Episode 2 of Dragons’ Den/The Apprentice

Welcome to our weekly Dragons’ Den and Apprentice blog, where a member of Harper Macleod’s entrepreneurial team will share their view of the latest episodes, give some professional insight to explain how we could have helped … and hopefully have a bit of fun along the way.  This blog is from Solicitor, Angela Gizzi who works within the entrepreneurial team.  The team have been involved in almost 200 transactions with a total deal value of more than £147m in the past three years, many of these being equity investments.

First up on Dragons’ Den was a flawless pitch from husband and wife team, Joel and Nikki Buckley. Their company, Eco Union, sells sustainable DIY tools. They were interrogated by Deborah Meadon- who is dubbed the “sustainability Dragon”. Deborah queried every aspect of their product, including the ink on the label, to see if it was truly carbon neutral and plastic free.  The couple impressed the Dragons with the concept that the paint trays can be reused even when the colours of paint are different, heightening their sustainability. We see carbon neutral and sustainability increasingly becoming a focus within the entrepreneurial investment community. It is not only important for businesses and investors to review their impact on the environment, sustainable businesses now want to take this further by using their business’ as a platform to share sustainability knowledge with the consumer.

The next particularity thought-provoking pitch was from Glasgow mum, Victoria Fullerton, who was asking for investment in her non-trading company Toto Sleep. Her product, the “Toto”, is a wearable device for babies to assist parents to track when their child is ready to sleep, via an app. New Dragon, Steve Bartlett, queried the technology behind the product however Victoria would not share this information with the Dragons as it was “patent pending”. Patent pending is a term which indicates the inventor is pursuing patent protection. We find that it is wise to patent new technologies or inventive steps taken by entrepreneurs. A patent will protect a new invention or idea. Once patented, the inventor has the right to take legal action against anyone who makes, uses, sells or imports it without your permission. Patents can protect your idea/invention for up to 20 years however the inventor will need to pay a fee to renew your patent every year.

After recently going through the tricky process of puppy toilet training, the last pitch resonated with me.  Canadian-born, Rebecca Sloan, invented the puppy training grass patch – “piddle patch” which can be used continuously for 1-2 weeks as opposed to an ordinary puppy pad which is single use made from plastics. What attracted new Dragon Steve Bartlett to the invention is the fact that the product can also be used for dog owners living in high rise apartments where getting outside every few hours is difficult. Rebecca received four offers from the Dragons. When deciding which Dragon to work with, the concept of equity “claw back” was discussed. We tend to find this concept in equity investments where the founder is keen to keep as much of their business as possible, but  still requires investment. In this instance Steve Bartlett offered Rebecca all of the money for 25% of the business, with a potential equity claw back, on the basis that if his initial investment is returned within a certain time frame then his equity stake in Piddle Patch will drop to 20% – allowing Rebecca to “claw back” 5% equity.

I then went on to watch The Apprentice, where Lord Sugar asked the candidates to create a toothbrush and matching app, to encourage teeth brushing, aimed at 6 8-year-olds. The candidates were to pitch to a high street retailer. When creating a new product, especially one designed for children, the branding and noticeability factor is key. You want this toothbrush to be something that the children notice in the shops and, in turn, ask their parents to buy. The girls’ toothbrush product, with bright colours and a cartoon tooth, looked like it was for a younger demographic and, in addition, their app was a game which did not give the children any tooth brushing direction. Again, the boys’ team disappointed as they produced a green and brown “magic wand” toothbrush that was deemed ugly by the high street retailer. However, the boy’s application seemed more practical offering a timer and encouragement to the children. When it was time to pitch, the girls’ enthusiasm and willingness to adapt the product to the high street retailers allowed them to win – with more than 10,000 units ordered. Similar to last week, the lack of proper branding and an unattractive product let the boys down. They have now lost two weeks in a row.

Please get in touch if any of the issues discussed above are areas that you may need advice on.