Episode 15 Dragons' Den

EVAN DAVIS: Wealthy...

..astute...

..innovative...

..fearless and shrewd.

These are the Dragons.

ROARING

The heat is on in the Den.

Together with formidable business giants

Peter Jones and Deborah Meaden

are global fashion tycoon with over 40 years' retail experience,

Touker Suleyman...

..the woman who turned her passion for food and drink

into a multi-million pound business empire, Sarah Willingham,

and the man who sold his online greetings card business

for £120 million, Nick Jenkins.

For entrepreneurs, it's the toughest business pitch of their lives.

Do they have what it takes to face the Dragons?

ROARING

Welcome to Dragons' Den

for the last time in the current series.

We have our final crop of aspiring entrepreneurs

looking for cash to build their businesses.

And here in the Den, they come face to face

with experienced entrepreneurs with the cash to invest.

-Yes!

-Coming up on tonight's show...

Guys, exceptional product.

I'm actually quite shocked by how good it is.

Don't give me the salesman talk now.

If the product had sold out,

would they have come back to you, yes or no?

-If it had sold out...

-Yes or no?

-Yes.

You're coming in here trying to value this business

at £1 million. I find that insulting.

You explained it. You explained why your margin was going up,

and your margin's not going up. That is so blinking frustrating.

You've been stood here for a while now,

-and I still don't get it.

-Have I come across that badly?

You've come across like you don't know what you're talking about.

First into the Den,

with a product designed

to revolutionise back-garden football

are Jonathan Cowan

and his daughter Tabitha.

Wear the floor out.

HE CHUCKLES

I'm excited about today, but somewhat nervous, I have to say.

I am completely bricking it

that I'm going to destroy my reputation.

I think I'm going to get a tough time from Peter.

(Ready?)

I'm going in with a tough valuation

and I don't think he's going to like it,

but I'm going to persuade him that my valuation is...right,

or nearly right.

Good morning, Dragons. My name's Jonathan Cowan.

I'm the inventor of Open Goaaal

and I'm here to offer you a 15% share in my business

for £150,000.

This is my daughter Tabitha,

the inspiration behind my product and a really good footballer.

She plays for Arsenal Ladies and for Watford.

However, like so many other kids,

she has this habit of hoofing the ball over the bar.

How I wince when I hear that phrase...

Daddy, please can you get my ball back?

And then there's the fetching every time the ball goes over,

having to go down the garden.

And of course, the white plastic goal -

you buy it, five minutes later, it breaks.

So, Dragons, the solution is Open Goaaal.

Tabitha, shall we show the Dragons how it works?

As you can see, when the ball misses,

it rebounds straight back.

What you can see is we have a white goal

which is surrounded by a ten-foot-high wall

of black netting suspended from the top of two poles.

The poles move closer together for people who have smaller gardens.

And the reason it's called an Open Goaaal

is cos it opens and closes like a curtain,

which we can demonstrate.

You walk it out of the way.

If this was at the end of your garden,

you'd now be looking straight down the garden

rather than having to stare at your goal.

We have a UK patent granted, and I've signed a deal

with the world's largest manufacturer of trampolines

who's taking it to their customers in the US and the UK as we speak.

Dragons, thank you for listening to me.

As they say in that iconic commentary

at the end of the 1966 World Cup final,

"They think it's gone over. It hasn't now."

Thank you, Tabitha.

A Premier League performance from Jonathan Cowan

and daughter Tabitha.

Would anyone like to have a go?

-I'll have a go.

-I'll just fasten this back into place.

Jonathan is hoping to tempt the Dragons

to part with £150,000...

-Yes!

-..in return for a 15% share in his product for budding Beckhams.

-I will try and miss this time.

-JONATHAN LAUGHS

Touker Suleyman may already be on target...

They'll be impressed by missing.

DRAGONS CHEER

..but can the entrepreneur win the support of the Den?

Jonathan, hi. Sarah.

I do love it when somebody comes into the Den

and you're solving a problem that you didn't really know you'd got

until they point it out,

and then you go, "Yes, that does happen all of the time."

So, what is the size of the market?

How many people have got space for this at home?

OK. The total market size for football goals

is about 800,000 units a year.

Samba, who are the leading brand out there in terms of brand name,

they shift, as I understand it, about 50,000 units a year.

So, you're restricted because you do need to have

significantly more room, I think, to put your product in.

A lot of my mates wouldn't have room for this.

-Mm-hm.

-So, what proportion of that

do you reckon you'll be able to eat into?

Well, let me first clarify something.

I'm not sure if it came through in the pitch.

This is deliberately designed to be narrower.

So, you can set it up in your garden with this pole here,

-one metre from there...

-Yeah.

..and that makes the whole thing six metres across.

We believe that we can deliver 24,000 units.

I actually believe, if anything, we've under-specced.

The market growth potential

is all about overcoming barriers to entry.

OK. Well, let's talk about where are you today.

Give us an idea of the business in terms of numbers.

Um...let me start by the history

and then tell you what the story is right now.

Try and kind of... Cos you're tending towards verbose.

Just focus on the numbers.

In terms of money, 400,000 turnover, year one.

Year two, 800,000.

Year three, 2.5... 2 million.

Year four, 3.5 million.

Jonathan may be talking a good game,

but are his financial projections built on solid foundations?

