Last night I watched Dragons’ Den, one of my favourite TV shows here in the UK, where entrepreneurs can pitch to 5 investors their business ideas and request investment in return for a percentage of their company.
In the process of finding real talent or potential investment opportunities and for general entertainment value you often see either ridiculous or useless business and product ideas. The dragons all come from different business areas, such as retail, leisure industry, hospitality. Although one of the investors is meant to have more of a technology background, when it comes to internet ventures, the dragons are slightly overwhelmed.
A couple of years ago Theo Paphitis invested £200k for a 30% return in an affiliate site Gaming Alerts, which I found startling. Amongst the internet industry there was a lot of discussion regarding this outrageous investment. In a later show Gaming Alerts was only mentioned very briefly and it was said that they moved the team of 2 into Theo’s office building, I guess to keep an eye on them and to see where his £200k actually go. I would like to know too!
In last night’s show, Deborah Meaden invested £100k for a 15% stake in the company Mydish.co.uk, a recipe sharing site. Maybe £100k would be a fair investment but the founder of the company already raised £600k investment to date and I truely ask myself what happened to all that money, as the site doesn’t really feature any spectacular functionalities, which would have added up to this kind of money. Otherwise I suspect, that the company owner Carol Savage has been ripped off by her web development company.
Those two examples just really demonstrate to me that those particular investors may lack the necessary know how in the online industry. Although I have to admit that in both instances the pitches were really professional and the people pitching for the investments were really confident and knowlegable. This is certainly an important part contributing to the investors’ decision making process. However, I still believe that they could have saved themselves a good junk of money if they just stuck to their areas of expertise.