Dragons’ Den SA episode 9: diesel, nerves and rental apps

We’re now starting to get towards the tail-end of the first season of Dragons’ Den SA. The episodes broadcast so far have shown that there are plenty of people with an incredibly broad scope of entrepreneurial ideas. The ninth episode of the season only underscored that, with ideas ranging from a method for making diesel engines more efficient, to home automation systems and an app that’ll be familiar to regular Ventureburn readers. Here’s how it played out.

Designing diesel

Opening up proceedings on this week’s episode was David Malherbe from Diesel Gas Africa, pitching a technology which he claims can make the diesel engines in heavy industry vehicles run more efficiently. Malherbe aimed big, asking for a R1.2-million investment in return for a 10% equity stake in the company.

The company claims to be able to make engines more efficient by injecting “the optimum” amount of Liquid Petroleum Gas (LPG) into their air intakes. Doing so, it says, results in an eight to ten percent fuel cost saving on each vehicle while reducing its emissions at the same time.

Given the highly engineered nature of the product, it’s understandable that the dragons were more than a little confused. Malherbe’s explanation did however appear to have them convinced.

Things began to go South though when the entrepreneur explained to public speaker and private equity partner Vusi Thembakwayo that the company had only sold two units in just over two years of existence. It also emerged that the company had spent R2.5-million in research and development, meaning that there was a pretty big financial shortfall.

“I think I’m not convinced about the demand, you know, and I’m also not convinced about the financials,” said Gunguluza Enterprises & Media chief Lebo Gunguluza, making him the first dragon to opt out of the deal.

“I think you need a different type of funding product,” said Identity Partners CEO Polo Leteka Radebe. “It’s wholly inappropriate to put a permanent capital structure in place when you actually have a short term capital need”.

For similar reasons, as well as a lack of expertise in the industry concerned, Gyft CEO Vinny Lingham and The Creative Counsel co-founder Gil Oved were also out.

Despite what seemed like early skepticism, Thembekwayo showed some serious interest. “I actually get the sense…that this is a license to print money,” he said before making a R1.2-million offer for a 70% stake in the business.

After failing to negotiate him down, Malherbe walked away from the offer.

A nervy pitch

Next up in the den was Mandisa Mzimvubu, who owns Digital Solutions — a company which specialises in digitising books, art, newspapers and magazines. She came in looking for R500 000 from the dragons in return for 25% equity.

It was a pretty substantial amount to ask for, especially in light of Mzimvubu’s admission that the business was still in the ideas phase.

While the hopeful entrepreneur did have numbers, the way she presented them hardly appeared to inspire confidence in the dragons.

“Sounds like you’re guessing,” said Radebe.

There were also issues around Mzimvumbu’s claim that her business would be the first of its kind in South Africa.

“I can tell you know, going to graduate school, that they’ve got the things you’re talking about already,” said Thembekwayo.

All the dragons were out in quick succession.

As Radebe pointed out, a little bit of research would have seen her come in far more prepared.

Redefining the ISP

Far more slick-looking — and sounding — were Rudzani Mashashwe and Warren Dickerson, looking for a R3.5-million investment in their Internet Service Provider business in return for a 35% equity stake. That sounds a little but crazy given the number of ISPs already floating around in South Africa, but One CLoud Internet is a little different.

Rather than providing internet connectivity at home or on mobile, this particular ISP aims to provide internet access no matter where people access it from and what device they use.

When told that any potential investment would be spent on purchasing the equipment and developing the software that would allow the ISP to get going, the dragons felt that they could have been given more information.

Ultimately the problem came down to the pitchers’ inability to explain how they would achieve what they wanted to.

“The vision is great,” said Lingham, “what you’re not telling us is how you’ll execute that vision”.

Things really fell apart however when it emerged that the two co-founders’ background was in medical aid rather than technology.

“This is a cloud with no rain that’s going to come out of it,” said Gunguluza, who pretty much summed up the feelings of the other dragons.

Ultimately the pair’s inability to articulate how they would go about achieving their goals cost them investment.

Fxing the rental market

Following One Cloud into the den was someone who’s startup will probably be pretty familiar to regular Ventureburn readers. Ekaya is an app that’s looking to fix South Africa’s rental market by improving the connections between landlords and tenants.

Read more: The rental industry is broken: can Ekaya fix it?

The company’s CEO Justin Melville is a seasoned pitcher, with the company having already attracted R1.4-million in investment from a crop of angel investors. So would he be able to convince the angels to give the R300 000, in exchange for five percent equity, he was asking for.

Despite a slick pitch, Thembekwayo was unsure about Ekaya’s value proposition.

While Melville wanted all five dragons onboard, both Thembekwayo and Radebe felth that htey wouldn’t be able to provide anything valuable to the business for such a small equity stake.

Lingham then stepped in offering R500 000 for 10% equity. Oved followed suit, putting an offer for the same amount on top of Lingham’s. All told, that would mean a R1-million investment for a 20% stake in the company.

Gunguluza then complicated things further by offering to give Melville what he originally asked for, on top of Lingham and Oved’s offers.

Rather than going straight for the money, Melville stated the equity being asked for was too high, especially given the startup’s deliberately low burn rate.

Ultimately Melville decided to go exclusively with Lingham’s offer, a smart move considering he was more interested in expertise than investment.

Discount, please

Next into the den was another app, this time in the discount voucher space. Called GeoVoucher, the app was pitched to the dragons by Matthew and Chante, who were asking R500 000 in return for 20% equity. Given that Lingham made headlines around the world for the sale of his mobile gift card company Gyft just prior to the start of the season, his would be the reaction to watch.

Read more: First Data buys out Vinny Lingham’s Gyft in $50m+ deal

To Ventureburn’s eyes, the app seemed unerringly similar to Vodacom’s VoucherCloud, something which has a much stronger built-in reach. Oved noticed that too and quickly shut down the assertion that VoucherCloud doesn’t have the same degree of geo-locationary ability.

Things got even more sticky when it was revealed that Geo Voucher team would be using any investment for marketing purposes.

“You want me to give you half a bar of my own cash to market something that already exists?”, Thembekwayo asked incredulously.

Their lack of differentiation, plus the absence of a technical founder, meant that all the dragons were out.

A South African approach to the smart home?

The final entrepreneur to pitch to the dragons was Guduzua Mabusela, pitching a home management system. Somewhat ambitiously, he asked for R1-million in return for 25% equity. The idea of being able to remotely manage devices in your house is hardly new, but Mabusela’s is one of the few South African-made ones we’ve seen.

Indeed, that was one of the differentiators that Mabusela pointed out as well as claiming that it was cheaper than the other options out there.

When he revealed the prices however, Lingham pointed out that it was possible to get more for substantially less.

While all the dragons liked Mabusela as a person and inventor, they also all felt that he simply wasn’t there yet as an entrepreneur.

Guduza therefore left with nothing, but with the right people around him, it’s pretty obvious that he could create something worthwhile.