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Hungryhouse, a site that helps users find and order takeaways online, came away from a Dragons' Den appearance last year with the promise of a £100,000 investment.
Unfortunately, the deal didn't work out in the end and co-founders Shane Lake and Tony Charles have since received a £150,000 cash injection from elsewhere.
We talked to Shane about the Dragons' Den experience and where they see the site heading...
Where did the idea for hungryhouse come from?
Tony and I sat down in 2005 to talk about ideas. We both come from IT backgrounds, but wanted to do something different. We brainstormed 10 or so ideas, of which Hungryhouse was the best.
The inspiration came from a US site called Food.com, which has since folded. Five years ago, even in the US, people were less interested in buying food online, but we think that the time is right now.
Were you looking for other investors before deciding to go on Dragons' Den?
Yes, we had hired a matching agency and were paying them a retainer to find an investor for the business. We did meet a few people that expressed an interest in the business, but we had no serious offers.
Perhaps we didn’t spend enough time looking for investment, but it is difficult for a startup when you have so much other work to do.
We also looked at financing the website via bank loans, but banks were reluctant to take a risk in the early days of the business.
Was it hard to get on Dragons' Den?
We initially applied back in 2006 and made it as far as the interview stages, which was a pretty rigorous process. We were invited to the BBC studios and presented a pitch to a researcher.
We didn’t make it onto the show the first time though. Online businesses are hard to pitch and explain on Dragons' Den – it’s difficult to describe something that you can’t show them.
At the time we had only 30 restaurants on board, having launched in February 2006.
We tried again the next year though, and eventually got accepted. This time around, the business had grown, so it was easier to pitch and the fact that we were still around proved the idea had legs.
Also, we did some training and practice on presenting the idea, so we were much more competent this time around, and were invited onto the show.
Why did the Dragons pull out of the deal?
Normally one Dragon handles the due diligence process when two are investing together and, in this case it was James Caan.
Initially, when we talked to James and his team we received some useful advice, but he was concerned that his consultants hadn’t given him a guarantee that the idea was going to work.
He didn’t feel that we could recruit as many restaurants at the speeds we said we could, and eventually decided to pull out, almost six months later.
We felt that, for an investment of £50,000, he would be prepared to take a risk and back the idea, rather than spending so much time on due diligence. We were still prepared to go through with the deal, but it didn’t happen in the end.
Tell me about the new investment
We have now been backed by two private investors, Bryan O’Connell and Andrew Fuller, who had seen the pitch on Dragons' Den and liked the idea.
Bryan O'Connell and Andy Fuller are serial entrepreneurs that have worked together for more than 20 years, having worked together at Philips. They also also invested in taxi website fairfare.co.uk in 2004.
We actually received some 30 to 40 offers of investment within days of our TV appearance, and we decided to get in touch with Bryan and Andrew after the Dragons deal fell through.
We have received an investment of £150,000 from this deal, for less than the 50% equity that we were prepared to give Duncan Bannatyne and James Caan. The new deal values the business at more than three times what the Dragons' Den deal did.
What will you use this new money for?
The money will mainly be spent on recruiting new restaurants and marketing, as well as a significant amount of website improvements.
How many restaurants do you have on board?
We have 401 restaurants on the site at the moment. We have added 250 in the past year since going on DD. Quite a few approached us after the show to join the site.
Our main focus is to get this number up, especially in the rest of the UK. At the moment, we mainly cover the London area.
How does the deal with restaurants work?
We promote the restaurant, display the menu and take the orders online. In return, we take 9% commission on each order. We then fax or email the orders across to the restaurant.
The deal works well for restaurants, as we are providing them with new business and they only pay when orders are placed.
Are you looking to make any improvements to the website?
Yes, the site hasn’t changed much since we first launched it. The basic functions of the site work well. Users can place orders simply and leave reviews of restaurants, but there is more we’d like to do with the site. We are currently in the process of hiring staff to make improvements.
What are your main sources of traffic?
Our primary source of traffic is Google AdWords, so we are paying for the majority of custom we receive. Our organic search results need to be improved, and this is something we will be working on.
How is the business doing now? Are you close to being profitable?
We can’t reveal exact figures, but we have been growing steadily over the last year and hope to be in a position where we are moving into profit over the next six to 12 months. At the moment, we are taking roughly 500 orders per night.
What are your plans for the future?
Initially, we want to get more restaurants on board and cover the UK as much as possible. We think our timing is right with this idea, as more and more people are accustomed to shopping for food online and we expect this to continue to grow.
Eventually, we hope to look overseas, as this is an idea that will easily transfer to another country, but for the moment we are focused on the UK.