Not all Dragons Den investments actually happen

Whether you watch the Shark Tank, Dragons Den or the array of other extremely popular business investment programmes on the TV, very often it is not quite what it seems. Research in previous years has shown that a significant number of deals agreed on the TV are never followed through in practice. Dragons Den in the UK is rumoured to have a 50% success rate which means that only one in two of those agreed in front of the cameras actually happen. So, do these programs simply play up to the television cameras or are there valid reasons why investments might not occur?

Due diligence

The whole concept of Dragons Den is that business experts are presented with business ideas about which they have no background information. They are given limited time to ask questions about trading, operations, the future, etc and then offered the opportunity to negotiate a potential investment. You only need to look at the faces of some of the “contestants” who secure investment on the programme to see how important it can be to them.

Why would some Dragons Den deals fall through?
Not all Dragons Den investments actually happen

One of the main reasons so many deals fall through is that due diligence can often unearth potential issues or change the terms of any potential investment. It is not widely promoted but those deals agreed on television are not binding and are subject to due diligence and further negotiations once the cameras stop rolling,

Better deals

The world of business is a cutthroat place and the better business ideas appearing on programmes such as Dragons Den can often attract attention from other investors. A number of companies who have appeared on the show often report exceptional interest in their businesses after the cameras have stopped. The deals agreed on TV are “not binding” and therefore a number are tempted to look elsewhere.

Indeed, those who watch these shows will see that potential investors will often give ideas for the future and reasons behind their offers. Feedback would suggest that some of those appearing on the show often change their mind and believe they no longer need a Dragon instead deciding to go alone. However, in many ways they are missing the point why they applied to the show – because they needed help!

What’s the point of owning 100% of nothing?

By definition the world of investment encourages greed from both investors and those selling parts of their business. Sometimes it is difficult to see the “wood for the trees” and as we touched on above, many companies deciding to go alone often forgetting why they went on the show in the first place. They may pick up on new ideas, may have second thoughts themselves or they might suddenly believe it is simpler and more straightforward than they assumed. However, those who undervalue the influence of a well-known Dragon do so at their own risk!

At the end of the day would you not rather own a smaller percentage of a large growing business with a Dragon incentivised to push the business forward? Or would you rather retain 100% control of a small business which is going nowhere? When you see this written down there is no real option, so why do so many people suddenly become business experts after appearing on the show?

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