Even Kevin Would Agree

I have been asked to blog for CBC's Dragons' Den, the Venture Capital reality TV show. It is a change from my usual writing style as the audience is different, so please take it with a big pinch of salt!

Every now and then, investors will take a punt. In other words, they put cash on a deal with the off-chance it may do well and spin off rich returns. This week, the Dragons played the lottery but also shared their appreciation for the finer elements of life – the Arts – by supporting two sensitive souls asking for $10,000 to complete their film project. Did these producers get lost on their way to the Canada Council for the Arts who gave a grant to the movie Young People F***ing. Then why not give a grant to a movie about a Canadian’s journey to the Playboy Mansion?
Of course, Dragon Arlene Dickinson grasped the marketing genius of these two artists who knew that by appearing on TV, they would build advance hype for their movie titled My Date with Hugh and expose it to a wider audience of highly intellectual and attractive Dragons’ Den viewers.
Dave, the producer, handed a card to the Dragons which had the list of movie stars appearing in the movie (I’m assuming in cameo roles). Suddenly, Dragons Kevin O’Leary and Robert Herjovec went into a feeding frenzy. But who’s names were on that list? Madonna’s soon to be released husband, Guy Ritchie? Perhaps Brad Pitt taking a break from Angelina and the kids? “Hi honey, I’m just stopping in to see some friends. Don’t wait up, love ya.”
That list also got W. Brett “Clint Eastwood” Wilson to briefly clench his jaw.
Brett approaches his deals like entering a bar room. He swaggers in, expressionless, and just when you think things are going swell, he whips out his six-shooter and blows holes in the deals. There went Herjovac’s offer of $25,000 for 25% of the business.
This left O’Leary spluttering, confused and annoyed,
“Why Brett, why? Why be a Bozo?”
Oh dear, using clown names on a big boy from Saskatchewan* – not good for building long lasting relationships. It just begs the question, did Kevin’s mother ever teach him about manners?
If you are pitching for capital and you find yourself in Dave’s delicious position of having investors start a bidding war, follow Arlene’s advise and ask what each investor group can do for you besides the money. Kevin claimed he had invested in a movie distribution company which made Dave rub his hands together and begin to drool, but Arlene warned that there was a strong whiff of bull manure in the air. Perhaps Kevin was invested in Disney - who knows - but Dave sure did not care and went with Kevin and Robert, leaving Arlene and Brett to twist in the wind. I suppose Kevin is more the target audience and Dave probably imagined himself having A Date with Kevin, drinking beers in his kitchen with the Explosion Bottlecaps and doing other manly pursuits. Yet, Arlene’s marketing ability may have created a more nuanced marketing campaign. Also, Kevin did confess to having an abysmal track record with movies.
There were two more artistic deals – fashion for plus-sized women and jewellery which Hollywood Stars are buying. What’s it with Hollywood? Why can’t we hear that Melinda Gates loved the necklaces?
When Cindy and Rina of Maximum Women described how they stay up into the middle of the night to make calls and do research, Jim Treliving appreciated that entrepreneurial craziness saying he did the same thing as he built his own business. Yet, Jim got the sense that Cindy and Rina knew what they were doing and cash would be used wisely. Arlene asked for 50% ownership, along with Brett and Big Jim. Despite the promise of long, dark, snowy Saskatchewan nights heating up with Brett stopping by for a hot chocolate beside the roaring fire, Cindy and Rina turned down the Dragons’ deal. Robert teased Arlene; finally, someone had stopped her from stealing their business.
The jewellery game is fickle and Kevin did a great job of questioning Rachel of Hillberg and Berk Jewellery but she convinced Brett to invest. The lesson here as that Rachel really knew her numbers which gave confidence that she was CEO material and not a one-product-person.
The best pitch came from Tom with dataSentinel who broke a laptop and then held out the USB key to access the up-to-date files stored safely on the Internet. Masterpiece Theatre could not have done it better and even someone with the abilities of a gherkin could understand Tom’s product. Too bad Robert broke the drama by saying the technology was already in the marketplace.
Bummer.
Robert asked if Tom had received government grant funding and when he confirmed this, Kevin asked for his tax money back.
The CBC and Dragons’ Den is also funded by tax dollars. As Brett pointed out, “This country is built by entrepreneurs” and with small and medium enterprises (SMEs) generating 60% of Canada's economic output and providing 80% of Canadian jobs. There is no doubt that the Dragons and the entrepreneurs who enter their Den teach a great deal about how investors reward innovation. If we want to strengthen our Canadian economy, the Dragons’ Den is a truly fantastic investment of tax dollars. I think even Kevin would agree.

