So You Want to be a Dragon?

So you would like to be like the Dragon's Den team on TV and have your own portfolio of investments in private small businesses?

Good. Because now everyone has a chance to be a real Dragon. This month's IOD Director Magazine features an article about an innovative and exciting new way for entrepreneur's to attract inward investment and for small investors to get a piece of the action. Set against the backdrop of banks unwilling to lend to small businesses, despite what was being said yesterday, who have solid orders and decent business plans because they have no collateral assets upon which to secure the loans, you now have the chance to make your own decisions based on these facts.

Enter Crowdcube.com, the new website and private investor club who specialise in investing in small businesses with big ideas. It's just like Dragon's Den in terms of the range of business types and what people are asking for and there is something for everyone. Rather than behaving like some arrogant tosspot for the TV's sake, you can either use your own judgement or just gamble with a minimum investment of just £50 in a single company.

Crowdcube is free to join but read the legal stuff at the beginning diligently and, just like the TV show, none of this amateur investing is governed by the FSA. So you are investing on your own judgement and you can lose the lot with no comebacks. This is real world stuff and not for the fainthearted.

Crowdcube acts pretty much like an angel network but investors can speculate on a small level and spread their money across several interesting ideas if they wish. There is a forum for chatting over ideas and there is an easy feel to the whole thing that makes you feel as if you are anything like small minded or have to be 'Bertie Big Bollocks' in order to invest in non quoted companies. It also means that you are part of small groups of investors in new ideas which are the lifeblood of the UK economy when Private Equity trade in buying and selling companies only and banks are more interested in trading debt. Without investment in simple ideas then Britain will not continue to replenish the 97% of all companies that make up this economy.


What frustrates about the stories at Crowdcube, such as Bubble & Balm who are seeking to raise £75,000, is that banks won't lend to the company because the owner, Sue Acton, has been wise enough to outsource manufacture and so has little or no tangible assets in the business. Banks shun this because there is no 'security' despite the fact the company has contracts with the likes of Waitrose and a niche corner of the market that could grow via the internet globally.
In the same issue of Director, a letter pleads in favour of bankers making £8m bonus and that we should applaud them for wealth creation but it is businesses like Bubble & Balm who make up the vast majority of the companies that trade and pay taxes in this country. Innovation is deemed not to be ideas like Sue Acton's but ideas to buy and sell companies like Boots to create wealth and we have to break that mentality in this country or to just believe it is about creating technology based companies.

Trade is crucial to our future. I think Crowdcube gives us the opportunity to be investors in the country's future and to build a portfolio as good as those who have the TV image for far less outlay.

Go onto the website, talk to the founder, Darren Westlake and see what you think. But remember, as with any investment, do your homework diligently. Bubble & Balm is one thing, snake oil is something quite different.

Learning By Failing

In today's Telegraph there is the usual feature of 'Ask James' where the Dragon's Den star, James Caan, gives his sage advice to job seekers. He is definitely qualified to do so, having made his considerable fortune off the back of starting, building and selling a successful recruitment company.

I had the good fortune to listen to James Caan speak last year at a small conference in London and he is very polished and enigmatic - every inch the 'nice guy' you see on Dragon's Den. I also think that much of his advice is very sound and this week's advice was a very good debating point about how to handle the very tough interview question of, 'Why did you leave your last job?'

I can sympathise with Caan's experience as I have heard every last excuse about the employer did not value the person, the targets were unrealistic, the hours too tough, the boss was an idiot, the company was going down the toilet, the pay was not good enough, the commission scheme changed, the company held back commission payments, the job role changed, and many more. I am excluding redundancies here but there is no reason why you cannot include them in the same question. The point being is that most candidates at interview look for another excuse to hide the stigma of having left their last company. And I say 'stigma' here as that is actually what they think it is. After all, no one would want to air their views about their boss at an interview with their prospective new boss, would they? Not unless they thought that leaving their last job was in some way a stigma that had to be explained.

Maybe I am using the wrong word here but it is that mental concept that an excuse or plausible reason has to be found for leaving your previous company and especially in these troubled times when there may be a considerable gap between leaving and finding a new role. Someone or something else has to be blamed.

Having been the interviewer in such situations many times, I cannot tell you how underwhelming it is to hear such excuses pushed out time and again. It doesn't matter who the person is or their age, the excuses seem to be the 'island of comfort' to explain people's inner lack of confidence in their abilities - the paranoid instinct that says there is always someone else to blame.

