Perspective

I love watching Dragons’ Den, the programme in which entrepreneurs try to get established business people to invest in their ideas. I love trying to predict which Dragon will say what, how they will negotiate a deal, how they compete with each other to make themselves look good against other Dragons. I love shouting at the TV, “What about patents and intellectual property?” before the Dragons. And I particularly love it when they so obviously get it wrong. Trunki? Come on, just because a bit of plastic broke on a prototype you aren’t going to invest in such an obvious hit? And I find it reassuring when they break all their own rules to invest in something they get emotionally attached to. E.g. Reggae Reggae Sauce. Although I’m sure it is deliciously invigorating many of the facts and figures that the entrepreneur gave turned out to be wrong, many of them during the programme itself.

But I hate it when an entrepreneur gets flummoxed by a Dragon negotiating for a better deal. An entrepreneur will open with offering 10% in return for a certain investment. A Dragon might find this too little and counter with 20%. At which point the entrepreneur shakes his or head and declines.

What are they thinking?

It looks to me like they are thinking from the perspective of the Dragon. I’m going to double his money? Double! No way!

But this is completely the wrong way to look at this. They should look at it from their own perspective initially. So I’m going down from 90% to 80%. No biggie. And then they can put themselves in the shoes of the Dragon. Ok, I can see that doubling the shareholding might double the help the Dragon will give. Which will make that 11.11% reduction in their shareholding (10/90) look pretty insignificant.