My illusions have been slightly shattered when I read this weekend’s article on the Daily Mail about the experience that Sharon Wright, the inventor of the MagnaMole, had at the hands of Dragon investors Duncan Bannatyne and James Caan. It’s one of my favourite TV programs as I love seeing all of the ideas people have for businesses and I love the concept of angel investment which can make a real difference to small businesses starting out. Bronco also had a client scoop the largest investment in the Den back in 2007.
Obviously the Daily Mail article is just one side of the story, but I don’t see any reason that would lead Sharon Wright to tell her story and write a book, unless she didn’t have good reason to expose the Dragons for who they really are. This story could really damage the reputations of Bannatyne and Caan and could lead to future issues in the way people do business with them.
Sharon had invented a new device that would help electricians and workmen take cables through cavity walls easily without any risk of electrocution. I remember when the program aired where she pitched to the Dragons last year as she was so confident and I wished that I would be able to be so calm and collected under pressure. What makes Dragons Den quite appealing to watch is to see business people squirm in the den as they forget their pitch or mess up their sums but Sharon though did an amazing job and was brilliant. All the Dragons wanted to invest in her and instead of getting a £50,000 investment for 15% she ended up with £80,000 for 22.5% shared between Duncan and James. There are a few months between the pitch and when the program airs which is when the deal is finalised which is where it all started to go wrong.
I can kind of imagine this happening, that a few weeks after filming she was asked to come to London with a meeting with James Caan, only to be told when she got there that he was busy. (that’s not a very good way to do business!) Later she went to meet Duncan who apparently was much friendlier and then the pre-contracts came out, and the £80,000 was actually a loan and not an investment. It sounds like Sharon was out of her depth on the contractual side of things and in hindsight should have involved a lawyer but signed up to the deal. It turned out that she received very little help from the Dragons, paid over the odds for things like a website through one of Caan’s referrals, and ended up having to pay £3000 a month for services such as use of Caan’s PR company. Sharon only ended up getting £26,500 from the Dragons of which she has paid back £22,000 as well as losing a whole load of weight due to an eating disorder and suffering a nervous breakdown.
This is no way to treat a business owner who has a very viable product that you have invested in and also have taken a substantial chunk of the company from. I forgot to mention that in the contracts it stated that one of the Dragons would be appointed Chairman so would have the casting vote…what!
What has Dragon’s Den turned into, or has it always been the same… rich investors, sat on a big pile of cash, waiting to pounce on the latest new idea, to take a big share of the equity, in order to get richer for not much effort. In a way they are preying on people who are often at their most desperate when they get into the Den as they have given a project their all, mental and financially, for often a long time and are looking for help.
Anyway it must be about time to tune into Episode 6 of this current series!