Failing, if it could be called that in losing your job, is part of life. It is as enriching as succeeding in terms of experience as without failing it is hard to know how to avoid it again while the subsequent feeling derived from succeeding after is all the more intense. We can all give our pithy stories of those celebrities or business people who pick themselves up after failure to succeed as such role models give us inspiration, but I often go to far greater depths to see how how people cope with and use 'failure' to their advantage.

Now let's stretch the word fail, here. Failure is not the only thing that pulls us down in life - there are many more reasons why people have to pick themselves up or make the best of a situation and I include in that people who suffer adversity for no good reason as well because they have similar, and often far steeper, mountains to climb but the principles are similar. So when I use the word fail in the same sentence as a name like Simon Weston it is not what I mean that he failed but here was a person who was dealt the cruelest of blows by being in the wrong place at the wrong time. He is one of hundreds of names we could use in the same context who have powerful, often thrilling stories of how they conquered adversities that threatened their very lives as well as their abilities to heal and move on.

It is from those people who have been dealt such huge blows by dint of accident, birth or negligence by others who use their situation to their advantage and become stronger characters and then successful people despite their enormous problems. Their special inspiration started by dealing with their point of adversity or 'failure' rather than dwelling on who to blame.

So when you sit down to think about the fact you have been made redundant or have lost your job because you personally failed to hit your target, don't try to hide the problem by inventing a reason or trying to transfer the blame. Think for a moment that you are in that position and you can dwell on the inequities that you may think put you there or you can plot your way forward, shedding the 'monkey on your back' that is the stigma of losing your job.

JK Rowling gives a very good account of this in her address to the Alumni at Harvard University where it was only when she faced the total depression of having no money, no job and no prospects that she could truly focus on the most important skills and ideas she had. It is something we can all use as well. Losing a job is tough and it is worse in a tough time. You may well have to accept that you did not perform as well as you should in your last job or because you were in the lower quartile of sales performers that you were identified as one of those who should leave.

Get over it. Think about what was it that you did and, more importantly, did not do that made you less successful than you should have been. Think about the number of meetings you regularly had, how you presented yourself, sold your company and why you failed to influence people as well as you could have done and then start thinking about what you can do to change things. So many times in my career I look back and think about how I could have done things differently and better, even when I was successful, and always it comes down to my lack of prioritisation. Even when I succeeded, I could have still not got bogged down in certain things and focused on more productive things that could have yielded even greater success and very often I find it was all to do with not moving from my personal comfort zones. Once I identified that, came to terms with it, I find things are far easier.

Sometimes you have to be honest with yourself about these things and being your own hardest critic is a recipe that can often lead to depression but is also the way to catalyse change. So when you think about that tough question about why you left your job, don't do what everyone else does and blame your last employer or someone or something else - take it on the chin if that's what it was.

The important thing is to do some reflection, once you have realised that you own your life and you are just as much to blame as your employer for losing your job. Was it your feisty attitude that put you at loggerheads with management which caused you to defocus? Was it the fact you you found it difficult to juggle personal issues and work? Think hard about why you possibly failed because learning the reasons allows you to see how you can change and be better for it.

There is a good reason why I mention all this which James Caan did not mention. That is that when I hear those 'excuses' from candidates I think to myself these things can easily be repeated.

If it was an issue with the boss then I know I am not perfect so it's likely I could cause the same issues for the candidate. If it was the company's lack of resources, well no company is perfect and so there is bound to be small things that cannot be provided. If it was the company not doing so well, it could happen here. The fact is that as an interviewing manager I would rather have people who have experienced things, understood what they have gone through and tell me how they dealt with it and how they will perform better in the future. Excuses are not a lot of use to me, interesting as they may sound.

Honesty is the best way and that starts at being honest with yourself. If you left a job because the money was rubbish, my alarm would be then why did the person enter the job in the first place? If the resources were rubbish, explain to me which ones were missing and tell me which company has it 100% right? If personal matters got in the way, what strategy have you worked out to cope with issues that may occur in the future that will no longer affect your performance? You see, employers should be very concerned about excuses about leaving the last job and it is certainly the reason why I ask the question. And for the skilled interviewer, if the answer is in the slightest bit unconvincing, then the follow up next questions will be like body punches as every interviewer should be looking for weaknesses and gloss.

