Not Actually In: Half of Dragons’ Den investments fall through after the show

For eleven series, viewers watch entrepreneurs appear on Dragons’ Den in the hope of securing valuable investment and support for their growing businesses. Some succeed. Most fail. But what happens to these deals when the cameras stop rolling?

According to a new report by Tiger Mobiles into the first 11 series of the popular BBC television programme using data from Companies House, Duedil, the Dragons’ Den website and by speaking directly with founders, they found that some 76 out of the 153 businesses that successfully pitched for funding on screen didn’t see a penny.

Tiger Mobiles, the Leeds-based mobile phone comparison site, were themselves rejected in 2008 by producers of the show and didn’t even make it to air.

Of the £13m pledged by the Dragons on the show during those series, only £5.8m was actually invested.

“I actually think that in terms of angel investing, these numbers are very high,” Dragons’ Den investor Deborah Meaden told The Sunday Telegraph that “In the normal world, I’d be lucky to get one in 10 deals away.”

According to Meaden, she and her fellow Dragons will only walk away from a deal if discrepancies appear during the due diligence phase, when accounts and legal documents are looked through and assessed. “Some people panic in the den and say something that is not true,” she explains. “If it’s not a material [discrepancy], I can forgive that. The den is a hot place.

“But if it is material, I feel completely entitled to walk away from the deal.”

But is the show selling a message of false hope? Some of the companies that have gone on to appear in Dragons’ Den What Happened Next follow-up specials didn’t actually receive investment.

Take The Wand Company, maker of the remote control shaped like a wizard’s wand, which has long been hailed as one of the show’s great success stories. The company has sold 170,000 wands to date and was chosen by the BBC to create a “sonic screwdriver” remote control under a Doctor Who brand licence.

“The investment didn’t go through,” admits founder Chris Barnardo. “It never even got as far as seeing the paperwork.”

This was not a case of the Dragons reneging on the deal, Barnardo says. “We went with Duncan [Bannatyne] on the show but we made £50,000-worth of sales after it aired, so we didn’t need the investment.” One entrepreneur who pitched during the current series of the show, who cannot be named at this stage because of a non-disclosure agreement, has said that there’s another reason that so many deals don’t go through.

As we covered at the time Sharon Wright, who delivered “One of the best pitches that the Dragons’ had seen” according to Theo Paphitis when she appeared looking for £80,000 for her fledgling business Talpa Products gaining in the funding from Duncan Bannatyne and James Caan went on to launch legal action against Caan when she found out his ‘investment’ was actually a very high interest rate loan and she was required to use many of his other companies to purchase services from.

There are others like Kirsty Worthenshaw, who received £65,000 from Dragons’ Den stars Peter Jones and Duncan Bannatyne in 2010 in return for 30 per cent of her ice cream business, said she felt that her deal was simple and fair. “I couldn’t afford my own lawyer when we did the deal because I was skint. Peter, my main Dragon, sorted that all out.

“I trusted them completely, worked with them for years, and when my lawyer came to check the paperwork so I could buy back the stake a year and a half ago, they were all very fair.”

According to Tiger Mobiles’ Dan Forster, who compiled the research, the issue is less about the structure of deals and more about the kind of companies that the BBC invites to take part in the show.
“The problem lies with the BBC, who, in a bid to keep the viewer count high, has turned the show into a contrived affair that’s more about viewer entertainment than genuine business success.

“They tend to pick pitchers who are TV-friendly rather than those who are investible with a healthy balance sheet.”

A BBC spokesman commented on the research, saying: “We are proud of our record of achieving investment offers in the den and we look into every detail of a business before they are offered a slot on the show. The BBC plays no role in the deal after recording, and we accept that it is typical for some angel investments to fall down at the due diligence stage.”

Meaden added: “The BBC couldn’t possibly waste taxpayers’ money on doing full commercial due diligence on every applicant. I spend an average of £5,000 to £10,000 on every company I am seeking to invest in.”

According to Kelly Hoppen, who has been an investor on the show for two series, there are a number of reasons why deals fall through after the show: “We have to remember that the Dragons make the decision to invest in an hour or two, when in real time they would take longer. Often some entrepreneurs, many of whom are in the early stages of their business and start-ups, in their excitement can miss vital facts and figures when pitching.

“Once the cameras are off, the Dragons may not find they have, for example, the rights to sole use of the brand name or the IP is not within the company and these are important points to consider with any investments, whether on the show or outside.”

“The most irritating is when people just walk away from the deal through silence,” added Meaden. “I’ve had two or three silences, which is most irritating when I’ve spent money on due diligence.”

According to the data, Peter Jones is the the show’s most prolific investor, offering funding to 54 of the 143 businesses.

The average amount pitched for is £100,000 and the average amount of equity given up by applicants is 40 per cent.

The highest amount of equity ever given away on the show was 79 per cent by RK Records, which has since rebranded as Bannatyne Music, Ryan Ashmore and his business partner Liam Webb both 18 at the time accepted the deal in exchange for £50,000.

The highest amount ever pitched for successfully in the Den is £250,000. However, on both occasions the deals fell through after filming.

Speaking about the current series Meaden said: “I’ve done nine and got seven away.” At the end of this series, Piers Linney, who recently left the show, could emerge as the Dragon with the highest investment per deal.