A financially forensic Peter Jones

is keen to pin down the details of the deal.

-What's the cost of your product?

-Landed in the UK, £49.

What do you sell it to your distributor for?

I'd sell it to a distributor for £78.

And what's the retail price of your product?

My product? This is £149.

A multiple is usually two and a half times, so, yeah.

So, if we pick on £20 profit per unit, for argument's sake,

how many units are you going to sell?

-5,000 in year one is a mix...

-Let's just focus on that.

-Mm-hm.

What will that make you in terms of your gross profit?

5,000 times £20, so 100,000.

£100,000 gross profit.

And you're coming in here trying to value this business at £1 million.

I find that insulting.

OK. I haven't yet had the opportunity to tell you

-the exciting things happening...

-No, you can sell it

-as much as you like...

-OK.

..but it doesn't stack up to try and suggest

that you are going to create a business

out of poles and a back net.

It's not poles and netting.

I have worked for 20 years in brand development.

I have never had so much positive feedback

about the benefits of this product

as I have about anything I've worked on.

I placed it in the garden

of an A-list Premier League footballer...

No, no, no, Jonathan, this is all noise.

The reality is, you need to have something of substance behind that.

Peter, I need to say to you, look, this is a growth business.

There's no right or wrong way to value a growth business.

I can go on to the crowd funding sites right now

and there are tons of businesses with different levels of valuation

-based on people's belief...

-No, no, no.

-..in the future potential of that business.

-No, no, no.

That's not good enough in here.

That is just not good enough in here

because I am a serious investor and it needs to stack up.

It's going to be wasted breath, in my opinion,

-for anybody to have dialogue with you.

-OK.

This is never, ever going to be worth £1 million.

Jonathan was anticipating a grilling,

and Peter Jones has duly delivered.

But it's not his valuation

that's caught retail magnate Touker Suleyman's attention.

-Jonathan, your 149 retail price...

-Yes.

..will not give the retailer a margin.

-You said your wholesale price is 78.

-Yes.

You talked about retailers making a 2.5 margin?

That's the rough multiple, yes.

Yes, so, at 78 at 2.5, what would that make it?

Well, um, 260... Um...

78, 104, um...

-Multiply 78 by 2.5.

-Yeah, it's, um...

-It's £200, isn't it?

-Yes.

If I'm a retailer and I'm making a low margin

on a heavy product that takes a lot of space,

why should I buy it from you?

I, um...

Cos he'll come back to you and say,

"You're a nice guy, Jonathan. I can't pay 78."

-No, he will. I-I, um...

-You're flabbergasted.

-I'm having one of those moments.

-Yeah, exactly. So, what have we got?

We've got a product where you may have to subsidise the price

-to give the retailer his margin.

-Mm-hm.

-And then 100,000 GP becomes 50,000 GP.

-Mm-hm.

-Correct?

-It would do if what you're saying is right.

And what you're saying is impliedly right

from where we're at here.

But I'm stood here feeling like in idiot

because I can't understand what I've just said wrong.

-Tell you what, Jonathan...

-Yeah.

-..I can't invest in you...

-Yes.

-..because I'd get a lot of muddled figures.

-Yeah.

And I wouldn't need one of those cos when I kick a ball,

-I kick it straight into the goal.

-THEY LAUGH

Touker, that's quite funny.

-So, on that basis...

-Yes.

-..I'm out.

An own goal for Jonathan as confusion over his margins

accounts for Touker Suleyman's withdrawal from a deal.

And a brand-conscious Nick Jenkins is concerned that his product

could be easily copied.

Jonathan, I think it's a good product,

but what I'm concerned about slightly is

that you can only make a certain amount of margin on this

before someone else will find another way

of making a very similar thing

that doesn't breach the patent that you've got.

And so if this turned into a big market,

the likelihood is that someone is simply going to say,

"Let's find another way of sourcing these at a little bit less,"

and cut you out of it, and that's it.

So, for that reason, I'm afraid I can't invest in this.

-I'm out.

-OK.

The real sticking point for me is the market.

The size of the opportunity, there's such a cap on it.

When you talked about the size

of the largest player in the market...

..it's too small an opportunity for me to invest in.

-I wish you the very best with it...

-Thank you.

..but I'm not going to invest, and I'm out.

Another two Dragons draw a line under a deal with Jonathan.

Has the entrepreneur done enough to keep Deborah Meaden onside?

Jonathan, can I tell you what I think's happened here?

-You've lost sight of what an investor has to hear.

-Understood.

-Let me...

-You've got a really simple business here

-and you're over-complicating it.

-OK.

I want to tell you the story, the bits I haven't told you.

I only want to know if it's a deal.

-An actual signed deal.

-I have a signed licence agreement

with a company called SportsPower,

who are the world's largest manufacturer of trampolines.

They supply Walmart, Kmart, Target, um...

-They're huge. So...

-They're huge.

-..that's brilliant.

What does that mean to you?

We get a percent of the FOB price

from their factory for every single sale.

What percentage is that?

6.5% and that obviously drops straight through to the bottom line,

-enhancing the margin.

-OK. And what is the target?

There is no written target in the plan.

They have a non-exclusive rolling 12-month agreement

to go out and sell it to their target audiences,

mainly UK and US.

Your problem there is that an agreement without any targets,

-with just a rolling plan, doesn't mean...

-Mm-hm. Agreed.

