Many thanks for all the reads, rates and comments - all are appreciated. An accountant by day and a ...
Many thanks for all the reads, rates and comments - all are appreciated. An accountant by day and a random reviewer by night I am not a professional writer, nor do I have any ambitions to be I guess I am just opinionated.
Member since:07.03.2007
Reviews:249
Members who trust:66
I’m sure most of you know what the Dragon’s Den is, who the Dragons are and the format of the programme, but for those of you that do not I think I had better summarise.
The Dragon’s Den is a place whereby entrepreneurs can pitch their business or ideas in order to raise cash to get a new business off the ground or grow and expand an existing and current business, and this is televised for our entertainment.
The Dragons consist of successful business people with excess cash to invest in new business. The current Dragons are Theo Paphitis, James Caan, Deborah Meaden, Peter Jones and Duncan Bannatyne. Profiles of the Dragons can be found on the official website http://www.bbc.co.uk/dragonsden/thedragons/theo.shtml.
My opinion
Equity investment is raising funds through selling shares in your company and no entrepreneur wants to give away part of its company however small, therefore this type of fundraising is typically seen as the last resort. The entrepreneur is only in the den as s/he cannot get funding from any bank, building society or other source. The simple fact that no one else will touch it with a barge pole and
provide financial support clearly confirms that the entrepreneur has a risky business.
The un-written rule in equity investment is the higher the risk, the higher the reward. This appears to be a concept that many entrepreneurs either don’t understand or seem to ‘forget’. When some entrepreneur’s are asking for substantial amounts of cash for a 20% it is understandable that the dragon’s are going to laugh, and rightly so. Whilst some may seem this treatment as harsh, or unfair think about it from a dragon’s perspective for a minute.
The dragon will be stumping up the cash, as well as providing advice, for a venture that could take off or it could fall over, and there is a strong likelihood that the venture will fail. Unfortunately it is a fact of life that many businesses fail in the seed or start up period, therefore if the dragon decides to invest then it is exposed to high risk. It is only right that the dragon should be rewarded if it invests and the business takes off.
If an entrepreneur can convince a dragon to invest then the entrepreneur not only gets cash but it also gets another body on board offer guidance and assistance in the venture, and let’s face it the dragons are very experienced, high profile people that have the knowledge and the track record to help the business prosper. These are qualities that money cannot buy and qualities many other potential investors don’t have, and therefore should demand a higher stake in the business.
Unfortunately what we see is only the tip of the iceberg, and it is basically the initial exploratory meeting that takes place in any equity fundraising exercise. The dragon’s agreement to invest on television does not necessarily mean that the entrepreneur actually gets the investment. Once the televised stage is over then the dragon will carry out additional investigations (called due diligence in the world of corporate finance) and dig deeper in to the financial and legal affairs of both the entrepreneur and the business.
Equity investment is not just a financial relationship between the dragon and the entrepreneur. There has to be mutual respect, trust and understanding. The two personalities must be able to work together and build up a rapport. Without this relationship the venture will never work, regardless of the potential success and earnings capabilities of the business.
It is the second stage and beyond, i.e. the bit we don’t get to see on television that, in my opinion, is where it starts getting interesting. I would love to see what the business venture is really like, how it is actually performing and what controls and procedures are in place. In addition, I would like to see what the entrepreneur is really like and how the relationship with the dragon develops (or falls over as the case may be) and the venture moves going forwards.
Obviously there have been some success stories from the Dragon’s Den, with the retail of Reggae Reggae Sauce and Leroy’s subsequent cookery book, however I can’t think of any other success stories from the show.
Whilst entertaining to watch, the dragon’s den does not really give much away in to the world of equity fundraising.
I like seeing the pathetic pitches about products that are never going to work, as well as hearing about the ridiculous results that the business is going to achieve (for example “we are predicting to turnover £5million in the first year”). This naivety clearly demonstrates that most entrepreneurs on the show are ‘ideas’ people and don’t really have a clue about how businesses operate in the real world and the dragons use this to really hammer them in to the ground through interrogations, making them look stupid in the process.
Whilst I should feel sorry for the entrepreneurs I don’t because at the end of the day it is another reality program where members of the public get their five minutes of fame, earn the production companies lots of money in the process, get exploited and get nothing out of it at the end. A victim of the celebrity culture perhaps?
(Originally posted on Dooyoo under the name of Yackers1)
How helpful would this review be to a person making a buying decision? Rating guidelines
Not entirely sure why, but as a businessman (of sorts) I've always avoided this like the plague, guess I'd rather switch off when I come home. A very interesting review though. Richard.
paulpry118 26.10.2009 21:16
I like Dragons Den but I am a bit fed up of the spin off programmes recently
Oct 25th, 2009
very helpful by (100%):
