Private Equity Fund Raises $980 Million

Sequoia Capital spent last week presenting to the private equity investment community and warning about how difficult it would be for fund managers hoping to raise money to invest in businesses. Turns out that raising capital for a new fund was not so hard for Sequoia as they announced that they had $980 million for their new fund. John Loewen says, "Not bad for such trying times. Much of that money is earmarked for BRIC countries but I would not be too quick to write off the Americans. Remember back in the 80's Japan Inc was supposed to take over the world."

Lehman Brothers Go-Slow Strike

O'Leary's Not Buying It

“This is a really, really bad idea.”“You’re crazy.”“You will end up going to the forest and slitting your wrists.”
These were vintage lines from the fieriest Dragon gazillionaire, Kevin O’Leary, who is to Dragons’ Den what Simon Cowell is to American Idol. Kevin says the things we are all thinking at home but would never dare to say to someone’s face and it’s what sets him apart as an investor. Like Simon Cowell, Kevin’s words may sting but not as much as spending $700,000 of your own money and ten years of your time without making a dime of profit – like the Dolls House kitty litter guys. That’s sad. Imagine if they had met up with the CBC Dragons back then, got a blast but listened. Maybe they would have changed their idea or found a job with Purina. Today they would have a healthy RRSP and bank balance instead of looking as if they’d sucked back a mouthful of Buckley’s cough medicine.
Ditto to the cute lady with her Bubbles the Dog book, the pizza box guy and the white-suited bee exterminator. As the marketing Dragon – Arlene Dickinson - quipped, “Bee gone!”
Dragons’ Den is back with a vengeance this season offering intrigue, drama, cruelty and redemption – better than any soap opera because if you listen to the Dragons’ questions and, yes, to Kevin’s digs, you cannot help but learn.
Dragons’ Den is back with a vengeance this season offering intrigue, drama, cruelty and redemption – better than any soap opera because if you listen to the Dragons’ questions and, yes, to Kevin’s digs, you cannot help but learn.First up (excuse the pun) was Fit to Touch, - a rather suggestive exercise program to do with your loved one, and if you have a friend but you are not a couple, do this program a few times and you will be. Although most of the Dragons chuckled and cringed, big Jim Treliving was interested because he had connections who could commercialize the concept.
In any developing business, no matter the industry, you need to translate your ideas into sales. In other words, how are you going to get customers to take money from their wallet and give it to you? Until you get healthy revenue you will need to depend on infusions of money: investment capital. In other words, cash from investors like the Dragons.
Kickspike, a golf shoe with retractable spikes, attracted the most money ever invested by the Dragons – one million dollars! What was so special? First of all, it is a sports product which speaks to all the Dragons. The shoe was easy to use and could be rolled out to a far wider market such as construction boots, seniors’ walking shoes and any sports shoes with cleats. Also, the designers, Colleen and Darrell Bachmann, were smart enough to take out a world-wide patent. With all these stars aligned, the Dragons recognized a good deal. Even the new Dragon, Brett Wilson, a brooding Clint Eastward from Alberta, broke character and actually got excited.
During the final deal, a computer interface that a senior could use to read emails, the full range of investor emotions ran across Robert Herjavec’s face. First, the realization that here’s a darn good product that could make a buck but quickly moving to the horror of how much it could cost to take it to the consumer market. As Robert said, almost to remind himself, “I could run through all of my money and still not have made a dent in the consumer market.”
Exactly. As Kevin pointed out, you have to calculate the cost of client acquisition. Then savvy Arlene shifted gears by reaffirming that the size of the seniors’ market was worth the effort and there were ways to reduce the cost of education by piggy backing the software with companies already serving the over seventies segment. With that, Robert and Arlene were in.
Getting back the invested cash – never mind a profit – from your investment is very hard. This is where watching Dragons’ Den is worth your time if you want to understand the mind of the entrepreneur. Kevin said he spent fifteen years battling in the trenches of the consumer marketplace. That is a long time being knocked down but getting right up again to push forward. It is where Kevin made his fortune but he told the other Dragons how he suffered nights waking up in a cold sweat and he ain’t goin’ back. With that, O’Leary said, “I’m not buying, I’m out.”

The CBC invited Loewen & Partners to be a guest bloger for their financial reality TV show, Dragon's Den. Jacoline Loewen raises capital for companies and is the author of Money Magnet: How to Attract Investors to your Business.