Here's an exception - I saw the interview by Alan Sugar of the Apprentice, Jasmine, who won the competition and he lined up the question beautifully. Jasmine was the owner of her own restaurant business and Sugar pointed out that she would never enjoy such freedom to be as creative and as successful as she liked than when owning her own business, so why did she want to work for him? Her answer was that she wanted to work for Alan Sugar and here the alarm bells should have clanged. She was either bare-faced lying, motivated only by winning the prize of winning a job working for a dubious boss at £100,000 a year or her business was not as good as she made out. There was no follow up question - he left it at that. A skilled interviewer would have picked that whole 'facade' to pieces and find out what really made the girl tick. The same for the other pretty blond girl but each interviewer in turn backed off.

Most managers just want to hear what they want to hear. So you can get away with playing the excuses game in an ideal world. But today we are no longer in the ideal world - companies are not recruiting much at all and the jobless total is rising fast. Each interview is a precious moment to sell yourself better than any. Only you know your superior qualities and in that short time you have to show the exceptional things that make you different, not just qualified for the job, and sometimes exactly why you may not be qualified but the right person. You will still get the odd tree-hugging manager who has to have an exact match to the piece of paper but trust yourself that your special qualities will win.

So when asked that question - you will have done your contemplation. You will have come to terms with why you were chosen to leave in preference to others, you will have looked at yourself in the mirror and seen your flaws, you will have had your honest words with yourself and you will have identified what you need to do to be more successful in the future. By the time the question has ended you will hit the interviewer square between the eyes and tell them you failed but you know why, you dealt with it, you benefited from the experience and this is what you have done about it and why you are a much more capable person because of it. In fact, you were glad you failed because most people go through life never knowing the reasons that hold them back from being very successful - failure exposes the weaknesses within, that becomes the powerful force for change that is the platform for a successful life.

So when Simon Weston realised that he could not turn back the clock or get his body back, he faced it down, stopped blaming others for his misfortune (even though there were others to blame), fought the demons it caused and used it to become the incredible man he is today. He, along with thousands of others who have been dealt the really hard cards in life, are the most inspirational people on earth because their 'failures' made them the people they are today. At a recent service on the Falklands, Weston met the man who pushed the button that sent the Exocet missile into the hull of the Sir Galahad that fateful day and changed Weston's life for ever.

He forgave him because in many ways, he had a lot to thank the man for. The ordinary guy from the village of Nelson in South Wales, became a great inspiration for many as a result.

That takes some incredible guts and human spirit to say that even if it sounds illogical, but misfortune and failure can make ordinary people quite extraordinary. Believe that, and you will ace the dodgy question at your next interview - just make sure you are 100% honest with yourself, know what you have learnt and why you are a better person because of it.

Play that message to yourself a few times and then think of all those whingers who make the excuses. Sounds a whole lot better, doesn't it?

Death By Meeting

How many managers can identify with my heading today? Sometimes a business day can just seem an endless stream of meetings, with little chance to do more than answer a few emails and return the odd call in between. In fact, sometimes it seems that all managers do is meet and do not actually DO anything.

Meetings in business are of course a necessity. In fact, I would argue that in times of a recession, it is important to meet MORE rather than less.

I have said it many times before, the speed at which this recession is striking is breath-taking - one minute the business looks pretty sound and the forecast is good, the next sees sales collapse, orders dry up, forecast dwindle and cashflow decline sharply. While small businesses can adapt quickly, too many get caught in rich veins of business or a few large customers which are fantastic when the market is strong but hit very hard when the market goes down.

Meetings Are Crucial

The need for faster, more effective meetings is paramount in times of hardship.

As market conditions and customer buying patterns change almost daily, it is critical to meet more often to make sure you are on top of what is going on.

Many firms I talk to wait until the monthly management meeting to discuss the forecast discrepancies, as a good for instance. With a fixed agenda and several topics for discussion, this is the 'formal' stake in the ground or governance for most firms. Again, when times are good, that is well and fine, but why wait 4 weeks to discuss and action news of a major lost piece of business or the withdrawal of a lending facility when it could have a profound affect on the business in bad times?

I have seen many managers with their 'One Minute Manager' or 'How to Run Effective Meetings' books - these are great tools, don't get me wrong, but it is a sad comment that most managers have little clue as to what an effective or productive meeting is. It seems many just call meetings to occupy their daily time and do not actually achieve a great deal other than fuel a cycle of more meetings. The fact is, instinctively knowing what the business issues are and how to go about solving them should a basic skill for every manager. Yet, they more often than not either stick to given formulae or delve into text books for answers, when the going gets tough.

