I was intrgued to see old Henry's take on the current state of the markets. Read...
Last year, I wrote about the fall of the public markets in Money Magnet. At the time, my publisher asked me to tone it down as she could not see Wall Street ever losing value!
I was surprised to see that The Economist has a sense of humour during these dark days but this is a good game to play. I got it from Jeff Watson.
Check it out:
We have passed the agricultural, industrial, and information ages and we've entered the conceptual age. The three As—abundance, automation, and Asia—ushered in this new era.
In the same way that machines have replaced our bodies in certain kinds of jobs, software is replacing our left brains by doing sequential, logical work.
And that brings us to Asia, to where that work is being shipped.
In Asia you have tens of millions of people who can do routine tasks like write computer code. Routine is work you can reduce to a spreadsheet, to a script, to a formula, to a series of steps that has the right answer.
Daniel Pink has written A Whole New Mind about this change and how it applies to the companies we create. "This is great book to tell you where to invest your private equity fund money," says Jacoline Loewen , author of Money Magnet and a partner in the private equity company of Loewen & Partners. "Every manufacturer in Ontario should read it to know what to do."
He tells us that his generation's parents told their children, "Become an accountant, a lawyer, or an engineer; that will give you a solid foothold in the middle class."
But these jobs are now being sent overseas. So in order to make it today, you have to do work that's hard to outsource, hard to automate. To play an interview with Daniel Pink, press on link below:
Taleb talks about Capitalism 2 where instead of relying on public markets to make money, people will now revert back to private money.
This is exactly what I said in Money Magnet, where I predicted the end of the public markets as the main model for creating value. Private equity is money which goes into companies directly from one human to another human who look eachother in the eye at least once every few months and who work together to build value in the business.
Beats the ATM machine style of investing in the public markets.
About Kipling: He had lost his dearly loved son in World War One, and a precious daughter some years earlier. He was a drained man in 1919, and England, which he identified with so intensely, was a drained nation. With all this as background, the general opinion is that The Gods of the Copybook Headings is a clinging to old-fashioned common sense by a man deeply in need of something to cling to....
As many do again just on 90 years later.
Where Does Your Deal Fit?
Ask your venture capitalist where your company investment would be placed in their fund horizon. If your company is first in, then you have more time (five years) to make money before being required to pay back the full amount. If you are last in, the time for the VC to get out will be closer.
It also depends when you meet with the VCs and at which stage they are with their fund. If they have already filled up most of their fund, they will be very choosy about the last two companies. If they have just obtained the cash, then they will be feeling more generous. After the investment, find out who will handle your file. Will it be the same person who did the due diligence and who spent time getting to know your business? That person will have an emotional attachment. If a new guy is handling your file, there will be far less commitment.
The VC is a high-risk, high-return animal. Three out of ten companies in their fund will drive their fund’s return. If you are in that portfolio and your business is struggling, expect some pressure from the VCs. They want winners as these are their bread and butter. VCs make money for people who make them money. There are usually ten years in their life cycle: the first five years are used to seed your business and the remaining five are used to harvest the investment. The VCs must get out. They are not there to fund you into retirement.
Your business plan is much like a resume and it’s the ticket that will get you to the next stage: a face-to-face meeting. Attracting money to your business will be easier if you show your vision of the business and how you plan to execute it. You can make yourself far more attractive to investors if you have a merger possibility on the radar that you can name.
“It's the people, not the product, that investors are most interested in,” says Ilske Treurnicht, MArs. “And first impressions are important. Be active and interested without being arrogant. A banking or VC relationship typically lasts four to eight years, so investors tend to look for people they like and believe they'll get along with. Also, they do want people who are prepared.”
"How people present themselves to investors says very loudly how that business owner presents their product to their customers.
When I went to McGill University, a slice of pizza at Gertrude’s on a Friday would be my one treat – otherwise I lived on peanut butter, tuna sandwiches, and beans on toast (yes, I like bread). I rarely bought a pre-made meal, which is why I was jolted by a blog written in response to Karen Selick, a lawyer with Reynolds O'Brien, LLP., who commented on Food Banks. This student was horrified at the thought of another student not being able to buy a cafeteria item. What’s wrong, I wondered, with the cheaper option of packing a cheese sandwich and an apple for lunch?
The end goal of helping the poor is desirable, but the debate rages around “how” we give.
The Food Bank style of charity – giving to ease symptoms – is not to be confused with venture giving – philanthropy – which targets the underpinnings of society, asks why poverty occurs, and seeks to level access to opportunities.
Andrew says, “It’s private companies like CYBF who taught me the skills to be an independent business owner by providing me with $1,000 a month for a year and giving me a mentor. CYBF insisted that I write business plans, make financial projections, and answer questions about the revenues and strategy of my business. By transferring their entrepreneurial skills, CYBF encouraged my passion for music into a business. I won the sound contract for a Sprite commercial and now I have my own studio – King Squire Audio. Of the 20 people in my CYBF program, more than half are now hiring other people. The cost – $240,000 – is peanuts compared to what the government is spending on big conglomerates.”
Andrew agrees with Selick, that “how” skills or resources are given increase the impact of levelling the playing field. “The CYBF model should be exploited as it is entrepreneurs who are running the program. Letting government ‘do the giving’ would be inefficient. It was private business people who taught me how to raise money and who gave me the right ideas about the tough world of business and this came through CYBF.”
