Sourcing finance for expansion along with a desire to recruit high-level expertise for specific functions such as marketing or business strategy is prompting companies to try their luck at Dragons’ Den type events. Produce Business UK investigates what food businesses can gain from participation and assesses their chances of success
Research carried out by business data site Company Check indicates that food businesses are the most likely to succeed when pitching to potential investors on the BBC Dragons Den programme. Chikas snack food is one of the businesses that has taken part. The company’s Chika Russell says: “Food and drink businesses work on Dragons Den for a few reasons; there are major changes in consumer eating patterns and the large players are not set up to innovate or meet demand for contemporary food products. Second, the Dragons are consumers of food and immediately have their own opinions on what will succeed.”
Company Check’s study found that over 17% of all investments awarded in the Den over the past 14 series went to food and drink companies. Admittedly, food and drink was not the most popular category in the early seasons, but it has definitely picked up speed following the extremely successful investment made by Richard Farleigh and Peter Jones in Reggae Reggae sauce and the product’s inventor Levi Roots is now worth an estimated £30million.
The entrepreneurs most likely to back food businesses are Peter Jones and Deborah Meaden, having invested in 17 and nine food businesses respectively. Referring to the success of this category of enterprises on the show, Jane Milton of Jane Milton Food Industry Expert, a specialist management consultancy for the food industry working with a number of Dragon food businesses, says: “The Dragons work with food businesses because they already have experience in this market. They connect to experts in different fields who can offer advice, contacts etc. and because you can make real changes, often without major investment. Because the Dragons have great contacts with retailers, they can open doors.”
Going it alone
Not all businesses offered deals by the dragons take up the offer. Chika Russell created a range of Nigerian-inspired healthy snacks which included hand cooked plantain and chick pea crisps. She accepted an investment offer from Peter Jones but later turned it down. She said “It was a great experience going on Dragons’ Den to have our business model challenged in that environment and be vindicated with five offers. Although I accepted Peter Jones’ offer initially, during the whole process I gained the confidence to realise that while it might be easier to get outside help from a Dragon, I could go it alone. And ultimately, knowing how hard it is to build this business, I didn’t want to share it with anyone who wasn’t going to sweat it in the same way as I was.”
To take another example, entrepreneurs Shane Lake and Tony Charles asked for £100,000 for their fledgling online takeaway service Hungry House. They accepted joint investment from James Caan and Duncan Bannatyne but this deal collapsed after the show. According to Company Check data, Hungry House is now worth £1,800,000.
Fiona Houston of Mara Seaweed had a much more bruising experience when Peter Jones began questioning her business valuation. She had been seeking £100,000 for 3% equity. The resultant confrontation led to no deals being made, and Houston later commenting that the experience had been like “standing in front of a headteacher and being told off.”
Coping with rejection
Rejection in the Den can still pay dividends, though. Entrepreneurs Dan Cluderay and Andy Needham run a business called Approved Foods which sells food that is still edible, despite being past the -best-before date. The food is sold online and includes fresh fruit and vegetables such as English Braeburn apples, peas, onions and garlic. Prices are low for example, a 2kg bag of Boston Maris Bard potatoes at 0.63p compared to the normal price of £1.49, or onions at 0.18p. Although unsuccessful in obtaining Dragon finance, the publicity proved valuable.
Needham says: “We were approached by the producers of Dragons Den over a period of months asking us to apply. We eventually gave in and applied and went through the screening process before appearing on the actual show. Although we didn’t get any offers of funding, we did receive some very favourable comments from the Dragons and Peter Jones in particular. The gap between filming and broadcast was around nine months. Within that period we had raised funding from elsewhere and completed the move, and other developments that we had talked about in the Den. Although the appearance was unsuccessful funding-wise, the publicity definitely helped lift us to another level.”
Following the lead
The Dragons Den model has become a very popular method of raising funds and accessing expertise. There are now countless smaller, Den-style events held every year often by university innovation centres, local councils or by companies seeking ideas from their employees. For example, this autumn, Thames Valley Housing is running a course for people wanting to start food businesses that will end with a Dragons-Den-style experience when participants can pitch their business plan.
Most pitches are traditional ones for new, small businesses, but there can be intriguing ideas offering solutions to serious food industry problems. Last year, Imperial College’s Institute of Chemical Biology Centre for Doctoral Training hosted a CDT Den during which PhD students pitched business ideas to a panel of judges that included Professor James Stirling, Provost of Imperial College, Professor Jackie Hunter, chief executive of BBSRC and Paul Atherton, founder of Nexeon. The winner was FungiAlert developed by Kerry O’Donnelly Weaver and Angela de Manzanos. The pair’s prize of £20,000 plus entrepreneurship support has led to the development of a business developing a device for early detection of plant pathogens in fields.
