The Dragons Den

If you are an inventor or have a business that wants to expand you have probably taken time out to watch BBC2s reality TV show The Dragons Den where four extremely rich and successful self made business men and women invest in new businesses.

Prospective business are invited to make a presentation to the four dragons, the dragons, people many of us have never heard of and are extremely thankful that we do not have them as neighbours decide if they are going to invest in the business after a short presentation.

It does not take too long before you have to question why these four extremely wealthy individuals with personal fortunes in excess of two or three hundred million want to show the world how obnoxious and lacking in character you need to be to achieve that level of wealth. You also have to marvel at how these very experienced business people can make a balanced and viable judgement based on very limited information.

You soon realise that what should have been an interesting and informative programme is low-level entertainment attracting viewers by its negativity and that the majority of inventions have little commercial value, that most business owners have a misguided view of their businesses true value, future sales and finances and that most investors want more than a minority shareholding in your business in return for their hard earned cash.

If the programme gave you all that information then the BBC are doing a better job than we gave them credit, if it did not then why not make an application to the Dragons and subject yourself to ridicule that would be bullying in a playground and the subject of an ASBO in the High St, at least you will provide us with entertainment and the Dragons with a little blood sport.

If you are a budding entrepreneur you will soon realise that the majority of new businesses fail within a year, those that appear to succeed are financed from personal wealth, others are second generation where a son or in-law has taken over the management or the business has taken on professional management.

Small growing business needs investment, that can be self-financed from borrowing but the lender will require security, normally equity in your home. Many small businesses do not have or are unwilling to risk that form of security so an investor is the next best alternative.

There are several organisations that can arrange introductions to potential investors including business link and several marriage bureaus in most locations that can be found through your local Chamber of Commerce, Library or Council.

Though the Dragons Den gives the impression that potential investors require little information and a good story the reality is any potential investor will require historical information as well as predictions.

When seeking an investor prepare yourself for several meetings, as it is not your money but someone else’s hard earned cash. Ask you solicitor to prepare a non-disclosure document before you start handing over sensitive information. Make sure your financial predictions are both accurate and realistic and make sure the same applies to marketing information and plans, one minor error may cause your potential investor to become suspicious of your other predictions. Plan your meeting and stick to your plan, practice your presentation.

Desperation and desire for the cash can blinker your decision when agreeing to take on an investor, treat your potential investor as if they were a Venture Capital Company, they will want a reasonable return on their money, a way out at some point during the partnership and make sure the investor can provide something more than the money, this could be expertise that can be called on when required or even hands on help. Be prepared to give away a larger percentage of your business than you first envisage, you can make this a mixture of ordinary and preferential shares if you are a limited company and most important of all make sure you have agreed how the business will be valued when it is time to buy the investors share back.

Finally, make sure you like and can get on with your potential investor, there is nothing worse than working with someone you do not get on with knowing there is nothing you can do about it for several years.

A former Chairman of a private commercial investment company wrote the Article “The Dragons Den” with offices in the UK, Jersey, Switzerland and the USA, providing advice and assistance to Governments, Local Government, International Businesses, Professional Football Clubs and Stars of Screen and TV.