*Mea Culpae: Brett is actually from Saskatchewan, not Alberta, as I have stated in past blogs.

J. B. Loewen raises capital for companies wanting to grow and is the author of Money Magnet: Attract Investors to Your Business.

You Made Money From That?

I've been asked to blog for Dragons' Den. Here is episode 4:

This week’s Dragons’s Den had me gripped – and it wasn’t just by the pitches but the interplay between the Dragons snapping at each other. As Robert Herjovic and Brett Wilson manoeuvred Marissa, owner of Moxie Trades, towards a deal, each of the Dragons took turns chipping at the opportunity. Kevin O’Leary had on his MBA professor hat, explaining how more products means way too much complexity for an early stage business. Unless Marissa sticks with shipping only boots, the SKUs (stock keeping units) will mushroom horribly and as Kevin said, “Marissa will find herself in the world of hurt”. Showing again why she gets paid the big bucks for marketing, Dragon Arlene Dickinson labelled Moxie Trades’ products for females in traditional male jobs as “badges of honour”. Brilliant - but before I could absorb this feel good moment, Kevin had kicked out with his hobnail boots of reality and inquired about the money. Ah yes, it always comes back to the money.
Brett Wilson picked up the theme and asked, “What is the margin on your boots?” When Marissa said around 30%, there were quite a few Dragons trying hard not to look too impressed. Kevin does know his industry metrics and let out that those margins were significant.
It was Big Jim Treliving who tipped over the Dragons’ negotiating table, telling Marissa not to make the deal, leaving Robert to blurt out with a blinding smile, “Damn you.” Gosh, Herjovac makes even his bad moments seem wonderful. He has enormous emotional intelligence in his dealings with people, particularly during awkward moments. Indeed, Robert gently asked Arlene to clarify after she said she did not want to do the deal with him. Actually, she meant the deal structure did not appeal. I also admire the way Robert sets out his boundaries telling other Dragons to make a deal or get out, but in the most charming way that only James Bond (or perhaps Robin Williams) could possibly top. No bridges were burnt with Marissa and we learn that this deal will return in a later show.
The Nails ‘n Martini presentation demonstrated how far you can get with investors when you realize that pitching is more about debate. Actually, the entrepreneur, Martin, approached pitching as a social encounter at The Devil’s Martini Club on Adelaide Street.
As you know, investors put money into people. With Martin, the Dragons recognized a positive, upbeat, outgoing personality and spent the time unpacking his concept even though he had neglected to do much of the work himself. You can see how the partnership between innovator and venture capitalist works. The Dragons bring financial competence, price out the dream and keep everyone grounded in realty. Big Jim is familiar with building a service business one city at a time and then moving down to the USA. Jim shared that the American market place is tough and that he got his “tail shot off.” This is exactly the kind of partner Martin should have in his business to guide him past the rocks and the hard place. Jim’s been there already.
Arlene told Martin she could drive a bus through his plan, particularly the costs. Martin dismissed her feedback saying he already gets money from his wealthy relatives. Hope they weren’t watching because my guess is that they will be putting a stop order on any more cheques. Martin reminds me of a teenager who racks up the calls on his parent’s cell phone and when the monthly bill arrives says, “Whaaaat? I didn’t know.”
Each week, the Dragons astonish me with their openness to listen to zany characters like Martin and to put their money into ventures. Innovation sure happens in strange, unbelievable places. Wouldn’t we all love to invest in a growing business and make money but how many of us could even spot a diamond in the rough? Last week, I was reminded of the crazy quirkiness of innovation at an entrepreneurs’ award ceremony. Lo and behold, the competition winner was a man who started on the streets of Montreal, walking on stilts while eating fire - Guy Laliberté, the founder of Cirque du Soleil.
Zut alors! Turns out, I worried needlessly about Brett Wilson’s sanity when he invested in Alison and her street circus business, Arial Angels. He may have actually done a pretty wicked deal by putting cash into what seemed a flimsy business concept. If a fire eater from Montreal can trade in his stilts for a business suit and finance partners – well, we can see that the world truly can become his stage.
Memo to Alison of Arial Angels: get hold of the book Blue Ocean Strategy which lays out how Cirque du Soleil reinvented the circus business model and beat the industry giant, Wringley Brothers. Then buy a navy blue suit and wear it. Robert Herjovic gave you the best advice for free – become a business person, do not remain an artist. Laliberté accepted his award wearing a suit and spoke about his financial partners, not a word about fire eating.
I’m becoming quite fond of Dragon Brett’s style and how his investment strategy involves so many elements around people, innovation, risk and reward. Maybe Big Jim should follow the Albertan instead of O’Leary. One thing I know: where there’s a Dragon’s Deal, it’s genius.