-Again, you've lost value in that.

-Yes.

-So, agreement with...

Very tight agreement, lots of targets, minimums,

cash upfront - that's at the one end of the scale.

The other one is if they sell, they sell

-and if they don't, they don't.

-Understood.

-That's at the other.

And sadly, you're at that end,

-so you're not underpinning value at all.

-Understood.

-I won't be investing, Jonathan.

-OK, thank you.

-I'm out.

Just Peter Jones now remains.

Will he be able to forgive

the entrepreneur's ambitious valuation

to give Jonathan the opportunity for a late comeback?

Jonathan, I think that you will sell this product,

and I think people will buy it.

So, there is no reflection on what you've created

cos I think you've created something that's really good.

The big issue, and the reason why you've got my hackles up,

is purely down to your valuation.

Even if it was slightly tweaked, there is no possible way,

based on the opportunities and the size of that opportunity,

that we could get even close.

And that's the biggest error that you made coming in here today.

That's the reason why I'm not going to invest

-and say that I'm out.

-OK. Thank you.

But I hope it's been an experience for you that you can...

-It certainly has. Thank you.

-LAUGHTER

So, final score - Dragons five, entrepreneur nil.

With the contest at an end,

all that remains is the post-match analysis.

It was a cracking presentation, but he just lost sight of the value.

He needs to kick his valuation round a bit more.

I expected a tough ride with Peter, and I got killed.

HE LAUGHS

Gutted.

But when your credibility is blown, then that's their privilege,

and that's what happened.

Next to face the Dragons

are brothers Harry and Charlie Thuillier.

HE SIGHS

I knew this business, to really work,

had to have Harry on board. We are polar opposites.

We're good at totally opposite things,

we're awful, luckily, at opposite things,

so we work really well together.

The brothers have devised a product which they hope will appeal

to both the health-conscious and those looking for a treat,

and they're determined to keep it very much in the family.

I don't think I'd choose anyone else to go into the Den with.

The only other person would probably be our dad

cos he can actually add up and do his sums

and that'd probably be quite useful.

-It'll be fine.

-Mm-hm.

-You know it'll be fine.

Hi, I'm Harry, and this is my brother Charlie,

and we're here to pitch for £60,000

in return for 7% of our business Oppo Ice Cream.

Oppo is the world's healthiest dairy ice cream.

It's made using virgin coconut oil and stevia leaf,

which makes it really creamy and sweet,

but with fewer calories than an apple

and a third of the sugar of an apple as well.

We add a superfood boost

to each of the three flavours that we have.

So, we have Madagascan vanilla and baobab,

salted caramel and lucuma,

and mint choc with spirulina.

The idea started in 2011 when Harry and I travelled to Brazil

to break the unofficial world record

for the longest distance travelled by kite.

We ended up running out of food

so we lost 8kg of body weight within two weeks.

This led us to try and find local superfoods.

These foods not only tasted incredible, really indulgent,

but they're also, obviously, really, really healthy,

which led us to think,

"Why do our favourite foods have to be not that good for us?"

So, when we came back from Brazil, I quit my job in 2012

and founded Oppo Ice Cream.

We launched seven months ago into Waitrose and Ocado.

Since then, we've launched into Whole Foods

and three regional distributors.

We're just about to launch into Budgens as well, Compass Group

and a high-street Italian restaurant backed by a celebrity chef.

We'd love you to have a taste of the ice cream.

An assured pitch from Charlie and Harry Thuillier,

who are seeking £60,000 in return for a 7% share

in their range of low-sugar ice creams.

(Wow.)

(That is very good.)

The Dragons all appear to be enjoying their free samples

with one notable exception.

This is a really difficult one for me

-because I own an ice cream business.

-Yeah.

-Which leaves me with a little bit of a conflict...

-Of course.

..because I'd want to remain completely neutral,

but actually say that, because of that reason,

I just, right now, need to declare myself out.

-Of course.

-So, I'm going to say those two magic words - I'm out.

Only minutes in, Deborah Meaden stands down.

But with four Dragons remaining, it's all still to play for.

-Guys, exceptional product.

-Thank you.

-Really, really good.

Really good. I'm actually quite shocked by how good it is.

I didn't expect it to.

I've done a lot of cooking with sugar alternatives,

with stevia leaf,

and it's so, so, so hard to replace sugar, actually...

-It's a real challenge.

-..in an indulgent product.

We know the trend is there. You just have to look at any paper.

You open any paper and it's there. They're always talking about sugar.

People want to reduce sugar.

-Can I pick you up on that?

-Of course.

-If you were to make a comparison of 100g and 100g...

-Yeah.

..compared with normal ice cream, if you take into account...

Leave out the stevia.

If you take into account the amount of fructose in here

because you've got natural fruit extracts of apple and grape,

how does it compare with the amount of sucrose,

as in normal sugar, in a normal ice cream?

So, there's around 6g - obviously it depends on flavour -

in that, per 100ml.

In normal ice cream, it's about 21 to 25.

I know quite a lot about ice cream

because of my experience in this market.

Whilst I know that it's an incredibly competitive market,

this free-from market is a growing area,

and I think you've got a chance.

You've created a product that has potential.

Charlie and Harry's ice cream

appears to have earned the Dragons' seal of approval.

Now Sarah Willingham wants to get the flavour

of the company accounts.

