After looking at how the investors of Dragons’ Den got it badly wrong by missing out on Just East we
think it’s only fair to look at when they got it right.
Let’s take a look at three investments that struck gold for the Dragons.
Investment #1: Levi Roots Reggae Reggae Foods Ltd
Peter Jones and Richard Farleigh invested in the charismatic entrepreneur Levi Roots (real name Keith Graham). The pair invested £50,000 for a 40% stake in the business.
The show aired in February 2007 and by March 2007 Sainsbury’s were selling the product; it obliterated expectations by selling 40,000 to 50,000 units per week – the original expectation was 50,000 per year!
Between 2008 and 2012 the brand became an extraordinary success. It was immediately adopted by big name brands, including Subway and the Slug and Lettuce pub chain. By 2010 Morrisons was onboard, by 2011 Dominos offered the sauce, and in 2012 KFC launched a Reggae Reggae box meal.
Graham is now worth a reported £35m, with Peter Jones citing the investment as one of his most successful.
Jones used his contacts to introduce the product to Sainsbury’s which provided the platform for the product to take off.
It demonstrated the importance of having the right contacts – Graham may have succeeded without Jones but it would surely have been more difficult. Graham did have the foresight to use a great story and his personality to sell (watch here) his product.
For his part, Peter Jones was shrewd enough to understand the power of leveraging the Dragons’ Den profile to help launch a product.
Investment #2: Magic Whiteboard
Neil Westwood gave away 40% of his business to Theo Paphitis and Deborah Meaden back in 2008. The pair invested £100,000, with dividends and a share buyback (from the owners) of just over £600,000, the business returned the investors around £1m.
The investment required some foresight: the business was turning over £50,000 when the Dragons invested and Peter Jones dubbed the idea “ridiculous” – yearly turnover is now well over £1m.
After investing, Paphitis immediately opened the door to Rymans and stocked the product in hundreds of stores; Deborah Meaden was apparently very influential on the PR and marketing side of the business.
After selling well in Rymans the product was distributed in Sainsbury’s stores and Viking Direct. The range expanded to include Blackout Blinds and was sold in a number of big stores including Argos.
The range of products has grown further and now includes a range of options including a basketball tactics whiteboard, weekly planners and travel blackout blinds.
The investment is another example of the importance of leverage – Theo Paphitis took a product that had experienced modest success and opened up a huge market, which was invaluable. For his part, Westwood developed a product that resonated with the public and offered genuinely good utility.
It shows the value of seeking funding from investors that can add value to the business – you can see the original pitch here.
Investment #3: Craft Clubs
The gin subscription service secured an investment of £75,000 for a 12.5% equity stake from Sarah Willingham, an investor with an interest in the drinks business through her investment in the London Cocktail Club. Peter Jones had declared the initial valuation of £2.5m as crazy and delusional.
In 2017 the business was voted number 14 in a list of the UK’s best startups, at which point revenues totalled £7.5m.
In 2017 the business had an impressive reach, with 25,000 active customers, 150,000 email subscribers and 400,000 followers on social media.
The business is now using its position to launch another brand called Bubble Club which offers sparkling wines. As an additional income stream it also provides access to its user base for other food and drink brands.
Like Reggae Reggae Sauce and Magic Whiteboard, the founders had hit upon an idea that added huge value to customers. Gin is becoming increasingly popular and customers have such an affinity with the product they are prepared to pay for a subscription – a notoriously difficult commitment to gain from customers.
I’ve spent an interesting few hours watching back over old Dragons’ Den pitches and I’m struck by three points:
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