Take it from someone who’s been on the show and successfully won backing from the Dragons: it’s worth it.
Back in 2008, I appeared on the show with my Rapstrap cable ties. It was nerve-wrecking, but by the end of the show, I’d agreed to sell 50 per cent of my business in return for £150,000 from Duncan Bannatyne and James Caan. (Watch the video below!)
Should you apply to Dragons’ Den? How do you get the Dragons to tell you they’re “in”? It’s time to dispel some myths.
The first reality to face is that sadly, Dragons’ Den isn’t a charity. Although Dragons’ Den may be classed as an entertainment programme, it certainly isn’t a game show. You don’t win a trophy on the day; instead, your prize is a genuine and serious business opportunity with some of the richest and most successful people in the country. It’s like getting David Beckham to join your local Sunday league team.
Of course, if you want someone’s money, it’s generally on their terms (just ask your bank manager!), and with high-profile Dragons involved, it can take a few months to negotiate the contracts and work out the details.
What’s in it for the Dragons?
As always, it’s about money. Venture capital investors want to make at least 20-30 per cent per annum, thereby doubling their money in three to five years.
Why? Because investors can earn 10-20 per cent per annum in more conventional ways where the work is minimal and the risks relatively low. Investing in small ventures – especially startups – is incredibly risky by comparison. Even after careful inspection and ample due diligence, only one in three are expected to make a profit.
Professional investors have many ways to mitigate these risks, such as first rights on any profits or entitlement to the company’s assets should the business fail. They also want enough equity to balance the risks across their whole investment portfolio.
You can do the sums if you like, but it explains why the Dragons (like any other savvy investor) want such a high stake in the business, and the assured return of their investment if the business does make money. It’s actually textbook stuff. Trouble is, a lot of Den entrepreneurs seem not to have read it. Dragons Den UK success stories
What do the Dragons look for?
As well as low risk, investors look for low maintenance businesses.
With only 2,000 working hours per year, and a portfolio of many investments, how much time can be spared on each company? Even full time it’s only a few hours per week (including travel), and the Dragons are pretty busy with other commitments too.
So like other professional investors, they focus on the companies that will benefit most from their involvement. Time is focused on the middling ventures that could become profitable with a little intervention.
Anyone expecting a Dragon to work everyday on their project is extremely naïve. Managing these expectations shows up a fundamental psychological difference between the investor and the entrepreneur. The entrepreneur thinks their idea will be a huge success, the investor knows it’ll more likely fail.
Ultimately though, getting a deal boils down to whether you can demonstrate a clear route to market, a good return on investment, and an easy way for the investors to cash it all in. It’s like scheming up a heist: How do we get in, how much do we get out, how do we get away with it? You have to be convincing in all three areas to get the go ahead. And then you still have to actually pull it off.
Doesn’t even matter what the scheme is. If you go in with an ill-conceived and unprepared pitch, expect to fail. Show up with enough convincing evidence on the other hand, then deal or no deal, you’re going to look professional and credible to over four million viewers, according to the latest BARB figures.
Is it worth applying to Dragons’ Den?
I’ve met many people who’ve been on Dragons’ Den, and very few who regret it. Getting the investment is certainly no measure of success: some who did have struggled, and some who didn’t are doing very well.
If your business idea is already attracting customers and has plenty of room to grow, then what’s wrong with presenting it to a wide audience? Nothing ventured, nothing gained – right?
Yet some entrepreneurs are still reluctant to apply for the show, even if the producers approach them directly. (Usually after their business has appeared in the local media. The BBC have a pretty good news gathering department, you know…)
Sometimes the fear of rejection prevails over the benefits of appearing, and sometimes there’s a perception that the show is a waste of time, possibly even damaging to the business. But business is all about managing potential risks and exploiting available opportunities. No solid venture should fail simply because it didn’t appeal to small handful of investors.
And if you’re still not convinced, look at it this way. Do you think the Dragons themselves would have passed up such an opportunity when they were starting out? And do you think not getting a deal would have stopped them becoming millionaires?
Andy Harsley is the founder of Rapstrap, which appeared on Dragons’ Den in 2008. Watch the video of Andy Harsley’s appearance below.
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