Talk us through your turnover, then.

-Where are you at the moment?

-Yeah, sure.

-So, last financial year...

-Yeah.

-..we turned over 60k.

That was with a net loss of 130.

This year, we'll do 230,

but we're certainly on target to beat that.

That's with a net loss of 220.

The year after, we'll do 550 with a net loss of 160.

And then, in '17/'18,

we'll do a million with a net profit of 35.

Wow. I must be honest, I expected them to be much higher than that

with what you've come in and asked for.

-In terms of turnover or profit?

-Yeah, much higher.

It is fairly conservative

cos we didn't really want to over-promise and under-deliver.

At the moment, we've got £50,000 worth of stock,

and that's where the majority of our loss is incurred,

and we'll therefore get that back later.

When it comes to these ice creams, 99 isn't the critical number.

The brothers are operating at a loss,

news that's unlikely to be greeted with enthusiasm by Touker Suleyman.

It looks like you are very investible.

However, 60,000 turnover. You're going to make a loss.

-So, I'm assuming you've got staff.

-Yeah, nine.

You've got the organisation.

What concerns me, if I was to invest,

is the continuation of these losses,

bearing in mind that you've spent a lot of money

on developing the business, opening doors.

And I would have thought by now

that those losses would have started coming down,

but they're increasing.

Yeah, we're planning on them increasing.

But not with my money.

I can see some businesses where you have to invest,

take the losses

and hope that it'll be worth a lot of money later,

but I don't see it in this.

I wish you all the best. I'm out.

Touker Suleyman joins Deborah Meaden in declining the deal.

And now, something appears to be troubling the Dragon

who's built her fortune on her refined palate.

I tell you what you do get, which is quite interesting now.

You do get that stevia taste in the back of your throat

that you get when you use a sugar replacement.

You know, that...

You can tell.

I now know that I have eaten something with stevia in it.

I haven't had that before. That's interesting.

We've worked really hard to try and mask that

through various ways,

primarily through using as pure stevia as we possibly can,

and also through actually not using that much.

I mean, there are a certain number of reviews on Ocado,

on Facebook, waitrose.com,

and we're at sort of five-star, saying it's absolutely fantastic.

You know, I think you've really done well with the upfront taste.

Really, I almost think there's nothing to change there.

But that aftertaste, it's a complete deal-breaker for me

because I think it will impact your repeat purchase going forward.

And until you nail that,

I don't think you'll reach the market that you want to reach.

I wish you all the best with it, but I'm afraid I'm out.

A major blow for the ice cream entrepreneurs

as the product's aftertaste kills off any chance of an investment

from Sarah Willingham.

Will Nick Jenkins or Peter Jones be any more inclined to invest?

Harry, Charlie, you've chosen a very difficult sector,

-the food sector, as you well know.

-Mm-hm, yeah.

It's a difficult sector to get right.

And although it's possible to create a small, niche brand,

to go bigger becomes very difficult.

So, you've probably got a one-in-ten chance of getting there.

This deal that you have offered today,

the reward doesn't justify the risk...

..so I'm afraid I'm out.

Harry, Charlie, I think you're two incredibly investable guys.

I think you've done something that's really good,

and I've eaten quite a lot...

-..of all of them.

-CHARLIE LAUGHS

-Wow.

-The reason is that I am an absolute ice cream fiend.

I love ice cream.

But I do think, sadly, there is a slight aftertaste.

You should carry on, but I think that you've really got to go back...

Not back to the beginning, but you've got to really nail this

cos you're going to live and die by the product.

And that's the reason why I'm not going to invest

and say that I'm out.

-Thanks for your time.

-Thank you.

-Cheers.

So, Charlie and Harry must leave the Den with nothing.

At first, their ice cream met with a warm response,

but both Sarah Willingham and Peter Jones's taste buds rebelled,

freezing them out of a deal.

When Sarah mentioned the aftertaste, I was genuinely surprised.

It felt like kind of a chain reaction

from Sarah saying it to suddenly everyone agreeing.

They're going to have to sort that aftertaste out,

otherwise, their product's going to be about as popular

as mudguards on a tortoise.

We're always looking to improve it. Always.

But I think we're pretty confident from what everyone's told us so far

that the aftertaste is incredible.

Still to come on tonight's show, nerves...

-QUAVERS:

-Thank you for listening, and I'm happy to take any questions.

-And breathe.

-Yes.

-THEY LAUGH

-..nonchalance...

-You're not good with numbers, James.

..and numbers.

I don't know how rich everybody else is.

Me? I think two years' return on my money,

I think that's not bad going.

Next into the Den, a supremely self-assured James Talbot.

I never have game plans. I never have scripts.

I never rehearse anything.

I will walk in and deliver my pitch as it comes off.

It will be ad-libbed.

So, will this self-styled showman dazzle the Dragons?

I think confidence - you're born with it.

For me, I've never been fazed whenever I've been placed

in front of a big audience or a camera or anything like that.

I think there's a natural confident showman ability

that I'm fortunate with.

Hello, Dragons.

My name's James Talbot, and I'm here today

to ask you for an investment of £250,001

for 12.5% of my company Damson Limited.

I started the company back in January 2012,

launching a Bluetooth speaker range,

and in the first month, we achieved £35,000 worth of sales.

Moving on from that, we developed Twist.

You twist it to turn it on,

and after about ten seconds or so, it will start playing music.

