After announcing free WiFi hotspots in the form of Google Station in South Africa just three months ago, Google on Monday revealed that it…
The first season of Dragons’ Den SA is over. Throughout its course, the dragons have given away millions, laughed some horrendous ideas out of the room and watched a couple of chancers sweat their way through their pitches. It’s been a pretty varied season and the producers have controlled the pacing reasonably well. Thing is, you can’t end a season on a damp squib, so what would they pull out of the hat for the final episode of the season?
Were this a high-tension drama series, they probably would’ve gone with a cliff-hanger. But it’s not: Dragons’ Den SA is an entrepreneurial reality TV show, so it was forced to go with the only option open to it — turn the volume on everything up to 11.
Fixing online shopping
First into the den on this final episode was Jens Herf from Shopstar, an ecommerce platform with a South Africa twist that’s meant to allow anyone to create and manage their own online shop with minimal effort. We’ve featured it a couple of times on Ventureburn and Herf has pitched at his fair share of startup competitions, so he shouldn’t have had too much trouble with the dragons.
The entrepreneur came in asking the dragons for R1-million in return for 15% equity in the business.
While Herf’s pitch to use some of the money for marketing could’ve been dangerous, the fact that he specifically said that he would hire someone to take care of that marketing should’ve helped temper the dragons’ usual skepticism.
Despite the fact that the dragons would’ve been expecting Yola founder and Gyft CEO Vinny Lingham to take the lead on this one, he felt that there were too many conflicts for him to get involved.
The Creative Counsel founder Gil Oved meanwhile had reservations about the intense level of competition in the space Shopstar is playing in.
“There are tons of companies who currently offer, and have been offering for years, the service that you’re talking about to a greater or lesser extent,” he said. “So, simple question, what’s unique about this?”
Herf pointed to Shopstar’s localisation efforts as well as its attempts to fix the logistics issues often faced by South African ecommerce players.
He was also able to rattle off exact numbers when asked to by the dragons, something that frequently scuppers pitches on the show. Despite all that however, the dragons seemed doubtful.
Due to a lack of differentiation from international users co-founder and director of Identity Partners Polo Leteka Radebe was out, followed by private equity partner Vusi Tembekwayo — who cited Herf’s overly high valuation, Oved, and Gunguluza Media head Lebo Gunguluza.
Effective office administration
Next into the den was Thabo Moyake, who was pitching his office administration software.
The aim of the software — to create a fully paperless office — isn’t exactly new and most of the features present in the software have been around in similar offerings for some time now.
Moyake’s slightly confused pitch saw him asking for a R1.7-million in return for 30% equity, but the dragons immediately poked holes in his lack of research around the competition in the market.
“My concern now is, I don’t think you understand the market and your competitors,” said Lingham.
Things only got worse when Moyake explained the business case for the company.
“I’ve lost so much interest in this, that I can’t think of a single question,” said Oved.
And that, along with the backwards-looking, naive nature of Moyake’s pitch meant that all the dragons followed him in declining to invest.
Oh what a healing
It’s easy to be skeptical when it comes to any new product related to treating ailments around the human body. There’s a reason, after all, that the phrase “snake oil salesman” has become common parlance. There is however precedent for South Africans doing legitimately well in the space, as happened with Bio-Oil. But which side of the fence would Vanessa Bailey, pitching her Healing Out ointment, fall on?
Bailey came into the den asking for R300 000 for a 15% investment in the ointment, which she told the dragons could be used to treat arthritis, upper and lower back pain and sports injuries.
Immediately, the dragons identified a problem when it emerged that the only real differentiator between her product and others on the market was its price.
Thembekwayo meanwhile refused to invest when it emerged that there had been no scientific testing on the product, as did Radebe who pointed out that “for an investor there are just to many red flags for investors”.
Other issues included her misunderstanding of the patenting process, the over-abundance of ailments the product claims to fix, as well as a completely insane valuation.
Things get a little rubbery
Next into the den was Shivani Pillay and her supplier Raymond Fourie, looking for an R850 000 investment in return for 15% equity in her rubberised spray business.
The spray-on and peel-off liquid coating is currently used most widely in vehicle customistation, but it is also used in other industries for rust-proofing.
The first issue that the dragons had was that they were being asked to invest in Pillay, who has the rights to the product in KwaZulu Natal, rather than Fourie.
“Any brand-building we do, you benefit through all your other distributors throughout the country,” Lingham told Fourie, “but we don’t”.
There were also questions around why Pillay needed funding if her business was already profitable and how she intended to grow if she had between 60 and 80% of the market.
Too many issues and complications meant all the dragons were out.
The big one
The last entrepreneur into the den for this episode, and the series, was Emile McLennan. The 18-year-old UCT student was pretty bold too, asking R5-million for a 30% equity stake in his company e-ship.
What’s scary is that the company, which connects people who need things shipped with the local transporters who have the capacity to fulfil those shipping requirements, has actually been around for a little while now (we first wrote about it back in January).
Obviously thrown off by McLennan’s age, the dragons appeared slightly dismissive of the startup at first.
That much was evident when Gunguluza asked: “What is the closest that you’ve ever been to any form of running or being involved in business”.
When the young entrepreneur revealed that he’d actually sold his first business, an online store, for R250 000 to fund e-ship you could suddenly see the dragons getting serious.
There were however still issues that they felt needed resolving.
“My first concern,” said Thembekwayo, “is that you want to spend R5-million of my money without even a sense of what the ROI would be that you would generate on that amount of money.”
Once he’d addressed those concerns however, things started to look up.
The only remaining issue was the amount of money he was asking for.
“I think this is a great business,” said Thembekwayo, “I can’t see myself adding value in this business in terms of where it is now and also I have some challenges around the valuation you’ve placed on this business”.
He was out, along with Gunguluza.
Even Oved, who saw serious potential in McLennan, had reservations.
“I want to buy into you ’cause I know you’re going to be a big success, and I really like the idea,” he said, “at the same time, why did you have to ask for R5-million, why? You don’t need it!”
Despite all the reservations, Lingham came in offering up to R5-million over a set period of time.
Essentially he offered the young entrepreneur R1-million for 35% of the business, with a further R4-million at an equity share to be determined in two year intervals. He also opened it up to Oved and Radebe.
The latter declined, saying that she preferred to work on growth businesses.
Oved then asked McLennan to think about the deal, especially it would mean putting his studies on hold.
The ad-man eventually agreed to go in with Lingham, resulting in one of the show’s largest ever deals and the largest ever on South African TV.