Priorities and Measurement

I don't have a secret elixir or recipe for managing in a crisis but what I do know is that very quickly, the executive team need to decide the priorities of the business, then have some key measurements of its progress against these priorities and then have a process to review the progress and adjust the business to put it back on the right course or remedy the situation. For this, I advocate more regular, shorter, more succinct and action-based meetings with a rapid cascade of actions after.

Deciding the priorities really comes back down to understanding what is going on in every part of the business to a granular level of detail. I cannot stress enough that in the sales and marketing areas, for instance, there is a huge requirement to review every deal reported on the forecast and have an understanding of all the dynamics in the marketing areas.

What I mean for sales is not a wishy-washy look at the forecast but a face-to-face, eye-to-eye review with every salesperson and a detailed look at every deal of significance and look at the situation of each customer. It's time for hard questions about every deal and its chances, about every customer and their situation and what every salesperson is doing to remedy shortfalls and to replace business that will not happen. It is also time to look hard at what existing customers are doing, what are they experiencing in the recession and how their buying patterns may change.

In marketing, it is about looking at how every penny is spent and how it can be geared toward supporting the sales team in remedying a shortfall. In short, it is getting alignment - through finance, operations, administration, IT etc - the business needs to be fully aligned to the common priorities.

These then become the template for the short review and action meetings.

Rocket Science?

Too often sales and marketing executives run their teams with wishful thinking - believing deals will come good or that customers will buy even when the data is obviously refuting this. Then, when all goes to pot, the same executives are the first to hand over control to the finance team and cost cutters and then bemoan the fact they don't understand the business. Theirs is a world of simple arithmetic and they don't see the long term as by the time the company is handed to them, the sole priority is survival.

Avoiding this is not rocket science - it is simple, practical management. If cashflow is declining and sales falling - the adage 'cash is king' becomes the mantra. The accountants can certainly batten down the hatches and collect cash more voraciously, pay suppliers on longer terms and drastically reduce costs. But viewing it from a holistic position, the salesforce and marketing can be refocused to drive a short term opportunity for more cash based sales via special promotions, targeted marketing and negotiating current deals to bring them and the cash in faster. Such priorities can be easily measured and reviewed very regularly, weekly, even daily. If one offer does not bite, try another - if one set of customers don't respond, try others.

More regular, more tactical management meetings really do drive the business around the twists and turns of a recession rather than waiting for the formal ones.

Cut Non-Priority Meetings

It is a direct outcome of this thinking that allows managers to quickly recognise what meetings are simply not essential. If the meeting does not help the business' priorities then do not have it - it's that simple.

Prepare in Advance

How many times, because business seems an endless succession of meetings, do you enter meetings where either you have not prepared or at least one of the other participants has not prepared for the meeting. Too often, there are 'I will have to get back to you' or 'the data was not available' or 'I got called into another meeting beforehand' given as an excuse. The fact is, if the priorities are not priorities for everyone then people will find excuses and revert to type, wasting time and energy on non-priority tasks.

Recessions are not forgiving - ignore them at your peril. If there is one time in your life when you deliberately skip non-important meetings then this is it.

In a recession, there should be no excuses. If managers do not prepare, there should be little room afforded and no tolerance as it is managing for a failure. And for the excuse of the 'data was not available' that too is symptomatic of non-aligned business processes. If IT is not aligned with the priority of producing data ready for the preparation, then a step is missing or again managers are not tuned in.

There is no room for non-alignment.

Use Technology

Using web and telephone based technology allows you to meet more people, more regularly and with less impact of dead time like travelling on the business. It's more green too which means it not only is better for the environment but it is cheaper for the business.

Stop Looking For Answers

From Government to business, we hear everyday that this is a global crisis and so it effectively answers all questions on performance. There is always an excuse.

That is not true. We know that many famous businesses actually started during a recession (e.g, Cisco, Facebook)and many more actually thrive during them. They do it because they do not look for excuses and answers, they look for opportunities, prioritise, align, measure, review and adjust. This comes from rapid planning, executing and a less focus on 'going through the motions' of business like having just the one monthly management meeting.

Companies who survive or thrive in a recession are absolutely on top of their business and understand exactly how they stand and what they are doing for the future, in every part of the company, from top down and bottom up.

