I’m a bit of an addict of Dragons’ Den. It’s great TV — but occasionally, people get really screwed.
I was watching Dragons’ Den on Dave the other day, when David Lees arrived to pitch for some money.
David Lees was an engineer of many, many years’ experience. He designed things, invented things, created new and patentable ideas and generally made lots of money for his employer. Eventually, he set off on his own, producing high-end stands for Plasma TVs — the kind you see at conferences and other big events. He sought an investment of £225,000 for 10% of his company.
So far, so good. A typical scenario. What makes this one different is that the company was very successful: it had consistent sales and was profitable. In fact, its success had already led to an offer from Panasonic to buy the company for £3.25m. Lees wanted a Dragon’s involvement primarily in order to secure a better deal — logical, perhaps, but unwise.
Obviously, the Dragons were interested: they could have accepted his equity offer, sold the company for, say, £4.5m, and doubled their money. Probably all within a few months.
Instead, though, they absolutely shafted him: offering him the £225k for 50% of the company — thus valuing it at a mere £450k — when they knew that the company was almost certainly worth over seven times that amount.
I was a little surprised to see such shamelessly naked exploitation. To my utter astonishment, rather than laughing at them heartily and telling them to shove right off, he acccepted the deal. I was practically spitting at the telly.
Thankfully, the Dragons took so long getting a deal together that by the time it was ready, Lees decided he was doing well enough on his own, and didn’t go through with it.
A narrow escape.