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.
This post is tagged david lees, dragons' den, ethics
I just watched that episode today in Kosovo. Obviously we are late in getting these episodes for about two years after you in UK. I was astonished as well and felt sorry for David Lees. I don’t know what happened afterwards, and how is he doing now!
Cheers from Kosovo.
Bez.
Just saw this episode last night (in Australia, re-run). David claimed he had been offered £3.25m for what was essentially a one-man operation. My reaction was that he was a fool not to take that offer if it was genuine. That amount was enough to retire on (after the 12 months hand-over period) and have a very comfortable life. So I was a bit suspicious of the claim. But I fully understand the logic (and opportunism) of the dragons when they made their offer. They were shrewd enough to quickly realise that they had an opportunity to buy 50% of something that was potentially worth £3.25m for just £225K. And of course the 50% ownership rather than 49% David suggested would increase their power over David to force him to accept the £3.25m offer, if it was in fact proved to be real. I imagine they would have claimed the right to pull out if they later discovered David’s claim was bogus, so they really had nothing to lose and a lot to gain by making the offer. I understand that in reality things developed quite differently, but this is my take on how the matter came across on the show as I watched it last night.