I have used the example of Aviva changing its UK subsidiary's name, Norwich Union, during a recession with a £ multi-million series of high profile advertising. Within weeks, they announce bad results, lose 33% of their market value and cut 1,900 UK jobs. This is monumental hubris and lack of management in a crisis. They just did what it said on the monthly meeting minutes and ignored the world around them until it was too late. In fact, it could even be worse than that - they may have actually decided to spend all the money KNOWING the results were bad.

That would actually be close to criminal negligence - deliberately diverting funds into stupid marketing that could have saved jobs. But it illustrates what I mean - priorities have to change in a recession.

Practical Solutions

I have blogged endlessly on the subject of managing during a recession yet I still see companies around me falling into the same traps. Often we get Dragon's Den heroes talking of their fantastic anecdotes and what has served them well. Duncan Bannatyne, who is one of the best of them, actually told the story of one of his managers calling and telling him a rival gym was putting leaflets on cars in the car parks suggesting a £50 reduction for signing up. Bannatyne gave the entrepreneur's response - only 5% of the City's population paid for a gym, so he wanted to focus on the 95% who didn't pay for a gym as there was a much bigger opportunity than just nicking customers from another gym.

But this was not practical advice - certainly not in a recession. If he is not providing enough value to his current members that they see a £50 offer as a good alternative, then he is going to lose customers. What is more, we all know it costs roughly 4 to 5 times as much to find a new customer than to keep an old one. The number one priority for every business must be to KEEP as many of its customers as it can - and if a £50 leaflet on a car window is taking customers away, then Bannatyne's business model is flawed - and ever more so in a recession when customers may walk just because they cannot afford it. Common sense would say the market opportunity on a 'nice to have' item like a gym will diminish in a recession - current cash paying customers are jewels in such an environment. In fact, in a recession, his advice could not have been worse.

But sometimes that's where entrepreneurs fail - they get too caught up in their own world to see the outside. I think Bannatyne was just illustrating a point because I cannot believe he got where he is today on such a course of action.

Sound Thinking

Again I don't have all the answers - but as an entrepreneur who has managed businesses through several recessions, I have learnt the hard way that applying the same principles in a recession is business suicide. Many of today's business people would not have gone through even one recession let alone a few, so solid thinking and good advice is actually very valuable - pithy anecdotes on the road to success from famous people often glosses over the point.

The question always remains - what does that mean to my business?

I have made the offer before, but I am very happy to offer my practical advice to businesses. Please contact me at nigel.dunn@calxeurope.com or 0207 193 2356.

Catching A Dragon

TV's Dragons Den has announced the first failure of one of its investments. JPM EcoLogistics called in the administrators last week. Deborah Meaden and Theo Paphitis had put in £100,000 for a 40% stake and they put in a further £27,500 after an emergency cash call despite asking all the right questions.

No Guarantee of Success

While Duncan Bannatyne was swift to point out all his investments were doing fine, both he and James Caan supported Meaden's views that Investors tend to look at a portfolio of investments to spread their risk and increase chances of a success. Meaden is right in saying '....if you don't take risks you have no economy.'

Of course, this is cold comfort for the Directors of JPM, Jerry Mantalvanos and Paul Merker, who went on the show in 2007 to seek investment in their haulage firm which ran its fleet on bio-diesel. They must have thought, as many do, that having high-profile investors you have a greater chance of success. It is also a body blow to firms which Lord Mandelson has described as contributing to the longer term view of decreasing emissions which seems curious that he has not selectively moved to help save it. But I would have thought it was just another soundbite in the sea of them from the Government at the moment.

The Reality of Business

What JPM's demise shows is that programs like Dragons Den are for entertainment value only. The reality is that there is no substitute for investors who are going to pitch in and support you. Fair play to Ms. Meadon and Mr. Paphitis for responding to the emergency cash call but I suspect that the Directors probably rued the fact their choice of investors was more based around celebrity than hard business facts.

I have no formula of success to reveal here but sometimes in a business like that, it would be wiser to look for investors who are like-minded or in the business. Unless you have a patentable, new technology that is ground breaking, firms of that nature are just a new, green take on an existing model and success was highly likely to be dependent on a few factors - 1) the price of bio-diesel as compared to normal diesel, 2) the comparative cost of maintaining the vehicles as compared to traditional haulage vehicles, 3) the comparative fuel economy of the vehicles but most importantly 4) the response of the competition.

