Season Six of the hit Canadian television show, Dragon’s Den debuted last night. LOVE this show as entrepreneurs pitch their ideas in hopes of securing an equity partner to help their businesses grow even more.
In the US, it’s called Shark Tank, but it is essentially the same show with the entrepreneurs coming from the US. There are two VCs who are on BOTH shows – Robert Herjavec and Kevin O’Leary. (BTW, Shark Tank is entering Season 2 – one of the shows that STARTED in Canada and crossed over to the US!)
But I digress. These entrepreneurs have to state their request up front: “I am looking for $100,000 for 20% equity in my company.” They then pitch the Dragons as to why they should invest their own money into their business. (No, producers don’t front the money – the Dragons invest their OWN money, time and effort into the businesses. So they have some skin in the game). Some entrepreneurs are only looking for money. Most are also looking for a strategic partner who will provide them sage business advice and/or open doors for them.
So it’s not just about the money. It’s also about who gives you the money. And sometimes, the Dragons collaborate and make an offer together. All of which you watch on this television show. Fascinating to watch. Even better to learn.
The opening season had Balzac’s Coffee Roasters asking for $350,000 for a 20% equity share in order to open two prime locations in downtown Toronto. But how many coffee stores do you need? Toronto has Tim Hortons and Starbucks at every corner! So what hooked these fire-breathing Dragons into accepting the offer? (BTW, four of the five dragons joined forces into the deal – which is a rare event indeed!)
1) The owner knew her stuff. She knew the numbers and was able to credibly answer the Dragon’s questions.
2) The owner had a track record. She already had five stores with a 20% operating margin. So she was credible.
3) The owner demonstrated how she was different in a short amount of time. She actually built a small representation of her coffee shop – built in the European tradition with minimal sales displays. Balzac’s focus is on coffee.
4) The owner invited the Dragons to join her in the coffee shop – so they could have a teeny tiny experience of Balzac’s Coffee Roasters.
4) The owner and her chief barista handed out samples of their coffee. (This is almost a given for anyone who has a physical product to sell. They must figure out a way to let the Dragons experience the product – and it makes for good television!)
5) Finally, it didn’t hurt that one of the Dragons enjoys a coffee at Balzac’s from time to time.
Take a look at this episode, and let me know what you think! What lessons do you take from the Dragon’s Den?