Not even the Dragons are immune from the recession

An interesting follow-up from a recent series of Dragon’s Den illustrates how even experienced investors like the Dragons can get their finger’s burned by the economic downturn…

You may remember the successful pitch given by Jerry Mantalvanos and Paul Merker back in 2007 for their business JPM Eco Logistics.

Deborah Meaden and Theo Paphitis invested in JPM - each investing £100,000 for a 20% stake (i.e. the two dragons had a combined stake of 40%).

Writing about her investment, Deborah Meaden writes on her website:

“Jerry and Paul were a little nervous so the pitch wasn’t the slickest I’ve seen but there was something about them I liked and most importantly I trusted and believed in them. They also knew their marketplace inside out and could show evidence of demand. Finally, because the environment is something I feel very passionate about it was a perfect fit all round.”

However, things haven’t turned out as well as hoped.  The business plan has no doubt been severely compromised by the downturn in the UK economy and by the severe over-capacity in the UK haulage industry. An expansion in the company’s fleet of vehicles and a change in the location of the head office may have also consumed cash.

Last week it was announced the JPL had been put into administration. 

The Telegraph also reports that “JPM had failed to pay its biofuel supplier, MPB Bioproducts, which had first issued a winding-up petition shortly before Christmas”.

It is not often that you read about a failed investment by the Dragons - I suspect that they have a very successful track record on the whole, and many of their “agreed” deals ultimately don’t go ahead once the Dragons have completed their investigations into the business plan (a process known as due diligence).

