Frazer Fearnhead, a founder of The House Crowd property crowdfunding platform, has been sharply criticised in a ‘car crash’ moment on BBC Two’s Dragons Den programme.
Fearnhead told the Dragons he had been in serious financial trouble for four years when the downturn destroyed his £2m property investment business. He says he plummetted from having an Aston Martin to finding it difficult to pay utility bills.
The programme - which encourages entrepreneurs to pitch for investment from five celebrity business leaders - heard Fearnhead say he wanted a hefty £1m investment from one or more Dragons in return for just five per cent of equity in his latest business.
His figures valued his business at £20m.
He claimed the £1m investment would allow The House Crowd - which enables individuals to buy into projects which acquire, renovate and re-sell properties - to move from raising an estimated £40m over the next 12 months to raising £125m.
When asked by one of the Dragons, Peter Jones, how he could justify a valuation of £20m for his company today, Fearnhead explained: “If we use the analogy of a wave...a surfer on that wave...we’re starting off...it’s very very hard to get going so we’re paddling very slowly...as that wave gathers momentum...we’re gathering pace with it...we grew 149 per cent in our first year, 211 per cent in our second.”
He went on to say that venture capitalists had said they could not value his firm - which had “exceptional growth” - in a traditional way. But he went on to admit that total income to the company over the past 12 months was £375,000 and it had not made a profit.
Jones went on to ask whether Fearnhead had secured that valuation from people who may have been under five years of age. Jones said no one could value The House Crowd at £20m “unless they were completely stupid.”
After a robust exchange of views with most of the celebrity business experts, during which Fearnhead said he had “an option” to get investment from venture capitalists, he was then castigated by the final Dragon, Sarah Willingham.
She said that his proposition and approach was “the most disrespectful pitch from an individual...I never expected to hear and be offended in this way.” She went on to say it had been a complete waste of time.
All five Dragons were Out - and so, in terms of winning his £1m investment, was Fearnhead.
He created The House Crowd in December 2011 with Suhail Nawaz. It started trading in March 2012 and claims that by last month it had successfully funded over 140 projects.
Here is one of the more painful moments.
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I saw this - it was a bit embarrassing. I felt sorry for him though, they consistently accused him of being rude, which he wasn't. It's just his valuation was high and he couldn't explain why.
The wave analogy mentioned above was particularly wishy washy and probably the nail in the coffin.
What a car crash! Sadly, I think Mr Fearnhead has delusions of grandeur. He seems to have plucked that £20m valuation out of thin air - completely laughable.
The fact that he even needs to head to the Dragons for that amount of investment suggests the business is struggling somewhat. Sounds like another entrepreneur with pound signs in his eyes and not much business sense.
He was drowning by that point, John. So the wave analogy was probably quite appropriate.
Painful viewing.
Horrible to watch. Someone needs to tell him his idea is going nowhere, to save himself from more misery and false hope. "Head in the clouds" springs to mind.
I've had experience of Mr Fernhead and am not that surprised he failed in the Den; right decision by the Dragons in my view
Yes, definitely wasn't rude. Deluded, yes, but rude is a little harsh. The wave comment was a huge blunder on his part in my opinion!
I suspect this was more of a raising awareness pitch than a serious bid for cash.
Very true Jeff - I did think that myself. Look at us all talking about The House Crowd now. And I'm sure that the website crashed due to traffic levels during Sunday's show which often seems to happen due to Dragon's Den. All PR is good PR? Maybe...
The wave metaphor/analogy was awful, as was much of his sales pitch. I think he would be well-advised to quit while he's not ahead.
One of the new Dragons (Sarah Willingham) is on an advert fluffing up Purple Bricks. Guess it shows she doesn't appreciate traditional agency models. https://www.youtube.com/watch?v=BjtAq2QsLvk
Put her on The Apprentice so Mr S can fire her :-)
Hilarious now that he has hit the £50m milestone. Dragons are not always right and their dressing down of him will come back to haunt them.
Given today's news, what are your thoughts today?
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