Due diligence in the Dragon’s Den

More than 50% of the companies that secure investment on Dragon’s Den never receive any finance…

Although the BBC’s long-running reality TV show Dragon’s Den has produced several business success stories, there have also been some missed opportunities.

In 2007, for example, Jamaican chef Levi Roots earned a tidy sum after celebrity angel investor Peter Jones offered £50,000 for a 40% stake in his Reggae Reggae Sauce business.

However, later that year, Jones and four other Dragons turned down an opportunity to invest in Tangle Teazer, which has since become the most successful hairbrush brand of the 21st century.

It’s truly heart-warming to watch the lucky few secure good deals and ride off into the sunset. Or not. More than 50% of the deals made on-screen were never completed, according to a 2021 report.

Statistics

An analysis of the show’s first 11 series found that:

  • 76 of the 143 investments agreed during filming remain incomplete
  • Of the 143 businesses that successfully pitched Dragons, 23 are no longer trading
  • £250,000 is the largest amount Dragons have invested. However, neither of the companies that secured £250,000 received this investment after their programmes aired

In real terms, Dragon invested just £5.8m of the £13m they pledged. Why? One simple reason: due diligence.

It transpires the conclusions researchers make after the show frequently contradict the information entrepreneurs share in their pitches on screen. Additionally, sometimes new information comes to light that makes the Dragons wary of investing.

Here at I&L, we always encourage clients to undertake thorough due diligence before making an investment.

Due Diligence

No self-respecting Dragon will part with their money before conducting some research to help them make an informed decision. The show’s celebrity investors won’t be intimidated or dazzled by prospects and they are able to:

  1. Sample the products
  2. Meet the entrepreneurs personally

Its astounding the amount of people who fail to undertake due diligence, despite having no tangible evidence or data.

Dragon Sara Davies said: “There’s a period of financial due diligence. So basically, everything you’ve claimed in the Den, is it all true? The BBC does some due diligence, but we want to check it all ourselves as well.”

If due diligence is good enough for the Dragons, it’s good enough for us! Check out our other posts on due diligence, here.

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