You'll notice the difference, though. There is no speaker.

You're not actually hearing very much coming out of this.

So, when you place it down on the surface,

it turns the surface into a speaker.

MUSIC PLAYS

Take it off the surface and it doesn't really deliver much sound.

It's great for parties, you're moving around, travelling.

It's why I developed the concept.

Moving on from that, I wanted to take this technology,

which is vibration technology, and develop it into headphones.

You'll have noticed that I'm wearing a set of headphones on my head.

However, they're not covering my ears,

so it means that I can listen to music at the same time

as carrying out activities such as cycling, running, jogging,

dog walking, any activity where you'd like to be aware

of your spatial surroundings,

but you don't want to cut yourself off,

and you want to hear the music.

We released it into the market in February,

and as a by-product, we're now working with the hearing impaired.

Because this doesn't use your ears,

if you do have certain hearing impairment conditions,

we're finding that it's actually helping people hear sound -

stereo sound - for the very first time.

We're looking for the investment today to work with your expertise

to help take the brand to where we believe it belongs.

Bone-conducting vibration technology is what York-based entrepreneur

James Talbot has come to sell to the Dragons.

Peter, can I change your track?

-No, I quite like that.

-Do you? Nessun Dorma.

He's looking for a £250,001 investment

in return for 12.5% of his company.

So, you get opera, Peter. I get Michael Jackson.

-Not sure what that says.

-You should all get the same thing.

But is his unscripted, ad-libbed approach to pitching

also the way he likes to do business?

Peter Jones is all ears.

-James.

-Yes?

-You've pitched a consumer-related product

which is going into competition with a Beats or a Dr Dre.

I just don't see this as something

that is going to have any chance of leading the market.

I think the issue, though, is it's being very subjective.

There are many people who can't have earphones that go into their ears,

there are people that don't like them going over their ears,

so how do they get to listen to sound the same way that you or I...?

Then you've really gone to a very tiny part of the market.

Not if you're looking at sports and athletics

and the hearing impairment market.

James, is this pitch about this is going to be used for people

who are unable to hear music normally,

or is there another purpose for it?

First and primary purpose we developed the product for

was to allow people to safely cycle.

-And then the other one is the issue of...?

-Medical hearing.

We're actually receiving an awful lot of traction today

in the press and the public from that.

We're also working with a Swiss technology company

that produce pagers for hospitals across Europe.

We're working with the European air traffic control agency,

where, again, they have issues.

James's failure to prioritise a single market for his product

is causing some confusion in the Den.

The technology entrepreneur seems determined to keep his options open.

Could Deborah Meaden be the Dragon to pin him down to one market?

What do you think is your main market?

The medical devices, but balanced with sports.

-The medical devices.

-Yeah.

-OK.

-So, you've got this fantastic thing that lots of people have seen.

-Yep.

-So, is that transferring into sales?

-Yes.

The whole company has had revenues of 3 million to date.

First year was 450,000, second year was 550,000...

..third year was 1.9 million.

What's generating the 1.9, and in which market?

It's the headphones.

We just did a deal with Sam's Club in the United States -

part of Walmart - for 1.4 million.

What's that done to profit?

Profit in the first year was 120,000.

It was 155,000 in the second year.

Third year, we're looking at net profits of 250,000.

So, you've actually got a business

that is selling nearly £2 million worth of product?

That's a really chunky piece of information

that I would have put right at the beginning of my pitch if I were you.

So, looking forward,

what do you think your sales are going to look like?

Forecast for next year is 1.45 million.

-And profits?

-Profits. Um...650,000.

And why does your margin increase so?

Because we're focusing on a higher-margin product.

The revelation that James is making a 50% profit

on every product he sells

has certainly grabbed the Dragons' attention.

But is it too good to be true?

Nick Jenkins has his suspicions.

James, how many businesses in this sector do you know

that have a net profitability of 50%?

No, it's the gross profit is 50%.

Ah! OK.

So, your pre-tax was 120, then 155, then 250?

-Sorry, Deborah.

-OK.

-The lights.

I want to know what your net profitability is...

In these years when you're doing 1.5,

-what's your net profitability?

-650,000.

-That was the first number that you gave me.

-Sorry.

In the 1 point... That's last year's figure.

1.45. 224,000. Sorry, I...

-224 net.

-Net.

-That's what you're projecting?

-Yes.

-OK.

-Now at 20% net profitability?

-Yes.

Apologies if I've completely confused you there.

But you explained it. You explained why your margin was going up,

and your margin's not going up. That is so blinking frustrating.

Exasperation in the Den as a mix-up over gross and net profit

results in James's margins appearing more attractive

than they actually are.

The entrepreneur who prides himself on never being fazed

is now looking distinctly like a rabbit in the headlights.

And it's not over yet.

James, at the 1.45 million

that you're predicting for this coming year,

what do we actually know about? What orders have we got?

We've got limited information, to be perfectly honest.

Jet2 have taken on Headbones,

and placed an order for 600 pieces in the last couple of weeks.

Selfridges have taken us on,

and put us into their new audio products

ranging in central London.

We're working with dixons.com, maplin.com,

Richer Sounds just in the UK.

-OK. So, basically, so far...

-It's headphones.

-..you've got an order of 600 headphones.

-Yes.

-And the rest is you're in meetings.

