Evan Davis - Reflections on Dragons' Den

The last show in the current run of Dragons' Den, and again it is one where we get to see two investments occur. The money really seems to have been flowing fast in the last eight weeks.

In fact, the total that has been offered by the Dragons and accepted by the entrepreneurs is just ten thousand pounds short of £1.5 million.

Lovers of statistics might like to know that this year the most prodigious investor has been Peter Jones (£442,000), who in fact put up more than James Caan (£277,000) and Duncan Bannatyne (£140,000) combined.

But from Duncan up, all of them have had their wallets open to a remarkable degree. Veterans like myself can remember the second series of the programme in which there weren't enough investments to put one into each episode.

In fact, I used to work on a rough rule of thumb that for each ten people who walked up the stairs into the Den, one would walk down again with the money. For most of this series, the success rate has not been one in ten, but two out of nine.

It's hard to understand this. After all, don't the Dragons know there is a recession on?

You might have thought that economic conditions would have ensured the Dragons were more careful with their money than usual.

For one thing, they don't have as much of it. The value of everything for everyone has gone down, and the posh houses and commercial properties in which Dragons have stakes are no exception.

But more significantly, one might assume that a recession is a difficult time to launch a new business, or grow one, what with the customers all staying at home and choosing not to spend so much money.

It has been said in fact, that a recession has the same effect on entrepreneurship as alcohol does on sex: it increases the desire, but reduces the ability. When the economy is low and other jobs are not available, people desperately want to set up their own company. But it is wrong time to get a business going.

Yet events in the Den this year seem to have by-passed that general rule. How come?

There is more than one reason for this.

Number one is that the quality of pitches has gone up. Hard to measure, I know, but it certainly feels that way. No wonder the Dragons find themselves tempted to invest more often.

Number two is that in the pits of an economic downturn, the Dragons need new investment opportunities more than ever. They may have lost some wealth but in a recession there are fewer things than usual to do with the money they have. It's not as though they can get a lot of interest on it by putting it in the bank at the moment. Again, no wonder the Dragons find themselves tempted to invest more often.

But there is a third and most important reason for the recession not to have had much effect on the Den. A good new business has to be good whatever the conditions in the overall economy. A recession should never be a very decisive factor.

Imagine you had invented the aeroplane before the Wright brothers. Or the mobile phone, or the cats-eye for that matter. No-one would say "hmm, it looks like a good idea but we should wait until the economy is a little stronger.. now is not the right time to launch it".

No, if an idea isn't going to fly in a recession, it wouldn't be worth investing in during a boom. And if it is worth investing in at all, it is worth it in a recession.

Great entrepreneurs are the very people who specialise in seeing opportunities where there are difficulties.

They'll see that even though many of their potential customers may be staying at home this year, that may not be a bad thing. It is a good time to start out, to finalise and test their design, to finish the product, put it on the market and be ready for when the customers come out and spend again.

It's been a particularly pleasing feature of this series of Dragons' Den that it has reflected this typically positive entrepreneurial attitude during the worst of economic times.

So for those that got their money in the Den – and for those that didn't.. good luck.

Last updated: 2 September 2009