Assumptions are usually the things that conspire to kill a business and sometimes it is too easy for an entrepreneur to get seduced by their own subject or idea to see how the market may respond. The haulage business is very traditional and mature and in austere times when cargo rates have been dropping, it was not the time to introduce premium rates to help satisfy Corporate and individual consciences about the environment.

Cost is king at the moment and so it is not surprising that such noble thoughts fly out of the window.

Sympathetic Investors vs Practical

One way around such a problem of having a fresh approach to an old, established industry with no greater innovation than a green edge was to have sought a long term investment by another haulage or similar firm who may have a vested interest to start a more green business. The reasons for this may be several but the most obvious would be that the industry is going to be forced down that route at some point in the future by legislation, it may be possible to seek greater help from Government if an old-style firm is seen to be practically investing in the future even by shareholding, and finally, it may actually be a really good bet.

How this could have practically helped is by JPM having a more practical investor. For instance, more business might have been able to flow to JPM from its investor on a spill over basis or because it is premium or the investor might have been more amenable to running JPM as a loss making investment for longer for reasons of legislative moves as explained above and by supporting it through the profit of the main company. It also provides a ready 'exit strategy' for all parties.

The problem with Dragon style investors is that they are investing purely on the worth of the business opportunity as they see it and from portfolio of risk point of view. They are not looking at it from a long term compliment to their own business or portfolio of businesses which may have afforded better protection to JPM.

The Dragons have responded with James Caan suggesting in future Dragons will want a bigger stake for their investment and I think that is very indicative of why Dragons are not good investors for everyone, although Duncan Bannatyne has still said his decisions will be made on a case by case basis.

No Right Answer

From an entrepreneurs point of view, there is no real right answer. Investment money is investment money. But as a rule of thumb in my book, if you do not have a patentable idea just a new take on an existing business, then you are going to run at loggerheads with the existing market. For that reason you must, must, must get your assumptions right and test them to destruction before you start because the incumbents in the industry will see you as a threat and treat you accordingly. So your Value Proposition, marketing, service levels and cost base must be able to stand the test.

In JPM's case, clearly they became victim to the desperation within a tight haulage industry. The Value Proposition around green haulage depends on the buyer's belief in a greener future. Today, and very sadly, that is not a strong enough reason to prefer the service when every major firm is looking at its cost lines.

Together with that, and their choice of investors, JPM walked into a trap of their own making. If only they had a business centred around environmentally carrying bank executive bonuses or disposing of bail outs more effectively - that would be a good business to be in.

Dragon or Pussycat?

'Entrepreneurs say they got burnt by investors' demands', shrieks the headlines in this week's Sunday Times.

'What a surprise' some may say in response. I listened to that nice James Caan's talk recently at the EREC in London when he described the Dragon's Den Show as terrifying at first as the Dragons had to make instant investment decisions without foreknowledge or due diligence. A 20 minute pitch and you make up your mind.

The article basically says that a few entrepreneurs have endured the nerve-wracking TV exposure and got their deals with a Dragon only to find that subsequently for one reason or another the deal falls foul.

TV Reality reflects Life

For once it seems a TV Reality show actually mimics reality. Gaining investment is not an easy process and inevitably it means that the two parties must ask deep questions about the veracity of the entrepreneur's claims, knowledge and ability to execute on the plans. If not then the Dragon may as well put their large sums on the 5.30 at Kempton Park with as much hope of a win.

In one instant, an Australian entrepreneur had an agreement in principle from two of the Dragons only to find 4 months later that it fell through. In a further instant, a chap who had a Foot Deodoriser had an agreement to invest but the deal fell through when it was found that he did not have a patent on the product although the entrepreneur claimed it was the Dragon who had put him under as much cosh as an employee.

How good is a deal anyway?

Some entrepreneurs have claimed the deals are not healthy. Lara Goodbody (surely an Ian Fleming name), the co-founder of YogaBugs, declined £200,000 for a 30% stake in her business and later got £250,000 for 15% in the business from another unrelated investor.

And here is the reality. Dragons Den is all about making good TV. Sure the Dragons have made a lot of money but they did not do it by chucking £100 or £200,000 down the pan on poor ideas. Likewise, people who give away 40-50% of their company for inward investment are effectively making themselves an employee at best and certainly the voracious ability to own your idea has been diluted greatly. Moreover, where is the equity left to hand out to diligent employees in the future when the share-grabbing Dragon has such a large stake.

