It takes guts to go into the arena of BBC2 television show Dragons’ Den, accept an offer with a handshake, only to decide against taking the money from a multi-millionaire with plenty of contacts once the cameras stop rolling.
But that is exactly what Alexandra and Rupesh Thomas, founders of drinks business Tuk Tuk Chai, did earlier in the year.
The pair accepted an offer of £100,000 from Peter Jones – the only original Dragon remaining from a show now in its 16th series – to then part ways the following day without the six-figure sum.
Rupesh explained to This is Money: ‘It was a great opportunity, fantastic. When we came out and we sat back and looked at things and how we’d like to be, we decided against Peter’s offer.’
Huge call: Alexandra and Rupesh Thomas stepped back from a £100k offer from Peter Jones on Dragons’ Den
However, the gamble appears to have paid off. After their appearance on episode one of the show, they successfully raised £300,000 through crowdfunding platform Crowdcube.
Not only that, but at a far less generous share of equity that Peter Jones had haggled for.
You could argue that the rise of crowdfunding is making the Dragons’ Den format redundant and is now simply a marketing tool for those looking to raise the profile of a business.
The show sees entrepreneurs pitch ideas to five established business people, including Peter Jones, who has an estimated net wealth of more than £400million.
Tuk Tuk Chai is described by the pair as the first and only ready-to-drink authentic chai, or iced milk tea, available in Britain.
Rupesh came from humble beginnings where he arrived in England from Kerala, southern India with £600 to his name.
His £2million company now has the product stocked in Harvey Nichols and in 110 Sainsbury’s stores.
But the pair want to boost the Sainsbury’s listing to 800 stores within two years.
Growth: Tuk Tuk Chai is currently stocked in 110 Sainsbury’s stores – but hopes this will be 800 within two years
Rupesh adds: ‘What viewers don’t see is that it’s a proper session that takes way longer than the minutes you see us on the television.
‘Deborah Meaden was out early and this was because she agreed we needed crowdfunding and an army of ambassadors. But that was edited out.
‘After initially accepting Peter’s offer via handshake we thought the best route for a start up like ours was crowdfunding and we parted ways happily,’ said Rupesh.
Alexandra added: ‘It [Dragons’ Den] is a very artificial environment with all the adrenalin and you reflect on it all when you get out and go home and you wonder whether you have done the right thing.’
After deciding on the crowdfunding route the day after the episode was aired, Tuk Tuk Chai completed the fundraising target in 24 hours for 7.5 per cent of the equity.
The founders asked for £150,000 on Crowdcube but Rupesh believed he could ask investors for more.
‘I am always a target driven person. When we hit our target we quite quickly raised it to £200,000, then £250,000 and £300,000.
‘I guess people believe in the product.
‘Our target was initially £150,000 and it went into over-funding,’ explained Rupesh.
Starstruck: Rupseh says that he was starstruck in the Den – but decided to turn down investment from Peter Jones, who is pictured on the far right
On Dragons’ Den, Peter Jones offered £100,000 for a 33 per cent stake in the business after Rupesh and Alexandra initially sought to only part with five per cent equity in the business.
‘When Peter made the offer he wanted to be an equal partner to share equal responsibility and rewards.
‘You do get starstruck [in the Den]. But we raised three times more for less than half the equity plus we have over 400 investors to shout about our brand,’ said Rupesh.
Alexandra added: ‘From Peter Jones’ point of view there was no need for us to get more money.
‘We chose Crowdcube because it’s one of the biggest and especially good for food and beverages where there has been a good success rate in this sector.
‘We also liked the way in which they marketed to investors.’
When asked whether Dragons’ Den was still relevant even though they got more through crowdfunding, Rupesh said: ‘Deborah Meaden had told us we had got an awful lot of things right and it was quite reassuring.
‘We gained a lot of coverage from it too as there were about three to four million viewers, so by all means it ticks all the boxes.’
Rupesh said that they will use the money generated from Crowdcube to scale up the marketing of the product and building greater efficiency in their production process by buying a new filtration machine.
What is Crowdcube?
Crowdcube was founded in 2011 and has had 751 successful raises with over £500million pledged investment on the platform.
There are currently 590,000 registered Crowdcube investors and the platform recently announced that 100 companies had raised £1million or more through it.
Well-known brands currently seeking funding on Crowdcube include award winning booking service and travel club Mr & Mrs Smith which, at the time of writing, had raised over £6million and digital banking app GoHenry, which now has just over £5million with 22 days left on the platform.
‘We had a 65 per cent success rate for businesses that went public on Crowdcube last quarter.
‘The majority that we fund tend to ask from between £250,000 and £750,000 – that’s our sweet spot for business,’ said Luke Lang, co-founder of Crowdcube.
Lang added that while start-ups have been successful on Crowdcube it does help if businesses have a track record.
‘Having a bit of traction, such as store presence, revenue records, etc., does help. It’s more interesting for investors and helps them to realise you have a product and service,’ said Lang.
Some other well-known companies that have raised on Crowdcube:
- Cawston Press – £1.07m raised – April 2018
- eMoov – total of £4.4m raised across two raises – Sep 2015 and July 2018
- JustPark – £6.25m raised in two raises – Feb 2015 and Nov 2017
- Mindful Chef – £1.9m raised – Sep 2017
- Monzo – £4.2m in three raises – March 2016, March 2017, November 2017
- Pod Point – £3.7m in three raises – Dec 2015, Jan 2016, March 2017