-Yes.

So, am I to assume that there is no Walmart order coming forward?

We haven't accounted for any Walmart order

because they're very much like Costco.

They do these single, individual, one-off deals.

James, I'm a retailer. I know a little bit about retail.

-Yes.

-You were lucky. You went to America.

You took one big order.

Now, if I'm a retailer and I place a big order

and they sell out, I'll be straight back to you.

I'd be on the phone saying, "James, how quick can I get a repeat?"

-Did you get that?

-We haven't done yet, no.

You haven't. So, basically,

the product probably didn't sell very well...

..and they probably said, "We're not going back for any more."

If that was the case, we'd have heard and they would have...

No, the case was if it was that good, you would have heard.

Normally, if something's not that good, you won't hear.

-A little bit unfair, purely...

-Don't give me the salesman talk now.

If the product had sold out,

would they have come back to you, yes or no?

-If it had sold out...

-Yes or no?

-Yes.

Either they've sold it and copied you...

..or they haven't sold it.

And that, to me, gives me a big question mark in my head.

A less than harmonious exchange,

as Touker Suleyman casts doubt over James's retail success.

And now Deborah Meaden wants to take James to task

on his unscripted pitching style.

James, when I'm investing in a business,

I like to think I can get to the bottom of the information.

And I'm sitting here listening...

You're a very good salesman,

but I'd rather hear exactly what's going on

-than hear somebody come up with a smart answer quickly off...

-Yeah.

..their back like that.

There has been no consistency.

I cannot bear it when I feel like I'm wrestling with marshmallow,

and every time I get that question answered,

another question pops up over here.

I've got a really horrible feeling that's how life would be with you.

I apologise for that.

I won't be investing in you, James. I'm out.

Deborah Meaden is the first Dragon to walk away from a deal.

But she's not the only member of the Den

questioning if this is a sound investment.

You came in here and I asked you the question,

"Is this fundamentally a business about supplying sound

"to the hearing market?" You said yes.

And that's a totally new product that you haven't as yet proven.

And I'm not entirely sure about the sports market.

I'm alarmed, as a cyclist.

The idea if I was wearing one of those listening to music

cycling through London traffic - that would be dangerous.

I'm not convinced by that market. Neither have you proven that market.

You haven't demonstrated to me enough

about the product that you came here to talk about,

and for that reason, I'm out.

OK. Thank you.

James, what worries me about this is that,

yes, you've got some products that you've sold

and you're not getting any real repeat business on them,

so you're looking for new products, new ideas.

You want to reinvent your business every year.

You remind me of a salesman that throws a lot of things at a wall

and you hope that one will stick.

And you end up, at the year end,

having a lot of stock which you've got to job out,

which will affect your bottom line.

I admire you. You're a great salesman.

I think you could sell ice lollipops to the Eskimos,

but you can't sell this to me today.

For that reason, James, I'm out.

Bad vibes continue to reverberate around the Den,

as two more Dragons turn down the deal.

And James's laissez-faire approach

seems to have sent Sarah Willingham into a state of confusion.

I feel like I'm on a carousel.

I'm, like, up and down on my little horse.

And one minute, I'm like, "Wow! This is a great business.

"Where do I sign?" And then the next minute,

I'm like right sat on the bottom of the horse again.

You've been stood here for a while now,

-and I still don't get it.

-Have I come across that badly?

You've come across like you don't know what you're talking about.

We don't know what business we are trying to invest in.

Is it cyclists, is it a speaker,

is it something else you'll come out with next week?

-We don't know.

-A nutshell of what you're investing in today

is essentially the Headbones product

of which we believe 65% to 70%

are going to come from hearing-impaired people.

But, love, you've only got one order of that -

of 600 - in the bag.

SHE GROANS IN FRUSTRATION

-I've got to say I'm out.

-Thank you, Sarah.

Only Peter Jones now remains.

Will he be James's unlikely saviour?

James, I think your business has a future.

I think your market is the hearing-impaired.

I do mobile phones for people that are almost blind,

but partially sighted, and we do well.

With your current businesses,

there wouldn't be any sort of ranging opportunities

within there in a scope that you would see synergies

that would align themselves to those products?

You're valuing your company today at £2 million,

and I think that's where you're a bit disillusioned.

Your business isn't worth £2 million.

So, make me an offer.

How much money have you got in your bank account at the moment?

-Um...we're overdrawn at the moment.

-By how much?

£70,000 of a 100,000 overdraft.

You're not good with numbers, James.

I usually think I'm very good with numbers.

Just the figures with the lights.

James, you've overpriced walking in here today.

You're too early-stage to get a valuation of £2 million.

Your company today is basically worth around 70k, 80k.

There lies the issue.

I can't invest in this. I'm out.

-Thank you very much, Dragons.

-Good luck.

-Good luck.

Mixed messages over margins and confusion over his numbers

means James makes the slow descent from the Den

without a multimillionaire backer.

I don't know why you all kept saying he was a good salesman.

-Yeah.

-He kept screwing us up, didn't he?

-He did.

Ultimately, the Dragons struggled to have as much confidence

in the entrepreneur as he has in himself.

I think the confidence is like getting a wind.

So, can it be knocked out of you?

Yeah, you can have the wind knocked out of you,

but it'll come back.

I fully intend, with my confidence, my abilities,

my passion, my commitment, to shine through this

and drive me forward into the future.