Entrepreneurs switch off your TVs

The reality is that the Dragons Den model is not good for real investing. The Dragons are making multiple investments for small cash in their terms that would normally consume large portions of their time to make the business successful. The entrepreneurs meanwhile seem to want to desperately give away huge chunks of their equity for relatively small capital stakes in the vain hope that James Caan or Duncan Bannantyne knows someone that can get them a quick hit to make millions.

In practice, gaining inward investment needs a strong business idea, an even stronger business plan which has sound research and strategy and then people who can execute. Entrepreneurs come in all shapes, sizes and backgrounds yet it is rare that you get the combination of all those things. Most commonly missing in people who have great ideas is the ability to take the idea to market or sustain that market. These people may be great at selling the concept but seeing a deal through to fruition may be very different.

My advice to would-be entrepreneurs is to build a proof of concept first. This means building a prototype business with the minimum possible outlay and creating the first few sales to prove your idea has legs. The first thing you may realise is that the idea actually pays its way so the investment required is for expansion only rather than getting the product built. The second thing you may realise is where your deficiencies lie and so the investment may be to get the correct manufacturing contract to build or people to sell etc. Proof of concept pinpoints exactly where the money will be spent rather than the investor seeing only large salary cheques being paid with their money.

It also means the entrepreneur has the upper hand. It will not mean you have to give away large chunks of your company for comparatively small sums. What you have proved is that you can take a small share of a large market and so you can sell the end scenario rather than next year's - the idea that the £250,000 for 15% is not an investment in a company with a small market but one that can take 10% of a £multi-billion market. If the investor cannot see that then walk away.

Dragons are real

What the article shows is that the Dragons in the Den are real. They don't actually give away all that money without due diligence and there are plenty of caveats before the entrepreneurs get their cash that are not shown on camera. However, the reality is that unless the entrepreneur can see a distinct and real advantage of taking a Dragons' money other than for the money itself, then this is exactly not the way to get inward investment in a great idea.

Dragon's Den or Dirty Den? TV Hero James Caan Shares His Secrets

'Observe the masses and do the opposite,' said James Caan as he opened this year's Executive Recruitment Conference at the Business Design Centre, Islington yesterday. This has been his personal recipe for success, but for those of us in the audience the burning question was why on earth did he invest in the dog-walking treadmill, 'Fur for life'?

The founder of recruitment firm Alexander Mann in 1985 which he eventually sold for, well put it this way, a lot, is now a household name but remains perhaps the most unassuming of the characters on TV's Dragon's Den and yesterday's talk reinforced it. He was relaxed, funny, engaging, answered all questions and stayed behind later to talk to a waiting throng but he just could not resist getting his gratuitous plug in for his new book, 'From Brick Lane to Dragon's Den'. Ah well, scratch the unassuming part and hence my reference to Dirty Den.

James Caan's 5 Tips For Business Success

For all in business, James' tips are worth knowing:

1) Vision - have vision which is transportable to a brand

2) Create a Partnership culture which allows people to share in success

3) Attract great people

4) Hire people better than yourself

5) Encourage Intrepreneurship rather than entrepreneurship to create depth and diversity in your company

It's worth exploring a few.

Creating vision requires clear leadership and good leadership provides a strong cause which allows people to buy in. He uses the example of Ronald Reagan touring a NASA facility and coming across a guy sweeping the floor he asked the rather redundant question of what did he do. The guy replied, 'I send people to the Moon.' That is a hugely powerful force in an organisation when such a lowly employee is joined into the common cause.

He also points out that over the years he has searched and recruited for many senior executives, most of which have joined big companies but few of which were given equity in the business - not just stock options. He asserts that sharing more of the fruits of success creates a far more vigorous company and develops creativity.

In attracting great people and recruiting better than yourself he gives the great example that having started Alexander Mann in 1985 he had built after 7 years a £15m a year revenue company. So he recruited a new CEO and went into business development himself. The new CEO took the company from boutique recruiter to mainstream and the first tranche of the business was later sold for £130m because James had realised he was not the person to have done this.

Intrepreneurship was for me the best tip. He gave the great example of a young girl in her twenties who had only been at Mann for 8 months, who had previously run a nanny business, came to him with the idea that major companies would outsource their recruiting. James initially could not see why companies would do that or how the model would work but they decided to give her a new legal vehicle, a small office, some equity in the new company and within a short period she had closed the deal with Vodafone. The Company was recently sold to Private Equity Firm Graphite for £93m. His assertion is that don't let people have to be entrepreneurs and start their own business to realise their ideas.