Jacoline Loewen is the author of Money Magnet.

Capital without Draining the Pool

Q: Why do business owners often sell their healthy business just to achieve some personal liquidity?
A: Because they are erroneously advised that they have no alternative.

Just because a business owner wants to achieve some personal liquidity doesn't mean he should lose the opportunity to run his company and share in its financial future. Unfortunately, all too often owners are told exactly that - they must sell their company to meet their objectives, resulting in both a loss of operating control and their opportunity to share in future growth. John Loewen says, "Business owners need to find a partner to guide them towards alternative liquidity solutions that allow business owners to preserve management control and substantial equity ownership."

It may be hard out there but many private equity funds have capital to invest in great companies. Do not think that selling is your first option - it's often the last. J.B. Loewen's book called Money Magnet describes those options in easy terms.

Peer-to-Peer: Readers' best advice about patent protection

Profit magazine has listed as a must-read for buinsess owners J.B. Loewen's book, Money Magnet: Attracting Investors to Your Business in their September magazine. In their article on how to get your intellectual property patented, Profit gives away a free copy of Money Magnet. Check it out as the advice is given by readers and I know one of the entrepreneurs.

There is No Need to Be Rude

Some people think the Dragons should be kinder and gentler with the entrepreneurs who dare to ask for their gold. One Dragons’ Den blogger wrote, “I think it is great to be honest with the investors but there is no need to be rude. It doesn't add to the entertainment value, just the opposite.”
I don’t think this fan is referring to Arlene Dickinson, Robert Herjavec, Jim Treliving or W. Brett Wilson – although Brett sure can crack the bull whip and we are only into the third episode; so let’s circle the wagons and get back to him later. For now, I have a hunch that this comment on rudeness to entrepreneurs pitching on Dragons’ Den is attributed to alpha-Dragon, Kevin O’Leary. What if the CBC recommended that he follow Tony Soprano’s example and sit down with Dr. Melfi to work through his anger issues? How do you think it would go?
Dr. Melfi begins, “Kevin, so you say you have a lot of money?”
“I’ll say. Don’t you know I’ve made four billion dollars? Not a million…four billion.”
“OK…and you’re on a TV show?”
“Yeah. Dragons’ Den.”
“Catchy title.”
“Who Wants to be a Millionaire was already taken. I suggested Who Wants to be a Billionaire but the CBC producers wouldn’t run with it.”
Dr. Melfi continues, “Perhaps we should talk about your behavior. Now Kevin, most people would be thrilled to have your success but some viewers complain that it’s distressing the way you grill those poor, brave entrepreneurs. I mean…on this last episode you called that man from Eco Anti Freeze a cockroach.”
Kevin sighs, “First of all, I asked him if he was a cockroach and that’s because I liked his business. I need to get him worked up, see how he reacts. Hey, when it comes to your own investing, money can disappear pretty quickly. You may have noticed the stock market?”
Dr. Melfi shudders, “But the point is - you could be nicer.”
“The point is to see if I like the guy because if I invest, we become partners. Besides, even Robert Herjovec told the guy he had an edge.”
“But he said it with a smile. Perhaps you could channel your anger like that?”