On to our final pitch now,

to be delivered by mum of three, Cath Harrop.

Pitching your business idea to the Dragons

is never likely to be a stress-free experience,

and Cath has had to think long and hard

about how she will handle the pressures of the Den.

Coming on Dragons' Den was a huge decision for me, really,

because I've always had a huge phobia of public speaking.

I've been practising at home to my six-month-old daughter.

She thinks it's great, so, hopefully, that's a good sign.

To stand in front of the Dragons and do my pitch is a real challenge.

I'm quite keen to get in there and get on with it now.

Hi. My name's Cath Harrop,

and I'm here to ask you for £35,000 of investment

in return for 20% of the equity in my business, mum2mum market,

which is a franchised events business

in the baby and children's sector.

mum2mum market organises babies and children's nearly-new sales

where mums sell to mums.

We run live events all over the country.

Having a baby is really, really expensive,

and by buying second-hand, there are huge savings to be made.

But when I had my own children, I got really frustrated

with the existing methods of buying and selling.

The final straw was when I bought a sling on an online auction.

I paid a fortune for postage,

and when it arrived, it had a cigarette burn in the strap.

I could see the need for themed babies and children's events,

bringing together parents with outgrown stuff to sell

with those that are looking for a bargain.

I did my first event in September 2011,

and it was a huge success and I've rolled out a franchise programme

across the country since then.

Now I have 35 franchises all over the country.

There's a huge demand for this type of business opportunity

at the moment. I'm selling a franchise a week,

so, come on, Dragons, mum2mum market is on a real roll.

I need you to help me reach my next target,

which is 100 franchises two years from now,

and beyond that, to see how we can take this concept further.

-QUAVERS:

-Thank you for listening, and I'm happy to take any questions.

SHE EXHALES DEEPLY

-And breathe.

-Yes.

-THEY LAUGH

The chance to invest in a national sales network

of nearly-new baby items

is the deal on offer from Londoner Cath Harrop.

She's looking for £35,000 in return for 20% equity

to help build her franchise business.

Sarah Willingham, who knows this space well,

is first with the questions.

-Cath, hi. You probably know I've got four kids.

-Yes.

This age group, actually,

so I am all over the second-hand market.

Explain how the franchise model works.

So, our franchises, we're selling for £1,000.

-Are you taking an ongoing royalty?

-Yes.

So, all the stalls are sold through my website,

and I take 30% of the stall booking fee.

They take everything else.

Each franchisee is aiming for ten sales a year,

and they should be making £500 per sale.

So, how much are you making per franchisee per sale?

On average, I make £140 per franchisee per sale.

So, per franchisee signed up is about £1,400 per year

-and 1,000 upfront?

-Yes. Yeah.

-OK.

So, you need to get to some proper scale

to make any proper money.

Well, I've sold 15 franchises in the last 13 weeks,

-and I had a baby at the beginning of that.

-Congratulations.

So, yeah, at the moment, it is growing really, really fast.

Cath's steely determination to grow the business

while growing a family is impressive.

She's proved she's got stamina,

but does Touka Suleyman think she's got the right business model?

Cath, can I ask you a question?

Could you have two businesses?

One, your franchise business, and two, with the right software,

do you think that you could create an online eBay

for second-hand clothing and toys for children?

Hmm. But the problem is,

if you take it away from the face to face,

you get all that hassle back of photographing stuff, listing stuff,

uploading it onto the website. If you go to sell something,

you get asked a million silly questions,

and then you sell something for 99p.

And the minimum tracked, Signed For postage with Royal Mail

is £3.90 second class.

So, your 99p bargain is not such a bargain

when you've got to pay £3.90 postage on it.

And this is... It's safe and a public place.

And it's a leisure activity. Shopping's a leisure activity.

Cath's passionate defence of the face-to-face approach

of her business appears to be winning the Dragons over.

But can she convince them that it's a business that can scale

to something really profitable?

Your valuation on the business of £175,000 comes from what?

Assuming I get up to 100 franchises next year,

that would put me at a turnover of 190,000,

with a gross profit of 175 and a net profit of 150,000.

There just seems to be such big demand for franchises that...

And how many potential franchisees exist?

I've got 120 territories on my map in my office.

I haven't divvied up, like, Scotland,

and I haven't thought about Ireland.

And that, all of a sudden, starts to look a lot more interesting.

With untapped territories comes potential growth.

But Peter Jones is still failing to see the pound signs.

Even if you grow to your 120 territories,

your maximum sort of net income is 168k or thereabouts.

So, you've already built your ceiling

of what this company can achieve.

And £170,000 might be a hell of a lot of money

to a lot of people, but it's not to an investor.

Peter Jones is clearly taking some convincing on her turnover -

relatively modest by Dragon standards.

Will Deborah Meaden be more accommodating?

What is it that you think you need from a Dragon?

I would really value someone who I could put my head together with

and think strategically.

I would really like to grow this business.

I'd love to have mum2mum market in every town,

and be one of the first places that people think of shopping

when they have a baby.

But Peter's point about the ceiling is absolutely right.

No entrepreneur likes to think, "That's it. Job done."

You kind of want to feel like there's opportunity out there.

Yeah, and I think I'll probably end up being a serial entrepreneur.

I've always gone on about how many good ideas I've got,

and this is my baby.

