One of the things that’s become abundantly clear as the first season of Dragons’ Den SA has progressed is that, unless you’ve got an incredibly good business idea and some serious numbers to back you up, you won’t get far if you’re pitching to the wrong people. Now, the dragons have wider array of expertise than most VC panels you’ll come up against but, as many of the pitchers in this season have learned, they simply don’t have it all.
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Heck, in this episode, a major deal was very nearly lost because only one of the dragons had the expertise to take it. If you didn’t watch the episode, you can find out which deal that was by reading this article, which will also tell you about tech arriving a couple of years too late, matching your aspirations with what you’re realistically capable of and knowing when to say yes to a deal on the table.
Drink up!
Kicking things off this week was Sebastian de Romijn of Pure Mix Cocktail Solutions, a company that creates fresh pre-mixed cocktails. The Argentinian-born de Romijn came in asking the dragons for R260 000, in return for a 20% equity stake in the business.
The entrepreneur was pretty bold in his claim, suggesting that the dragons would get their investment back in three years and nine months. Interestingly, de Romijn seemed to suggest that his product was ideally suited to restaurants and bars — using the premise that it would save money on having to upskill staff and that each cocktail would be identical — rather than home users.
Nerves meant that his pitch came briefly came unstuck, although that seemed to rectify itself once he got behind the bar and started pouring the dragons samples.
He also appeared to be answering the dragons’ questions fairly well until he revealed that he’d held back a little during the company’s three years in existence.
“Entrepreneurs should bite off more than they can chew and then chew like hell,” said the Creative Counsel founder Gil Oved. “You’re born ready, you should be selling this to death”.
Public speaker and equity partner Vusi Thembakwayo meanwhile pointed out that distributors might have an issue with the freshness of the product if they couldn’t move enough stock in one go.
Gunguluza Media owner Lebo Gunguluza had similar reservations: “If the non-fresh guys saw a market in the fresh side, they would’ve all been there,” he said.
Despite his earlier reservations, Thembakwayo did appear interested. “Sebastian, I actually think you have the makings of it,” he said. “This is the first time in a long time somebody’s come in understanding ratio of sales per day, ratio of bottles, who’s had a direct nab on the numbers…you’re doing all the right stuff”.
None of that however could convince him to invest.
Identity partners CEO Polo Radebe meanwhile declined on the basis that she doesn’t invest in the alcohol industry.
An offer did come forward from Oved for the amount de Romijn was requesting in return for 50% of the business and on condition that another dragon came in with him. Gyft CEO Vinny Lingham immediately jumped in on the deal.
Things seemed a little tense when de Romijn asked if Oved and Lingham would come down on their requested equity. Despite, or perhaps because, they said they wouldn’t, de Romijn accepted the deal.
Wiping up
Next into the den was Zithane Mirmbali, who asked the dragons for a R1-million investment in return for 10% equity in his smart toilet paper lubricating device. He was pretty confident in the business, suggesting that, together with its companion app, the business would be worth US$100-million by the end of the year.
Within seconds of the pitch starting, the dragons were in hysterics.
Despite this, the entrepreneur soldiered on, saying that the device had already been well-received in the US and that many felt it was an ideal replacement for wet wipes, which people are banned from flushing in many states. It also emerged that R1-million had been invested by the IDC to develop the product in the first place.
When the device was unveiled however, it appeared to be little more than a wall-mounted hand sanitiser hanging next to a roll of toilet paper.
The dragons seemed equally skeptical.
“I have sat here patiently really hoping that you would show me what was unique about it, but as soon as you sprayed I saw it doing what I’ve seen similar devices doing in the past,” saaid Radebe.
Their interest was however piqued when it was revealed that Mica had agreed to stock the device in a cash deal. Things quickly swung back when the paperwork for the supposed deal didn’t check out.
Too much uncertainty and an inability to back up big claims meant that all the dragons were out.
Keeping track of your customers
Third in to the den were father and son team Joggie and Adief Myburgh, asking for a R1.6-million investment in return for a 10% equity stake in their real-time customer tracking company Vicky.
The company’s central product is a base station, coupled with tracking sensors which monitor the behaviour of customers within a store. The data is then fed back to a server and can be accessed via a dashboard in real-time.
The company also has advisers on-board who can advise retailers on what the data means. In a market where the most successful startups have catered to enterprise level businesses rather than consumers, it makes sense.
There were however serious reservations, especially around how highly the father and son pair had valued the business and what sums they had used to come up with the value. And when it emerged just how much work there still remained to be done in setting up the company — basically everything — things only seemed to get worse.
It was also concerning that they were looking to disrupt a relatively established niche based solely on price point and ease of use. Indeed, Oved felt that the Myburghs were actually behind on some of the technology on offer in the space today.
For that reason, he was out, followed in quick succession by Gunguluza. Lingham also declined to invest, but suggested that if they’d come in asking for less and using an industry standard, such as iBeacon, they would’ve stood a better chance.
The other dragons quickly followed suit.
Digging into something meaty
The final pitch for this episode came from Johan Jacobs, who came in asking for a R2-million investment, in return for a 10% stake in his Halal abattoir. Unlike so many of the entrepreneurs on the series to date, Jacobs had a very clear idea of what he would use the investment for: ramping up his ability to meet demand.
At the time of recording, he told the dragons that he could only meet four percent of the demand he had for his meat. This, he said, was down to his own cash flow and capital restrictions.
Also in his favour was the fact that he had exact numbers on-hand and the business’ profitability. Even more impressive was the fact that he had projected how much gross and net profit the business would make were the dragons to invest the requested amount.
However good the business seemed, Lingham had to bow out because of his religious beliefs. The other dragons however remained very firmly interested.
Given where the business was at however, it was natural that they’d be curious about why Jacobs hadn’t received loan funding from a bank.
His response was that the banks simply don’t give loans to abattoirs, which the dragons found slightly strange.
Nonetheless, the figures had them seriously excited.
“I think you’re thinking too small here,” said Thembakwayo.
Even Oved, who said that he didn’t want to play bank and wanted to be involved with a company that needed him more from an expertise side, was tempted.
Despite that excitement, Gunguluza said he was out, because it wasn’t his kind of business and Radebe had to bow out because of a conflict of interest.
This kind of pitch couldn’t fail to attract an investor though and Thembakwayo came in offering R1-million for 25% with the proviso that Oved offer the same amount for the same equity percentage.
That deal was quickly dashed however when Oved said he didn’t “have the guts” to throw that kind of money at an industry he knew nothing about.
After some serious thinking though, Thembakwayo came in for the full amount (subject to a thorough due diligence, of course).
