The Dragon's Den

Despite being positioned in a primetime, midweek slot, ‘The Dragon’s Den’ – BBC 2’s new business meets reality TV show – is as much a salutary lesson for would-be entrepreneurs seeking investment as it is a programme  for mainstream viewing.

A cross between the X Factor and Operatunity but without the singing, the Dragon’s Den features would-be entrepreneurs facing the real thing and pitching for their money to help back their business ideas. Facing the panel of five real life entrepreneurs, the wannabees present their products and concepts in the hope of securing – not a recording contract or the chance to perform in a west end show - but real hard cash. They don’t have to sing for their supper as in other reality TV shows but they do have to hand over a share of the equity in their business… and endure criticism which makes Simon Cowell look like a pussycat.

But does The Dragon’s Den reflect the real experience of those seeking external investment? Does personality matter as much as it seems to in the Dragon’s Den and should entrepreneurs be put off by the grilling which those who enter The Den have received?

Joyce Duncan, director of operations of Enterprise North East Trust (Enterprise) says, "Television is entertainment and we should expect that the most interesting moments are those featured. But the programme does illustrate the key area where most would be entrepreneurs fail when seeking investment and that is in lack of preparation."

"Types of investors vary, their reasons for investment vary and they look for different returns, continues Joyce. "They are similar in that they all have selection criteria by which they measure their risk. Frequently they make decisions based on the people who are involved in the business, their knowledge, experience and likelihood to meet targets they set. Although some investors will look at new starts, most investors will prefer to work with businesses which have been trading for a couple of years. At this point they should have a realistic picture of where their business is and how it can grow."

The Dragon’s Den illustrates the importance of understanding the investors you are pitching to. The diverse panel members all have their own agenda – some are driven by the financial figures behind the business and others by the personalities involved.

"It is important to know your audience. By doing your homework you should find out to whom - you will be presenting, and how they like businesses to present themselves. Some of the ‘pitchers’ in the programme seem wholly unprepared and can’t cope with answering even basic questions."

Joyce continues, "Some agencies such as LINC allow short investment pitches to be made to groups of investors – similar to the Dragon’s Den set up. It is important to practice and use your time well. Try to deliver your ‘pitch’ to someone who will give you an honest opinion of your performance. This television programme should be evidence enough that how you deliver your pitch is vital. You may think that learning your pitch verbatim may give you confidence in a stressful situation, but if you rely on remembering it word for word, you will be all at sea if you take stage fright."

One of the most common mistakes in presenting to investors is not clearly defining the current position of the business. Tears have been spilled in The Dragon’s Den when ‘victims’ have been unable to give simple financials such as estimated profit and not knowing the difference between gross and net profit. The programme proves that having a great and innovative idea is not enough. Investors want to feel confident that the idea is a solid one and that the individual is the right one to take the concept to fruition.

"Giving too much detail on some areas of the business is another common pitfall. All entrepreneurs will be passionate about their idea and have areas of weakness. By ignoring the weak areas and hoping that enthusiasm will carry the day you may actually be highlighting a chink in your armour."

"Not saying what you want from the deal and how a return will be ensured is another mistake," comments Joyce. "Honesty, knowledge of your subject and backup information are all important."

Generally, investors do not promote themselves widely to the public as they would undoubtedly be overwhelmed with proposals. Introduction agencies such as LINC in Scotland, banks, professional firms and enterprise agencies can all put businesses in touch with potential investors. Enterprise can assist businesses with all aspects of development including securing investment in all forms.

Enterprise can be contacted on 01467 672500 or at www.enetrust.com.

Ends

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