And I don't see myself selling it, but maybe put a manager in.

I've got lots of good people in the business already

who know the business inside out - my franchisees.

Concerns that the business has a ceiling

that Cath will struggle to break through

are deftly handled by the increasingly confident entrepreneur.

Now Nick Jenkins has come to a decision.

Cath, in all businesses,

you have to ask what you want to get out of it.

Are you in this because you want to sell it after three years and exit,

or are you in this because you'd like to have a good living

and, actually, you enjoy doing what you're doing?

Now, you clearly enjoy speaking to your franchisees.

This is not a business, I don't think, that you're going to sell.

Why would you? You know, it's great.

I just don't think there's enough scale in it

to justify any of us coming in

and spending quite a lot of time in it because...ultimately,

um, we're probably not going to get a reward.

So, I'm afraid, for that reason, I can't invest. I'm out.

One Dragon down.

With a background in money-saving tips for mums,

could Sarah Willingham be Cath's perfect business partner?

Cath, I'm really...

I'm really trying, actually. I really am.

It's a space I know very well from a business perspective

and also as a consumer, as a mum.

You know, I e-mail a couple of hundred thousand mums every week...

..telling them about stuff like this.

It's an area that I'm extremely passionate about,

and I am extremely torn.

SHE SIGHS

SHE EXHALES DEEPLY

I think, on my figures, you pretty much get your money back

-after two years, at 20%...

-Yeah.

..and then the size of the business would be that much bigger,

then ongoing.

SHE EXHALES

Plenty to ponder for Sarah Willingham.

But elsewhere in the Den, it's far more clear-cut.

Cath, can I tell you, I think it's great what you're doing.

This is brilliant.

But in terms of a major investment

and scaling this up into something where we can become,

-you know, very wealthy together...

-Yes.

-..it's not an opportunity

because you've made it very clear

where the ceiling is of the business.

So, that's why I'm not going to invest, and say that I'm out.

Thank you.

Cath. Touker.

Yeah.

-My advice to you is think out of the box.

-Yeah.

Something online eventually could be worth a lot of money.

But in your present format, I think it's too small for me.

Unfortunately, I'm out.

OK. Thank you.

Two more Dragons out,

both citing the current size of the business opportunity

as the one reason for not investing.

Sarah Willingham's been on the fence with this one,

and she's finally ready to show her hand.

You know what? I...

I love what you're doing. I really do.

And I am extremely torn.

But I am looking for things that would create a bigger value

with a, you know, potential sale and, um...

And I'm sure this is one that I will regret.

But it's not for me, so I'm afraid I am out.

Not the result the entrepreneur was hoping for,

as Sarah Willingham, the Dragon with existing business interests

in the money-saving sector, declines the deal.

Only Deborah Meaden remains.

Is she about to deliver the final blow?

Well, I'm going to let you know where I am.

This is quite small.

But I like your instincts. I think you're absolutely right.

Very soon, people are going to struggle to find the place

where they actually come face to face with other people.

This becomes as much of a social event as it does anything else.

-People start to look forward to it and enjoy it and meet people.

-Yeah.

So, yes, I hear what everybody says about it's a small market.

We can take a ceiling off.

-That's what an entrepreneur does. Not, "I've got a ceiling."

-Yeah.

It's actually, "There must be other opportunity."

I don't know how rich everybody else is.

Me? I think two years' return on my money, that's not bad going.

I'm going to believe you

when you say that you're a serial entrepreneur.

So...I'm going to make you an offer.

Your offer to me - 20% of the business for 35,000 -

I'm going to up that slightly,

um...to get the return on investment.

So, I'm going to make you an offer for 35,000.

I want 25% of the business. We're not far away.

Would you meet me in the middle at all?

No.

OK. I'd love to accept your offer, Deborah. Thank you very much.

-CHEERING AND APPLAUSE

-Very pleased to hear it. Fantastic.

-I haven't even got children.

-CATH LAUGHS

I'm not going to get this at all, but I get the... It's fantastic.

Finally, and against all the odds, a deal in the Den...

-That's really good.

-Cath, well done.

-Well done, you.

..as Cath Harrop overcomes her initial nerves

to deliver a winning pitch.

That was absolutely brilliant. I'm absolutely thrilled.

I know that some of the Dragons thought

there might be a ceiling on my market,

but I think, with Deborah on board,

that her and I can bust through any ceiling

and prove them all wrong.

So, it's been a tale of two entrepreneurs -

one oozing with confidence, the other consumed with fear.

But as Cath has just proved, if you have a great business,

it will triumph over a few nerves.

And that brings proceedings to a close for this series.

And what a series it's been.

We've had more investments than ever before,

and to have seen the innovative, the ingenious and the implausible.

Warming up.

-THEY LAUGH

-It's absurd.

You look like Harry Hill trying to get fit in the living room.

The Dragons will be fine.

I-I-I'm flabbergasted.

-I couldn't work with you.

-HE SCOFFS

This makes me really cross.

-What, have you found gold?

-Yes!

-I'm going to make you an offer.

-I will make this happen.

All of the money.

-Thank you very much. Well done.

-Cheers, mate.

-Oh, really pleased!

-Thanks so much.

-Cheers.

-It was so surreal.

-Yay!

-Touker time. Isn't that amazing?

-Touker time.

Marvellous. Brilliant.

Can you wrap it up?