Dragons’ Den exposure for businesses failing to ignite funding search

Entrepreneurs entering Dragons' Den to pitch for investment are failing to pursue the traditional forms of business finance before taking their businesses on the show, new research shows.

Findings from a report on companies which have failed to secure, or turned down, investment from the BBC’s Dragons’ Den shows that 84 per cent had not approached a bank before going on the show.

Pensionledfunding.com’s Dragons Dented study also reveals that two thirds say that their appearance on the show has not helped them secure further funding.

Of those which had tried to secure bank funding before appearing on the investor show, which currently has Dragons including Peter Jones, Duncan Bannatyne and Piers Linney, 60 per cent had been turned down.

But some 94 per cent admit that taking a slot on the TV programme has raised their company’s profile.

More than a third of the survey’s respondents who appeared on Dragons’ Den received an offer from the investors. However, once the camera’s had been turned off, 58 per cent of those fell through for contractual reasons.

Speaking to GrowthBusiness, Howard Carter, founder and CEO of anti-mosquito product Incognito, says that prior to appearing on Dragons Den in 2008 he took some specialist advice on the firm’s figures and already had an order from Alliance Boots. Carter received an offer from James Caan for the full amount, but for 40 per cent of his business.

‘We were only asking for £100,000 for 12.5 per cent, which we though was reasonable,’ he explains.

‘To give 40 per cent away when we had already sold 10 per cent of the business to family and friends who had paid pro rata wasn’t realistic – it was bordering on extortionate. I felt like i was being mugged in an alley by some of the Dragons.

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The survey by Pensionledfunding.com finds that, of the 553 contestants who appeared during the first eight seasons of the show, only 140 appeared to be still trading or marketing a business pitched to the Dragons.

Of those still trading, 75 per cent say that the Dragons did not discuss the value of their intellectual property (IP).

Some 84 per cent have never had an IP valuation, and half of that figure did not consider their venture to have any IP value.

Guy Unwin, co-founder of household goods business Planit Products, comments, ‘We received a £200,000 offer from James Caan which was later retracted for reasons we accepted, but it still left us needing to find a form of funding that gave us the working capital to grow the business.’

Adam Tavener, chairman of Clifton Asset Management, which runs pensionledfunding.com, adds, ‘Whilst programmes such as Dragons’ Den demonstrate the importance of having a clear, well-developed business plan alongside an innovative product or service, they also show just how much owners are forced to give away in return for funding.’

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for GrowthBusiness.co.uk from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.