Dragons’ Den Episode 6: holding onto the hoard

In the real world, outside of TV, even the most polished entrepreneurs have to fight extremely hard to get funding. It’s not easy. You are, after all, asking people to invest their own money in you.

This week, the entrepreneurs in the den got a taste of just how difficult the fight for funding can be.

Jobbing around

Amanda and Paul Rabinowitz, the first entrepreneurs in the den this week, initially had us breathing a sigh relief. The product they were pitching, a mobile jobs portal aimed at students and called Muva, is much more in-line with the kind of startups Ventureburn typically covers. That initial confidence was only aided by the fact that they were throwing around terms like MVP before they’d even entered the den.

The two came in asking for R120 000 in return for a 10% equity share in the business and had clearly at least read what investors look for in a pitch.

Interestingly, the product doesn’t just serve as jobs portal for students looking to get their hands on some part-time work, but also as place where merchants can post discounts aimed specifically at students.

Given South Africa’s high levels of unemployment, it’s interesting that the two decided to target university students. That said, they are the more likely group of job seekers to have smartphones, which are easier to develop for. It could also provide it with a relatively tech-savvy user base to expand outward from.

While all the dragons had questions, none seemed completely dismissive of Muva.

As in so many cases in this series however, things seemed poised to slip up when equity partner Vusi Thembekwayo asked how the investment would be spent. Some of it, the Rabinowitzes revealed, would be spent on rebuilding the site while the remainder would be spent on marketing.

“Give me a number,” the renowned public speaker requested in relation to the latter.

Gyft founder Vinny Lingham meanwhile was concerned that the two were working on the product from opposite sides of the country. “That’s not a good formula for success here,” he said.

The Creative Counsel founder Gil Oved on the other hand took issue with the fact that the Muvu founders wanted to charge students for use of the service. The proposed charge may only have been R25, but Oved was right when he pointed out that it was going against the grain of what the world’s most successful mobile companies were doing.

“There is way more value in acquiring these users and selling the information of the users or the access to these users to big corporates, either through advertising or through transactions,” he said.

While he did think they were onto something, he felt he couldn’t provide them with the kind of time and resources they needed. Identity Partners CEO Polo Radebe was out for similar reasons, as were Thembekwayo and Gunguluza media CEO Lebo Gunguluza.

There was finally a ray of hop for the siblings though when Lingham offered R500 000 for a 40% equity stake on condition that they brought in a CTO and convinced Oved. Unfortunately they weren’t able to do so, meaning that the deal was lost.

Drink up!

Next into the den was Durban-based entrepreneur George Anderson, who was hoping to sell the dragons on his idea for a tool to track alcohol consumption in bars. He was willing to give away 30% equity in return for a R1-million investment.

In Anderson’s favour is the fact that the business is already up and running, but how much growth potential would the dragons see in it?

What the entrepreneur has done is develop a piece of software that prints out labels you stick onto bottles at a bar, which will apparently allow those bars to accurately gauge how many tots have been sold from a bottle.

According to Anderson, his system has a massive advantage in terms of cost over its electronic competitors.

The investment meanwhile would be used for registering patents in foreign markets. Things appeared to come unstuck however when the dragons started asking questions about Anderson’s turnover. In particular, Anderson’s inability to provide exact numbers left the dragons unimpressed.

“You are telling me for four years, you don’t have a clue of how much money you are making?” asked Gunguzula. When the answer to that turned out to be affirmative, Gunguzula only got more angry.

“I’m very unhappy about your pitch and I’m definitely not investing,” he said.

Not knowing his numbers meant that Anderson’s pitch didn’t stick and all the dragons were out.

Help, I’ve got a headache

Ask any VC about the emails that come through their inbox and you’ll almost inevitably hear at least one story about someone trying to sell them some form of miracle water. Dragon’s Den finally got its version of this huckster in the shape of Lungiso Lechaba.

Asking R450 000 in return for a 20% stake in the company, Lechaba was trying to sell the dragons on what called “Meditating Water” — essentially bog standard bottled water with a little headache powder already stirred in.

Apparently designed for on-the-go clients, it’s designed to save you time when it comes to stirring headache powder into your water.

Despite reassurances that Aspen was helping Lechaba, the dragons were concerned around how he intended ensuring that children wouldn’t get their hands on the water and that people wouldn’t overdose on it.

Under interrogation meanwhile, it wasn’t even clear that the medicated water Lechaba was trying to pitch to the judges even had any medication in it.

“I don’t see a clear need for what you’re selling,” said Thembekwaya, “this is water. Finished.”

Given all those issues, it was clear that there was too much to do for the dragons to be of any use. Small wonder then that all of them were immediately out.

Business in 3D

3D printing is huge right now. It’s an emerging technology with plenty of excitement around it. So when Simon Carter and Richard Van As walked in with their proposed idea for a 3D-printed farm.

Called Robo Beast, the idea is to essentially stack together around 30 3D printers, enabling businesses to engage in rapid prototyping. The entrepreneurs came in asking for 35% equity in return for a R1-million investment.

Regular Burn Media readers might recognise Van As as one of the pioneers of 3D-printed prosthetic limbs, so the pair certainly come with experience in the space, but would the dragons be impressed?

Initially things appeared to be going well, with the product already established and printing as well as a definitive costing structure. The fact that they were also willing to put R500 000 of their own capital into the farm.

Both Lingham and Oved however took umbrage with the fact that the pair’s other company would be manufacturing the printers for the farm.

The latter also took issue with the business itself.

“As you guys started talking, I felt butterflies in my stomach but those turned into moths,” he said. The ad-man told Van As and Carter that it would likely run out of steam within the next five years.

The other dragons agreed and were out.

Get on your scooter

The final entrepreneur in the den was Lynne Scullard, whose business Scully Scooters. The business trains people how to ride scooters safely and also sells the two-wheeled vehicles to customers its trained. In addition, it provides courses which show people how to get going with their own businesses once they’ve bought their set of wheels.

Scullard came in asking for R800 000 in return for 20% equity.

Probably the most well-prepared of the entrepreneurs to take part in this episode, Scullard came in knowing her figures and, more importantly, what she would do with the investment.

That said, Radebe felt that Scullard should have presented herself as an enterprise development provider.

Despite a lot of nodding heads, both Lingham and Oved were out because it wasn’t really their game.

Thembekwayo provided the first offer of the show when he proposed taking a 25% stake in the business for R400 000 on condition that another dragon come in with a matching offer.

Unfortunately none of the other dragons were willing to partner with him, meaning that Dragons Den SA had its first zero-investment episode.