The State of Recruitment Industry

For many in the audience some of James' points were not welcome - I loved them. He bemoaned the state of the Recruitment business and that recent developments had brought 30% fees into sharp focus. Was a phone conversation and an hour's meeting to get a job brief all that was needed to recruit for a company? His maxim was that you needed to spend a minimum of 2 days with a Company to understand expectations, culture, management style and more before you could possibly be able to spot individuals who could do the job. Hurrah for someone in the industry and so prominent to argue in the face of 'Transaction Recruiting'. I will keep this independent but he also highlighted that 30% fees are justifiable when the process is executed with diligence because the cost of getting it wrong is not only lost recruitment fees, it is the rolled up cost of the executive's salary consumed before leaving and then the ramp time to find a replacement plus the missed opportunity cost - an equation I have replayed to many hiring executives and HR people who still simply choose the cheapest. When I posed that question to James that the industry is responding to the requirements of clients, he rightly was adamant not so - this was the recruitment industry conditioning business that it is all about quantity of CVs produced and getting a fast buck. Clients, if sold to properly, would always choose to pay 30% fees for proper diligence to avoid the cost of bad recruiting.

More Serious Matters

So why did James Caan invest in the dog treadmill, much to the derision of his fellow panellists? The story goes, James arrived for his first shooting of the TV series and did some rehearsing before they went live. A short way into the filming, a wave of panic came over him - where were the documents and business plans for the participants so he could read up before they came on? Fellow panellist Duncan Bannatyne put him right - the person gets 20 minutes to pitch an idea, you have your money and 20 minutes to decide based on what you have heard. This is television and reality show business. After 5 days of filming James had not made an investment, remembering they film the entire series in one hit, because his conservative approach could not allow him to make a decision based on the model. So as he got up for another day of filming his wife asked him how it was going and he replied that it wasn't going as planned - he couldn't make a decision. She reminded him he could not go an entire series without making an investment, he would hardly be invited back if he did that. So when James got on set that morning, he backed the first person who was filmed, Sammy French and 'Fit for Fur'. I like that story.

The roaring success was Peter Moule's Chocbox. This guy had been in business a while, had sold more than £1m of his invention, made £350k profit and had £250k in the bank. He wanted £150k for 10% of his business. The other panellists scoffed and wondered why the guy wanted an investor, he had a business. James Caan was intrigued. Amongst all the wannabes who came on the show with the merest slip of an idea, no sales or proof of concept, no track record of success, no money of their own and just a vain hope of success, here was a professional guy who had the product, sales, track record and cash of his own. It was a gift horse. Peter Moule, meanwhile, had a plan.

James beat him up to get 40% of the company for £150k and they horse-traded so that 1% of equity would be given back effectively if Peter sold £1m more. By any measure it was a good deal and having seen the episode myself, I thought Peter was daft. Not so. James Caan's connections brought in a huge wholesale electrical distributor who negotiated an exclusive deal on the product in return to buy 5m units each year for 5 years. Peter Moule was nobody's fool. Overnight for 40% equity he had transformed a bumbling, profitable business into a multimillion pound success and market leader.

The corollary to the story was this. Some months later, Peter Moule called James and bemoaned the fact his entire month's work was receiving a single order from the distributor for hundreds of thousands of units, forwarding the mail to the factory and then creating one invoice. Success had made his role redundant. Further he had not touched a penny of James' money so there was £400k plus interest in the company doing nothing. So James, who received thousands of hopeful business plans a week many with 'electrical' in the heading, decided to set up a joint venture investment vehicle with Peter, 60-40 in Peter's favour. James would forward 'electrical' business plans, Peter would investigate them and together they would decide to invest or not. Peter Moule, from 20 minutes of TV in which 4 out of the 5 panellists poo-poo'd him, had become a real life Dragon.

Summing Up

I like James Caan. He is not just a hard-nosed businessman; he has true, ethical values in an industry that has forgotten them. In the era of web-based recruitment, his deep belief that reducing the cost of recruiting will ultimately cost hiring companies millions in poor recruits being jettisoned and reloaded is right on the money. The figure at senior level is 40% of all executives will fail in the first 18 months. It really pays hiring Companies to choose recruiting partners who understand them and share their pain when it goes wrong.

You know, I even think his book will be a good read.