Dragons’ Den SA Episode 7: sweetening the deal

What do collectible marbles, a kiddies table, a macadamia nut processing plant and bespoke confectionery shop have in common?

The answer, which should be fairly obvious given that you’re reading this article is that they’re all things that were pitched on the latest episode of Dragons’ Den SA.

While a number of the episodes in the season so far have had a definite theme to them, this one appeared fairly random. That said, this was also one of the episodes where there were evidently more lessons for your average entrepreneur.

Kicked into touch

First into the den this episode were Peter and Kim Hogg, presenting their South African rugby-based game Flicka Ball. The game is essentially a sophisticated version of the marble trading games so many of us played as children.

The pair came in asking for R300 000 in return for 20% equity, which they hoped to use in order to renew the patent and licensing on the product.

Almost immediately, the dragons raised concerns around the viability of the product as well as the Hoggs’ overall business proposition.

“As far as I’m concerned there’s no great need for this in the market-place,” media mogul Lebo Gunguluza told the couple.

“This is just not a business, it doesn’t tick the boxes” said public speaker and private equity partner Vusi Thembekwayo, referring to the fact that the Hoggs only have one product. He also felt that it simply wasn’t scalable.

Interestingly, this episode also showed the first signs of tension between the dragons with The Creative Counsel co-founder Gil Oved taking issue with how nice some of the other dragons were being to the prospective entrepreneurs.

“You guys are all being like very sweet and nice,” he said, referring to Gyft founder Vinny Lingham in particular. ” I don’t understand the concept. What’s the concept? It’s a branded marble…So please tell me what you see in it”.

Despite Lingham seeing some opportunity in the business, both he and Oved were out immediately.

These childish things…

Up next in the den was Jarred Pillay, who was pitching a three-in-one carry bag aimed at toddlers. Called Tod-pod, the device is capable of transforming from a carry bag into a table and chair. While Pillay’s funding request — R1-million for 25% equity — did seem a little excessive, he appeared to have his ducks in a row with regards to patents and trademarks.

Pillay also claimed to have had reasonable international interest in the product after exhibiting it and a couple of trade shows in Europe. That, alongside his experience in the baby product industry appeared to have the dragons showing some real interest in the concept.

Government backing and a willingness to burn ships and take entrepreneurial risk only seemed to sway things further in Pillay’s favour.

Things derailed however with each new revelation Pillay made around other investors in the concept.

“I’m going to ask you the question,” said Thembekwayo, “Give it some thought, give me an answer, make sure it’s the right one. How much has been invested in the product so far?”

“When you change your numbers in real-time, it makes us nervous,” said Oved.

Pillay’s inability to give a straight answer threw the dragons, with both Lingham and Oved pointing out that it made him difficult to trust.

That lack of trust, coupled with some worries around the dragons’ own expertise meant appeared to have Pillay scuppered. That is, until Identity Partners CEO Polo Leteka Radebe threw him a life-jacket in the shape of a R500 000 investment offer in return for 25% of his business.

Lingham then offered to split the R500 000 with Oved to make up the full R1-million asked for. Things got more complex however when Oved offered a third deal: the full R1-million for 60% cut into three equal portions with a 10% earn-back option for Pillay.

After a little horseplay, he accepted for the episode’s first deal.

Shopping for investment

Next into the den was Shane Ngosoga, who was willing to give away 40% of his drive-thru grocery store business in return for a R6-million investment.

The nature of Ngosoga’s business, alongside the fact that it hasn’t even been set up yet, and his own nerves meant that things were off to a rocky start for the wannabe entrepreneur.

On that front, Gunguluza was out immediately.

His lack of experience and over-inflated expectations meanwhile had Thembekwayo fuming.

“What did you smoke this morning?” he said.

All of the other dragons were out shortly thereafter.

I think the lesson here is that in the same way as there are people who shouldn’t enter singing contests, there are also people who have no place being on an entrepreneurial show.

First comes love…

After that disaster, would things be better for Jason Greenburg? The entrepreneur was asking R200 000 in return for 10% equity in his business, called The Wedding Movie Company.

Unfortunately, the company pretty much does what it says on the box: produces wedding videos. The only unique selling point Greenburg could offer meanwhile was himself.

“Um, I don’t get it hey,” said Radebe,”I don’t see the value proposition. I don’t see an investable case at least for me.”

Other issues cropped up too, with Lingham pointing out that with the value resting on Greenburg, the business wasn’t scalable.

Ultimately, while Greenburg could make money, his business simply wasn’t investable.

You must be nuts

Next into the den were Mpho Mashele and Ghotso Seroto, who were pitching the dragons their macadamia nut processing business. The entrepreneurs came in asking for R1.2-million in return for a 20% stake in the company. The investment, they said, would be put into their processing plant, which produces a variety of macadamia-oriented products.

The ultimate goal, once the plant is built, would be to supply the nuts to China and other Asian countries.

While the margins seemed high, Oved took issue with the fact that the two had never run a factory before, asking exactly what intended to use the R1.2-million for.

As it turned out, it was necessary for a R10-million+ from the Industrial Development Corporation.

Gunguluza meanwhile had some advice for them:

“Gents, forget about the processing plant,” he said. “Honestly speaking, just forget about it…make that first million for me and then we can talk.”

The other dragons agreed that they were aiming to high too soon and all were out.

Selling confectionery happiness

The final entrepreneurs in the den were Christopher and Tanya Berg, who were selling their idea for a confectionery-making business Candy Wasted. A bespoke candy and cupcake store, the shop would offer a fresh take on the space.

The Bergs were asking for R500 000 in return for 50% equity. While the dragons enjoyed the taste, they were less convinced around the business side of the proposition.

One thing that did seem clear was that the dragons they should aim more at the online market and supplying specialist products to places like hotels rather than setting up a retail store.

The tough, competitive nature of the retail space meant that Thembekwayo was out immediately.

Lingham though offered to come in for an online play, provided that one of the other dragons came in with him. Once the Bergs indicated that they were willing to pivot, the deal was done with Radebe partnering up with Lingham.

Two deals in one episode. Not bad.