Kevin raises a valid issue that when you raise private equity capital, it is all about partnership. When the Dragons invest, it is not like a bank loan which is passive. It is venture capital which means the Dragons are giving money for a piece of the business to become an active partner. They need to get into the boat to row with the entrepreneur for five years and it is known that some investors will rile up an entrepreneur to assess their personality. Character is important as the Dragons will introduce the entrepreneur to people in their network and that reflects on them. The Dragons will meet the entrepreneur frequently, build the strategy, phone him and trust his business skills. The Dragons must be confident that they can get in that row boat together and pull the oars in the same direction. That’s the point.
It does not take away from the fact that pitching your business deal is very hard whether you are on TV or not, and can be underestimated by the majority of owners wanting to raise capital. The two fellows with Eco Anti Freeze are an example of how quickly a presentation can go from good to grotesque. Jim Treliving owns Mr. Lube which is a client of Eco Anti Freeze in Vancouver already, and it was obvious Jim was pleased that the team had done their homework about his possible interest. Recycling of chemicals is a growth business so all the Dragons looked interested. Unfortunately, when the questions began, the wheels came off. Fair or not, you need market data to back up your statements or at the least, to try and give a response. There is no doubt Eco Anti Freeze will find an investor if they allow financial partnership in their overall company, not just Ontario, and they work on their market analysis. Rest assured, they will live to see another day and do well.
Compare that presentation to Darryl with the Buster Rhino BBQ sauce. As he presented, Darryl took on the questions with flair. Although he also lacked numbers and was sketchy on the use of investment money, Darryl made it clear he would be a fair, flexible partner. As Robert Herjovic and Brett Wilson told Darryl as they handed over a cheque for $200,000, “That was not the sauce, that was all about you. That was wonderful.” So Darryl will be grillin’ and chillin’ with the Dragon team because he kept his head and they liked his attitude.
“Kevin,” Dr. Melfi continued, “Can you empathize with these business owners risking their reputations to come on TV and show what is close to their heart – their business?”
Kevin leans forward, “Agreed. But when is the normal entrepreneur going to have five top experts focus on their business? Never! What about the millions of people watching – someone’s going to like what they see even if us Dragons don’t. Past presenters have gone on to raise capital – last year there was a group who raised millions after being ‘distressed’ on the show. Wish I’d had the Dragons’ Den opportunity – I would have jumped at it.”
“Even if it made you look like an idiot?”
“Absolutely! To get that kind of television exposure is worth it – yes, even if you look goofy. You’ll be so much further along than if you’re still in your basement thinking your product’s going to change the world.”
“But couldn’t you just say ‘I’m out’ without slamming them? You told one nice presenter that you would rather put needles in your eyes and let a truck run over you. I’m concerned about how you are damaging your reputation and embarrassing people.”
“Listen lady – a lot of people told me I was crazy. Did I cry? OK…a little but that stays in the cave. I listened. I asked questions. I learned. I adapted. I changed my business. Do you think I got to where I am without pain? I had the sweats. In the middle of the night. For years! Does anyone care about that? Nooooooo…”
Dr. Melfi glances at the clock, “Well, Kevin, that’s it for today –same time next week?”
J.B. Loewen raises capital for established companies and is the author of Money Magnet: Attracting Investors to Your Business.