Dragons' Den: 'No better than banks'

With the new series of Dragons’s Den being readied for transmission, what better time for an ambitious alternative funder to shine the spotlight on what happens behind the scenes at the BBC’s entrepreneurial showpiece?

This week, Clifton Asset Management brought three companies who had left empty-handed back to the studio near Tower Bridge to review their experiences and assess how realistic the Dragons’ Den is as a model for small business finance.

If truth be told, Clifton chairman Adam Tavener has done very well out of the programme by contacting unsuccessful pitchers to suggest his pensions-based funding model as an alternative. So it was appropriate for him to take his place in one of the leather seats to...

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Comments

Dragons Den funding    2 thanks

Andrew Snowdon | | Permalink

THe reason why that type of funding has a small take up is because of the poor pitches and ill-thought out business models presented to them. There are contestants going on there that frankly have cobbled together some ridiculous business notion and seeking publicity rather than serious finance.Great TV viewing for us though! Fortunatley the Drasgons ridicule it for what it is but still new contestants come on making the same mistakes.

Why would an investor pay £150,000 for a 12.5% interest in a business that is only turrning over £150,000? What did he seriously expect? At best it is probably making about £15k profit and more likely making nothing at all. It is all based on some possible turn around at a later stage so why shouldn't a business angel expect a proper proportion for his risk capital?

Howard Carter may have kept more of the business but using his pension in that way means he has put all of his inverstment eggs in one basket. It also overlooks what a more experienced investor could have brought to the busimess - it is better to have 60% of something worthwhile  rather than 100% of very little usually!!

IFA?    2 thanks

Ian McTernan CTA | | Permalink

Not sure an IFA could recommend putting all your eggs into one basket in this way- it's usual to want to separate the pension from the business so that if the business goes down you at least still have your pension to fall back on.

I can see the attraction of leveraging your own pension in this way but it has many pitfalls too, and is not for everyone.

Probably better off remortgaging the house before considering potentially making your retirement a gamble.

If it's the only way to get the business going and you feel confident about the business then go for it- but be very aware of the additional risk this type of 'funding' provides.

Dragon's Den

Michael C Feltham | | Permalink

Anyone with a modicum of experience and expertise in venture funding cannot take this reality TV programme at all seriously!

The panelists are not business angels: they are egotists seeking media exposure with the added bonus of sometimes being able to behave in expected manner as Vulture Capitalists!

Real Business Angels add significantly to a business by injecting expertise, contacts and act as mentors: whereas far too many exemplars of "successful" Den participants recount subsequent horror stories of broken promises, equity funding being changed for loans and complete lack of support and assistance.

No real fund manager of VC would even consider making any offer, no matter how parsimonious, prior to a series of robust analyses most significantly including Due Diligence evaluation.

Such a programme might serve the cause of SME business and start ups better, if it focused on just one serious case per show and demonstrated how any entrepreneur needs to jump through serial hoops and fails to gain support, in a majority of cases..

As with so much TV  today - and BBC in particular - Dragons Den is a charade and must be perceived as such.

 

 

Dragons Den

Andrew Snowdon | | Permalink

I don't disagree with the comments above but it ignores the true impact of the programme - to entertain, introduce novices to issues in business finance and hopefully give outsiders an understanding in what is involved in a business pitch and how to present a business plan. Of course it is somewhat glib but that is TV. It still serves a purpose in a business education, especially for younger viewers. The common faults such as not considering financials properly continue to be demonstrated each time thus enabling lesson for viewers.

If one pitch only was used for 1/2 hour it wouldn't be making prime time and wouldn't serve much additional purpose over and above the same type of programme that can be found in the obscure channels.

Dragon's Den

Michael C Feltham | | Permalink

Andrew Snowdon wrote:
I don't disagree with the comments above but it ignores the true impact of the programme - to entertain,

Precisely! Surely, since it is primarily to "Entertain", then it has no real purpose towards greater business understanding?

Quote:
......to (sic) introduce novices to issues in business finance and hopefully give outsiders an understanding in what is involved in a business pitch and how to present a business plan.

One would suggest "How not to present a Business Plan: and in majority, "What Business Plan" is more apposite.

Quote:
The common faults such as not considering financials properly continue to be demonstrated each time thus enabling lesson for viewers.

One must presume applicants to the programme have watched earlier programmes: so clearly the message isn't getting through!

After now 25+ years involvement in corporate financing and VC and more particularly working with numerous local, county and regional agencies as well as the gamut of SMEs from family businesses thru start ups and turnarounds, Business Plans are a rarity: and good effective plans almost non-existent: as is even effective financial record keeping, despite the enabling facility of IT.

The Late Sir John Harvey-Jones's programme "Trouble Shooter" focused on one business per broadcast. And this was reasonably popular!

For me Dragon's Den is a sort of Britain's Got Talent, using aspiring entrepreneurs as the dummies and serves no purpose in an educational sense: worse, it provides a false image: mainly thanks to the choice of Dragons.

The only, early, Dragon worthy of any real respect was the US financier Doug Richard: however Richard cut his teeth in The Valley and the tech biz.

His VC language, however, would be foreign, since I doubt the current crop really know what such benchmarks as IRR, Pre-Money Value and Post-Money Value etc mean...