Please tell me you have some sales

The Dragons looked stunned when Paul with the plastic doo-hickey that rolls up the rim of a paper cup said he had sold 200,000 of the things and had made $100,000. With the detailed description of sales achieved, energy swept through the Dragons and they each piled in with their ideas about the potential market. It was exactly what Paul said he wanted – a brain storm with smart entrepreneurs- although he did also let slip that his friends tell him, "You're crazy!"
Kevin O'Leary agreed, "You're crazy but you're crazy like a fox." Glad Kevin's a Simpsons fan but when asking for investment money, save your psychological confessions for when you've made the front cover of Profit because that streak of eccentricity could make your potential investors a tad nervous. Even the kindly Robert Herjovec said, "Paul, it's over."
Moving on to the ideas that amuse us armchair Dragons, there was one gentleman anxious for Canadians to make his symbolic head gear as instantly recognizable as the sombrero. Guess he's not heard about the Mounties' hat made famous by Dudley Do-Right, or Paul Gross in Due South and he must have missed that law suit where the Mountie preferred to wear his turban. We got a sense that Brett Wilson, the new Dragon, like Clint Eastwood, would have liked the idea if it had involved a big cowboy hat with a black cigar thrown in for free. Now you're talking. Someone said that Clint Eastwood has two expressions – the one with his hat on and the one without the hat. Likewise, Brett has two expressions: one when he wears the next Canadian headgear – the "duck foot" hat - and one when he doesn't.
Then the ladies from No Smudge Lipstixx were a little alarmed to learn from Kevin that they were in the most competitive industry from hell and that their competitors would blow their cars up in their driveway. Yikes! Kevin's comments reminded me of when I was at university, we had a Friday night party where we watched Charles Bronson movies and every time Charles killed someone, we all had to take a drink. I think Dragons' Den could package a game where every time Kevin says "you're crazy" you take one swig of beer and "you're an idiot", a shooter of tequila and when he makes someone cry, you get to wear the "duck foot" hat.
When a teacher with language software arrived, Kevin groaned, "Please tell me you have some sales." Yeah – half a million dollars worth sold from the basement of Catherine's home. Kevin and Robert Herjavec agreed that it is unique for early stage software to have such a good level of sales.
I'm a huge fan of Kevin and the sheer exuberance he brings to Dragons' Den. Someone has whispered in his ear that he's not always super nice but as he says, life is tough. Kevin says it aloud and when people let their stress rise, they miss what Kevin is needing from them. When pitching, expect your heart to pound and give yourself something to calm down. Hold your lucky rabbit's foot or breathe slowly.
I would prefer to deal with someone like Kevin who lays his cards out and gives the entrepreneurs clues to what he needs to hear. He told Catherine he cares about the children which got guffaws from Robert, but if Catherine had been paying attention, she should have jumped in with statistics about the children using her software. Instead, she didn't give even a smidgeon of numbers. She left Kevin remembering his purgatory of life in educational software and swigging back what looked suspiciously like scotch, from his water glass.
Jim Treliving piped up that anything Kevin O'Leary likes, he's interested in coming for the ride too. Poor Kevin has to piggyback the other Dragons and they are making his deals more competitive by bidding up his offers. With the dramatics over, Arlene snapped up that deal at half the value and Big Jim did not join her. Unlike Kevin, Arlene walks softly but carries a big stick. Did the Dragons know that she made her original money by investing in educational software? Catherine, did you hear Kevin say Arlene's ripping you off by stealing half your company?
At this point, my son flipped his laptop over to me to show Catherine's software. He's just started Spanish this term but can already say a few phrases, seems to be handling the vocabulary and is actually enjoying it. As an anxious parent, I have wondered how he has managed to survive. Turns out the teacher gets them to do mini tests on the software as a treat which means my son has already done many quick quizzes to test his Spanish. Compare that to the two tests he may have done with a traditional classroom teaching method. That's hot – which brings us to the end of the show – the mini street Cirque De Soleil called Aerial Angels- two dynamic women with a sizzling street act.
Again, Kevin told the street acrobat, Alison, she was arrogant, did not listen and forget about the crying crap because business is no place for tears. Robert as usual, saved the day advising Alison to decide if she was an artist or a business owner – the same business attitude blocking Catherine from earning the profits she deserves.
Suddenly, from the shadows Brett spoke up, "Alison, I love your passion. I'm in."
The other Dragons looked at Brett as if he had confessed to being scammed by a Nigerian email.
Dear Brett,I am writing to you with a matter of great urgency. My beautiful acrobatic auntie has expired and I need to send her bank balance to an Albertan account. Please show your compassion and tell me the details of your bank account. We are absolutely keen to meet you too, but you can send a blank cheque as well, if you prefer.
Had Brett taken to heart Big Jim's earlier advice to the "roll up the rim" fellow to get a good lookin' gal and sales would soar? I'm with you on that Jim, and Richard Branson of Virgin definitely buys the Treliving marketing theory: There's no doubt that in the right situation, looks do sell. But perhaps Arlene laughed wryly because these are exactly the reasons that women think men in business can be manipulated – how smart is it to make decisions using your libido?
After this show, Brett will be smiling as he specializes in entertainment and knows how to make money with these talented artists and Arlene got a slam dunk with her software deal. Albertans are a mysterious, quiet bunch but they're the ones in Canada with the growth economy, making the money.

CBC invited Jacoline Loewen to blog for their reality TV Show Dragons' Den. Loewen raises capital for companies and is the author of Money Magnet: How to Attract Investors to your Business.

Continue reading at Dragons' Den at the CBC

With a Name like Schmucker's

Are you afraid that your family business will be taken from you if you partner with private equity? Mark Schmucker is the fourth generation leader of Schmucker and was recently in Toronto giving a presentation about how the family business mystique pays off in sales.
Mark showed advertisements from the 1960's which could play today just as successfully with their emphasis on family living, green lawns and a plate of jam sandwiches.
Mark says that in the early 90's, during the big market downturn, his father and uncle made the decision to bring in private equity partners. At the time, the Schmucker business was not doing well and there were family issues too.
With the help of partners (not just lenders) who put in cash but also brought a great deal more, Schmuckers began their growth tract by starting off buying Jiffy peanut butter. Mark says at first the family thought the spread into breakfast foods seemed too ambitious and peanut butter seemed crazy, but today they are happy because they own 8% of a billion dollar company, fifth in their industry.
Not bad.
Jacoline Loewen's book, Money Magnet: Attracting Investors to Your Business, goes through this challenge for business owners to decide if they want to be in control or get wealthy - lifestyle or legacy. Schmuckers chose to go with "get wealthy" and found out what thousands of family businesses have learnt: giving up some of the company to private equity partners results in a lot larger amount of money.
John Loewen says, "bringing in private equity partners to a family business is probably the smartest plan if owners want to pass along the wealth of the business to future generations. Like Mark Schmucker, you do not need to won 51% to have control of the company and private equity gets the mystique of family businesses."