Just taking part in the process can clarify business proposals, provide confidence when pitching to future investors and dealing with promotional situations. Companies that have participated in similar initiatives say that the learning curve was intense, making them more conscious of the need to know exact figures by memory, to be able to argue and to discuss strategy in a coherent manner. Being under pressure concentrates the mind too; with just three minutes to make a pitch from memory and then deal with questions is very hard work, especially when under the spotlight of TV cameras or an audience.
Needham says: “We haven’t taken part in other Den-style funding opportunities, but would recommend anyone getting involved in anything that helps raise your profile and awareness; it only needs one individual or enterprise to become aware of you to potentially kick-start your journey to another level.”
And the scientists behind FungiAlert are under no illusions of what the Imperioal CDT event brought to their ideas. O’Donnelly Weaver says: “We wouldn’t be where we are now if it wasn’t for that competition. Both of us have done entrepreneurial things in the past but we were not sure where to take the concept first. We gained a lot of experience as a result of taking part in that Dragons-Den-style competition. After doing that, we took part in another two competitions, which gave us more funding and time to develop it [FungiAlert]. In February this year, we gained a private industry investor, a social entrepreneur.”
Case study: Cocofina
So what does a Dragons Den application involve? We interviewed Jacob Thundil of Cocofina about his experience this summer. Cocofina produces a range of coconut-based products such as snack bars, coconut oil, coconut milk and pure coconut water. Set up 11 years ago, the products are sold in many retail stores and exported to 25 countries. Thundil was offering a 5% stake in return for £75,000. His resultant deal with Nick Jenkins and Sarah Willingham was for 20% of the company in exchange for £75,000 and a chance to buy back 10% of the business at a later date. All the Dragons made offers.
“I have always been a fan of Dragons Den and had my fair share of laughing at other people. I never expected to be in front of the Dragons myself,” says Thundil. “In February, I got an email encouraging us to apply to go on Dragons Den. I thought it was spam, but it prompted us to call the BBC and speak to their researchers who encouraged us to apply online. We were called for an interview and they said they wanted to take the application further.
“Everything you say has to be verified, and a due diligence process is undertaken to confirm qualifications, products, patents and so on. Each step of the way we kept thinking we would be dropped off and then we were invited to take part. There was a sudden problem when Deborah was due to give prizes at an event I was due to attend, and we were supposed to have no contact with the Dragons before the show, so we had to be called up for a filming session before the event.
“We had to be on site by 6am. We drove to Manchester with all the props the day before, as we had a huge display that had to be set up in the studio. On the day, we had to be prepared to wait from 6 am until 6 pm. You only go to the Den when your name is called. We were waiting with other participants in a large room and were told not to discuss business. You could see people continually practising and going over figures. Everyone was getting nervous. I knew the first two did not succeed as they were called very quickly. We were the third to pitch.
“It only seems like a few minutes on TV because they choose the highlights of the pitch. We were in the studio for two and a half hours. It is like a glass walkway, waiting and waiting. You seem to get in a lift then go out and there was the display with screens all around it. The Dragons were not allowed to see who we were or the product before that point. As I removed each screen, I could see more dragons. It was a bit scary. Then you had to find the right mark on the floor on which to stand. It is only a small mark.
“My pitch went well, without any humming and aahing. I gave out product sample boxes and there were a lot of questions. I soon became confident that they liked the products. I only wanted to work with them if we liked them. I expected Deborah to be quite aggressive, but she was very friendly. When they realized we were serious, all the dragons were friendly. You have to believe in your product and your company.
Dragons Jenkins (l) and Willingham (c) "really seemed to appeal" to Thundil (r)
“Nick and Sarah, the new Dragons, really seemed to appeal to me especially Sarah with her food background expertise. She was very friendly and approachable. I had read the biographies of the Dragons and done extensive research about them. Sarah had a down-to-earth approach. Nick had great experience in marketing, especially online, having built up and sold Moonpig. Sarah could also help me with relationships with retailers. The two dragons have already been to our company and have started helping us.
“When you pitch, the Dragons do not know your company. Talk of rejections taking place later usually comes when they do detailed due diligence on a business. You have to be able to show figures and back them up.
“What I gained from the experience was confidence. It taught me a lot about talking to people about the business. I started this business with zero, using just income from my pay packets. In the early days, there were no bank loans just sacrifices. I saved money from my pay-cheque to develop the business.
Appearing on Dragons Den has taught me a lot about presentation, having to do a pitch from memory in three minutes. You need to be focused and make sure the pitch reflects you and your company. Appearing on TV has also helped with publicity.”