Anyone who watched this week’s brutal episode of Dragons’ Den may have been surprised to find Theo Paphitis talking about sticking pins in his eyes and Duncan Bannatyne behaving a bit like a spoiled toddler who’d just been handed a carrot instead of a lolly – so with this in mind, should business angels adopt the modus operandi of the VCs in Dragons’ Den?
I watched with interest the pitch from entrepreneur Guy Jeremiah who arrived at the Den hoping to secure £100,000 of investment in return for 10% of his plastic bottle business.
The pitch seemed convincing enough to begin with. “Buy into my folding plastic bottles and save all the waste from this other great pile of plastic bottles I’ve brought in”. With investment in eco products now all the rage, Mr Jeremiah thought he was onto a surefire winner. Afterall he was offering the dragons the chance to gain a slice of the £multi-billion bottled water industry and save the planet.
What ensued was a study in cringe-worthy TV as the fatal flaws in the entrepreneur’s business plan were ruthlessly exposed by each of the dragons in quick succession. The folding bottles were only going to add to pollution and waste, Duncan Bannatyne felt that they would bulge his pockets spoiling the lines of his suit. Theo Paphitis reacted by saying “aw wanna stick pins in my eyes.”
A visibly enraged Bannatyne added that he re-uses the bottles he buys several times to save waste. Not only that, he has plenty of room in his “shports bag” where he keeps his “trainarsh” before adding something about public fountains being the best and most environmentally friendly place in the world to get your water. But this was only the prelude to him crunching up the bottle and lobbing it in the direction of the crestfallen entrepreneur. Cue camera zooming in on mangled bottle in the far corner of the room and back to Mr Jeremiah who looked as crushed and mangled as his eco bottle RRP £4.99. He probably left the Den feeling like he had the green credentials of a senior BP executive.
But I couldn’t help but wonder while watching whether it is right that when an entrepreneur appears in front of you with a business idea, he should be given a good ear bashing and have his gear thrown at him? We’ve come to expect this kind of behaviour on TV Shows like X-Factor and Celebrity Come Dancing, but why is it now filtering into business programmes on BBC 2?
Ok Dragons’ Den is an extreme case, they need to keep viewers interested and what could possibly make better TV than seeing “sophisticated”, sullen faced investors who might kick off any minute for seemingly insignificant reason, throw wads of cash at people or launch products into the four corners of the room?
Behaviour like this certainly puts the entrepreneur under pressure and if business angels began acting this way – perhaps some already do – then there will need to be a rebranding exercise. But it might be useful to have a less extreme sense of this fear factor in place during negotiations. When the entrepreneur’s pitch is done and the questions begin, it might be useful for the business angel to take a less friendly approach, put the entrepreneur under pressure and extract anything that might be misleading in a pitch.
This year the TV Dragons reflect a more conservative attitude that is pervading the VC investment sector and filtering down into the angel sector at the moment. We know that VCs are investing less in seed stage businesses than they were, so they are even less likely to fall for the sales patter in an unconvincing pitch.
In this climate entrepreneurs will need to try harder to convince potential investors of their credentials and demonstrate the bottom line – that their business idea can and does make money. Business angels will also need to play their part and encourage entrepreneurs to develop or improve on their ideas, some of which may turn out to be a genuine attempt to solve an everyday problem in a new way.
Caution isn’t a bad thing, it helps us avoid costly errors, but it can also lead to missed opportunities. Perhaps those plastic bottles so ruthlessly cast aside by Mr Bannatyne will go on to make millions more than the £700 they’ve made so far. Perhaps we might see Duncan lose it altogether in a future episode. It will be interesting to find out.