UK manufacturing - GlaxoSmithKline invests in 1,000 new jobs [22 Mar 2012]
Buying-in to the Facebook culture [5 Feb 2012]
Investment in People - Google and Human Capital [26 Dec 2011]
Business investment: the UK corporate cash pile [15 Jun 2011]
Changing demand in the market for live music [16 May 2011]
Jaguar goes for NPD investment with £5bn plan [10 May 2011]
Life in the chocolate factory - automation, productivity, motivation and culture [24 Apr 2011]
The UK Economy - Business Investment [14 Mar 2011]
CSR - Branson, Paphitis and Meaden Turn into Eco Warriors [7 Feb 2011]
Businesses argue the case for greater investment in public infrastructure [16 Oct 2010]
Meeting the entrepreneur behind Magic Whiteboard [6 Sep 2010]
A good example to use when explaining what firms do as they come out of a recession [22 Apr 2010]
Corus chief calls for more government funds for the economy [8 Apr 2010]
Recession Survival Strategies Cost UK SMEs £16bn [31 Mar 2010]
Marketing in a recession: more focus on brand advertising and product enhancements [20 Feb 2010]
9 business survival tips for getting through the recession [1 Feb 2010]
Strategy in a recession - Fusion Systems [1 Feb 2010]
What business students can learn from how businesses have handled the recession [1 Feb 2010]
Outdoor Ice-skating heads firmly down the product life cycle [3 Dec 2009]
Buffett Bets on the Railways [5 Nov 2009]
Q&A - What is globalisation? [27 Oct 2009]
Q&A - What are the main causes of unemployment? [27 Oct 2009]
Managing Cash Flow - Beware the Economic Recovery [26 Oct 2009]
The lights go out for the nightclub market [26 Sep 2009]
The dramatic slump in advertising revenue continues [18 Sep 2009]
Is a recession the perfect time to launch a technology start-up? [14 Sep 2009]
Can you spot the next ‘disruptive technology’? [7 Sep 2009]
How to beat the tourism competition?  Be the “steepest” [31 Aug 2009]
Video case study: battling for survival in the restaurant trade [31 Aug 2009]
A dramatic fall in business investment [27 Aug 2009]
Strategic business decision-making - Network Rail [26 Aug 2009]
How to improve profitability? - give customers a “staff appraisal” [12 Jul 2009]
Business angels take flight - just when small businesses need them [12 Jul 2009]
Innovation helps firm buck the recession [9 Jul 2009]
Spare capacity prompts a fall in business investment [4 Jul 2009]
U2 on Tour - Investment appraisal and capacity utilisation rolled into one! [2 Jul 2009]
Q&A - Outline the main costs and benefits of inflation [1 Jul 2009]
Q&A - Explain the role of corporate objectives in business strategy [1 Jul 2009]
Budget Hotel Chain Now Feeling the Squeeze [17 Jun 2009]
Building a tourist facility on the top of a mountain [12 Jun 2009]
Q&A - What is a sales forecast? [31 May 2009]
Q&A - Should a start-up raise investment from outside investors? [27 May 2009]
Q&A - What are the main things to consider when obtaining finance for a start-up? [26 May 2009]
Q&A - How is profit used by a business? [26 May 2009]
Investment appraisal in the rail industry - Branson wants to take the long-term view [22 May 2009]
Video case study - Vodafone strategy turns to cost-cutting [19 May 2009]
Sources of finance: PLCs turn to their shareholders [11 May 2009]
Q&A -  What is share capital [2 May 2009]
Video case study - German Car Industry [1 May 2009]
Q&A - What are commodities and how are their prices determined? [1 May 2009]
Q&A - What is a bank loan? [1 May 2009]
Video case study - Wind turbine production is stalled [1 May 2009]
Small businesses in the middle of the crunch - insights for students [22 Apr 2009]
Can Fairtrade buck the UK recession? [20 Apr 2009]
OCR 2880 (ACE) - Why build a railway line when a bus will do? [11 Apr 2009]
Viability of wind farms poses a “sources of finance” challenge [9 Apr 2009]
Independent schools hit by the downturn [7 Apr 2009]
Innocent turns to Coca-Cola to finance international expansion [7 Apr 2009]
The never-ending sales promotion proves a winner [28 Mar 2009]
Cash flow management - dividends in the spotlight [6 Mar 2009]
Q&A - What is profit and why is it important? [1 Mar 2009]
Q&A - What are the advantages to a start-up of being a franchise? [1 Mar 2009]
Q&A - What are the financial objectives of a new business? [1 Mar 2009]
Improving cash flow by reducing stocks [1 Mar 2009]
Sauces of Finance - Masterchef finds it tough [27 Feb 2009]
Monopoly - irresponsible banking rears its ugly head [20 Feb 2009]
What a bunch of cobblers [20 Feb 2009]
Cost-cutting made simple for small businesses [17 Feb 2009]
Flexible employment at Mini - the upside and the downside [16 Feb 2009]
Seeing things in black and white? [10 Feb 2009]
Interactive investment appraisal simulator [9 Feb 2009]
Video case study - Living Salads [9 Feb 2009]
The train feels the strain [2 Feb 2009]
Video case study - LG moves away from mass production [25 Jan 2009]
Cutting capacity in the service sector [17 Jan 2009]
Why small firms suffer from unavailable bank loans [17 Jan 2009]
Making a mint from “out-of-time” [15 Jan 2009]
A Great Overview of the UK Retail Sector’s Problems [4 Jan 2009]
The Corporate Jet Under Pressure [4 Jan 2009]
The Grim Outlook for UK Unemployment in 2009 [1 Jan 2009]
In a recession - cash is King! [30 Dec 2008]
Valuing Apprentices [29 Dec 2008]
Bracing ourselves for a series of retail business failures? [21 Dec 2008]
A tale of two retailers with contrasting fortunes in the slump [19 Dec 2008]
Will the Crunch deflate the Football Bubble? [2 Dec 2008]
Business cutbacks and job losses [26 Nov 2008]
Video case study - three small businesses born in the storm [26 Oct 2008]
Selling is the way to respond to a recession [13 Oct 2008]
Forget the credit crunch - lets order a pizza [1 Oct 2008]
50,000 fewer start-ups in the UK during 2008 [29 Sep 2008]
Rapstrap becomes Dragons Den’s Biggest Success to-date [17 Sep 2008]
Economic environment - disposable income takes a dive [4 Sep 2008]
In cod we trust - battered chippies are beating the credit crunch [3 Sep 2008]
Dragons Den - The Deal that Floated Away from the Dragons [27 Aug 2008]
Price wars are the milky way for supermarkets to fight for market share [23 Aug 2008]
A “challenging macroeconomic environment” is the excuse [19 Aug 2008]
Wanna job? Get down to McDonalds [18 Aug 2008]
Investment appraisal looks unappetising for the cheesegrater [14 Aug 2008]
Marketing strategy - making the pier stand out from the crowd [13 Aug 2008]
How much would you pay for a fish & chip shop? [9 Aug 2008]

BUSINESS TEACHER RESOURCE NEWSLETTER
Get first news of business teaching resources, ideas and other materials from tutor2u. Over 9,400 business teachers from the UK and around the world receive our regular teacher email newsletters. Sign up for free here!