bloke big-time but surely any Marina just needs to
subscribe to ADSL and put up a reasonable antenna to give boat-owners
WiFi access?

That said, I think you learn more about business watching Dragons Den,
Working Lunch and the Apprentice than you do on an MBA (MBAs will
disagree but hey I have run my own business so could probably tell them
a thing or three).

The important points seem to be:

1. IP - you'll see this on working lunch too when the cover
investments.. You might have a great idea but if you don't at least hold
some tangible assets such as patents anyone can rip you off.

2. Someone the investor can trust, and trust to get on with things

3.
i. no lying in the pitch
ii. if your business is already up and running are you following up on
sales, chasing down leads – basically hungry for success (few are)
iii. Are you running after lots of other ideas at the same time?

4. Facts and figures – do you have sales forecasts, turnover
projections, marketing and startup costs, what about competitors?

5. Don't ask for money to pay your wages

Those are just some points, I'm sure you can come up with more.

The sums asked for are not that great - I have trouble seeing how some
of the business can get off the ground, although that is part of the
game of the vulture capitalist. Keep them on short rations and get them
to sell you more of the business for further investment. You want to be
looking at owning a lot of the business by IPO time.

Unfortunately missed last night's show - snow on the roof has broken the
satellite dish. Is it repeated?
 
D

davidof

The other thing that surprises me is how arrogant some of the people are
- they are asking for money and yet it is like they are offering these
guys some fantastic investment opportunity and they should be grateful.

It is something I see personally a lot in some of the work I do.
Chancers who might just cut me in on some of their action for some
totally outrageous sum. No thanks mate, I'll pass.

But maybe it works with some people?
 
P

Poldie

Richard said:
But well and truly milked so that she still has the odd hundred thousand
to invest on Dragons Den.
If her compant went belly-up then maybe she won't have that sort of
money lying around to risk on other people's projects. Perhaps mingling
with rich, successful businessmen is a hard habit to break.
 
T

Tim

... One thing is clear, many people have trouble doing
simple maths. They come in, want 150K for 10% of their
company and can't make the mental leap that they are
valuing their company at 1.5Million while it is still a vague idea.
Tee hee. Someone complaining about people not "doing simple maths", and
getting it wrong themself!
Actually, wanting £150K for 10% means they are valuing it at £ 1.35 Million
(not 1.5).

Otherwise, agree all points!
 
A

alfi286

Tee hee. Someone complaining about people not "doing simple maths", and
getting it wrong themself!
Actually, wanting £150K for 10% means they are valuing it at £ 1.35 Million
(not 1.5).

Otherwise, agree all points!
No, if they valued it at £1.35 Million then a 10% share would only
cost £135k
 
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A

Alec McKenzie

Tim said:
Tee hee. Someone complaining about people not "doing simple maths", and
getting it wrong themself!
Actually, wanting £150K for 10% means they are valuing it at £ 1.35 Million
(not 1.5).
I'm afraid it is "Tim" who is wrong here. They are valuing the
company at 1.5 million. What they are valuing at 1.35 million is
the 90% they would retain after selling 10% of it.
 
A

alexrpeters

Loving the new series of Dragon's Den. I can't believe the number of
Does it matter?
Of course. If you are asking for a five or six figure investment, the
least you can do is to look presentable in front of potential investors
rather than looking like you've come from the pub. Would you go to a
bank manager for a loan in a shell suit?
This is the whole point of the program. The producers could send out a
one page fact sheet stating what is required - but that wouldn't make
entertaining TV..
Why should the producers help with a pitch? Just act like a
professional, it's not rocket science.
Especially the one who sits in the end seat

Surely that investment was about making a fast buck on a toy that would
be trendy for a short time?
What investor would view making a "fast buck" as a negative. Corporate
raiders do this all the time. Take an undervalued company, strip the
assets, slash costs, sell the company for a profit. If these
entrpreneurs think that the Dragons have their best interests at heart,
they will be in for a nasty sock when they come to sign away their
equity
Just send me £100,000
What percentage of your company do I get ;)
 
A

alexrpeters

snip
Those are just some points, I'm sure you can come up with more.
All good points. Most pitching is simply a way to show the investor how
much money they can make from you. That is all they care about. That
woman waffling on about Bollywood films didn't have a clue. When they
asked for figures she couldn't answer. What was she expecting?
The sums asked for are not that great - I have trouble seeing how some
of the business can get off the ground, although that is part of the
game of the vulture capitalist. Keep them on short rations and get them
to sell you more of the business for further investment. You want to be
looking at owning a lot of the business by IPO time.

Unfortunately missed last night's show - snow on the roof has broken the
satellite dish. Is it repeated?
I haven't seen any repeats but if you Google Dragon's Den then you can
view highlights of the show on the BBC website.
 
T

Tim

I'm afraid it is "Tim" who is wrong here.
Oh yes?!

They are valuing the company at 1.5 million.
What they are valuing at 1.35 million is the
90% they would retain after selling 10% of it.
You're not thinking straight!

If they *sold* 10% of their own shares (as you suggest above), then the
money would go to *them*, not directly to the *company*. They'd be able to
go out and buy a Ferrari personally, but the company would not have any
extra loot to fund its activities!

So they would actually allot *new* shares to the Dragon(s), so the money
goes into the company.
The Dragon(s) would be issued with shares numbering one-ninth of those
existing beforehand, so that afterwards they have 10% of the new total, and
the founders have 90% of the new total...
 
T

Tim

No, if they valued it at £1.35 Million
then a 10% share would only cost £135k
Someone else getting it wrong too!

If it was valued at £1.5M and then they paid another £150K into it, then it
would be worth £1.65M and so 10% of it would be worth £165K - for which
they'd only paid £150K !!
 
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T

Tumbleweed

Tim said:
Someone else getting it wrong too!

If it was valued at £1.5M and then they paid another £150K into it, then
it
would be worth £1.65M and so 10% of it would be worth £165K - for which
they'd only paid £150K !!

Thats not how it works though, the 150k is paid in, in the expectation that
the company *will be* worth £1.5M (at least) None of the people on DD have
businesses worth 1.5M to start with! (Or at least, not ones that they want
investment in).
 
T

Tim

Thats not how it works though...
Oh yes it is!
[Panto time?!]

... the 150k is paid in, in the expectation that
the company *will be* worth £1.5M (at least)
If they thought it might be worth £1.5M in the future, then they certainly
wouldn't pay 10% of that now for 10% of the equity, because it might not
happen!

Suppose it might be worth £1.5M in the future. Alternatively, it might be
worth £0.
So based on probabilities, they might value it at (say) £0.5M now.

None of the people on DD have businesses
worth 1.5M to start with! (Or at least,
not ones that they want investment in).
.... which is why the Dragons say "you are over-valuing your company, at
£850K!" when someone wants £150K for 15% of the company.
Have you never tried listening to the figures that the Dragons actually say
when people offer too little equity for the money?!
 
T

Tumbleweed

... which is why the Dragons say "you are over-valuing your company, at
£850K!" when someone wants £150K for 15% of the company.
Have you never tried listening to the figures that the Dragons actually
say
when people offer too little equity for the money?!
Not to that level of detail no, but I will do next time so we can discuss
who is right:)
 
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T

Tim

Not to that level of detail no, but I will do
next time so we can discuss who is right:)
I am! ;-))

[Altho' it is true that even the Dragons **used to** get it wrong in the
very first episodes. I'm glad to say that they always seem to get it right
now!]
 

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