Key Points:
Investment: £85,000
Investor: Richard Farley and Deborah Meaden
Equity Offered: 40%
Business: Rotomate - A rotary clothes dryer with a protective cover
Target Audience: UK households who use outdoor clothes dryers
Challenges: Market size assumptions, product appeal, valuation concerns
The Pitch
21-year-old Roger Heinz presented his innovative product, Rotomate, on Dragons' Den, seeking an investment of £85,000 for a 15% stake in his business. Rotomate is a rotary clothes dryer with a unique protective cover designed to shield clothes from the rain, addressing a common issue in the UK where unpredictable weather often leads to soaked laundry. Roger showcased his early successes, including repeat orders from leading DIY stores and a recently finalized agreement with a national wholesaler, positioning his business for significant growth.
Financials and Offer
Roger provided detailed financial projections, expecting to sell 8,000 units in the current year, generating a profit of £32,000. He projected sales to reach 50,000 units in the following year and 250,000 units in the year after, based on securing agreements with multiple wholesalers. The cost to produce each unit is £7, sold wholesale for £11, and retailed at £24.95, indicating healthy profit margins.
Richard Farley made an early offer of half the money for 15% equity, contingent on another dragon matching his offer. Deborah Meaden, impressed by the product's potential, offered the full amount but demanded 20% equity. Ultimately, Richard Farley matched Deborah's offer, leading to a joint offer of £85,000 for 40% equity.
Challenges Highlighted by the Dragons
The dragons raised several concerns during the pitch:
- Market Size and Competition: Peter Jones and Theo Paphitis were skeptical about the actual market size and Roger's projections, leading to their decision not to invest.
- Product Appeal: Some dragons questioned the appeal and necessity of the product, given existing alternatives and consumer behavior.
- Valuation and Equity Demand: The equity demand from Richard and Deborah was considered high, leading to a heated debate among the dragons about the fairness and strategic value of their offers.
Conclusion
Despite fierce arguments and scrutiny, Roger Heinz successfully secured an investment of £85,000 from Richard Farley and Deborah Meaden in exchange for 40% equity in his business. This deal not only provided the necessary capital but also promised valuable guidance from experienced investors. Roger's determination and innovative solution to a common problem won over two of the dragons, setting the stage for Rotomate's potential growth in the UK market.
The session underscored the importance of understanding market dynamics and presenting realistic projections to attract investment, as well as the strategic value of selecting investors who can offer more than just financial support.