The Food Bank is well meaning with its belief in the redistribution of wealth, but I believe in the redistribution of skills to people like Andrew Squire, who has shed his dreadlock image and projects a quiet confidence. The Food Bank tips the pendulum toward socialism. I nudge the pendulum toward free enterprise. The totality of resources is never sufficient to meet all goals at the same time. Life is dialectic – private enterprise versus public duty. But effective giving is something we can all have the courage and honesty to face.
Jacoline Loewen is a financial advisor for companies seeking capital, as well as a corporate strategy expert, lecturer, and writer with three published books. the latest is Money Magnet: How to attract investors to your business.
VCs don’t invest in technology or markets, they invest in people.
If the people stuff goes wrong, it’s hell. They put you through due diligence while at the same time trying to find out what kind of person you are.
When you pitch in, it’s a sociological experiment to see what makes you tick and whether you will be co-operative or will crack.
Probably the most powerful action you can take is to find a referral to a partner in the business. It’s a bit like dating. If someone they trust refers you to a VC, they will take your call. "The question I get asked the most is how to find investors," says Jacoline Loewen, author of Money Magnet. "Owners are better of having a company like Loewen & Partners find them a suitable investor."
Warning: Bad phone manners are an immediate red flag. The VC knows they are entering into a seven-year relationship and they will not waste time with someone who rankles. If they can’t see themselves married to you, it’s a quick, “thank you but no thanks.”
“Often companies we like do not have EBIDTA or revenues, so we cannot use these tools as value markers.” Instead, Peter Carrescia of VenGrowth Capital Management Inc. says, his team values businesses with:
• High barriers to entry;
• The capability of rapid revenue growth;
• An analysis of what will happen in the market over the next three years;
• Identification of the Number One Issue to overcome;
• The perfect intersection of company, services/products and cycle in the market.
The whole business of investing is complex and wrought with chaos. A very big difference when investing in IT compared to other businesses is that the VCs know that eventually it all comes down to the team involved. Tech VCs can perform the complex science of due diligence, research the market and call past clients, but the only valid metadata worth drilling into is the people. The art of predicting winning people is much harder. Investing in a practiced team is a good indicator of success, but it is still an art.
The key reason why the biggest leveraged buyout ever was killed was that it
didn't live up to a "solvency opinion" -- a declaration by auditor KPMG that the
company would have been solvent after the takeover loaded it with billions in
Posted by Anastassia Kobeleva
Last night I was at the RBC Women Entrepreneur of the Year awards and Diane Francis of The National Post was there and also commented frequently on the tough days we are facing. There was a ripple of agreement through the room of 2,000 female entrepreneurs. The Publisher of Profit magazine brought some light to all this gloom and doom telling us about research that recessions and depressions first begin to lift in the SME sector. Our target market - Loewen & Partners, that is - is the SME with revenues of $10M+ and it’s true that there is private equity investment dollars available.
It’s time for another game of Crack the Whip with Kevin O’Leary at the head and the entrepreneur at the end.
And we were not disappointed as the Dragons’ Den show opened with Elke presenting her Lump O’ Coal, a Christmas stocking stuffer. Robert Herjavec thought it was cute but as Elke brought out her red Lump O’ Coal for Valentine’s, and so on, Arlene saw the flaw - Elke really had a single product for the investment opportunity.
There is only one thing that bothers Kevin—SKUs!
We’ve covered the topic of SKUs (Stock Keeping Unit) before with past Dragons’ Den presentations; Kevin means that the cost of managing and delivering single unit orders will eat up the profits. Think shirts: If you only had one design of shirt, you can see why delivering orders of one shirt to many stores would not be cost effective. To scale up, a company needs a wider range of products to pack for each client, otherwise you will be SKUed. And with that, Kevin skewered the deal, saying, “Deep in your heart, Elke, you know Lump O’ Coal will be a lump of you-know-what.”
Arlene tried to reason with Elke and said with a calming smile, “Cut through the harsh criticism (I’m really sorry you have to listen to Kevin) and hear the very good advice (Kevin is not such a ‘nothing burger’, he does teach at an important Business School).”
What Arlene was trying to explain is that an equity investor needs to make returns of above 20%, but by no means is Elke in a bad business. A single, seasonal product will simply not attract investors like the Dragons, and she would be better off getting debt financing or a government loan from the EDC. Quite rightly, Jim Treliving also respectfully advised that the company was a nice cottage industry and to keep it that way.
Single SKU companies can work and we saw this with a previous presenter – Sue and her Omega Tree Stand – who did well after fizzling at Dragons’ Den. Getting exposure on the show resulted in orders coming to Sue—landing her Canadian Tire and big-box stores high volume orders.
That doesn’t change the fact that for venture capital, the Dragons made the right decision, but thanks to Dragons’ Den, Sue got the free marketing exposure to get her phone ringing.
W. Brett Wilson, who is more used to coal as a source of energy, squinted in his tough guy way and rasped, “But why would anyone buy a lump of coal?”
Being of Scottish descent, I know that the Lump O’ Coal comes from the tradition of having a tall, dark stranger with a piece of coal for your fireplace be the first to cross the threshold in the New Year (Fabio look-a-likes being particularly popular with the ladies of the house.)
But I digress.
Let’s get back to Robert Herjavec, he of the matching tie and handkerchief sets, with his agreeable—almost rakish—way of chatting with entrepreneurs. It’s evident that Kevin doesn’t want to be any entrepreneur’s Facebook friend, but Robert’s warmth will soothe entrepreneurs, getting them to relax. But it was not enough to calm the nerves of the laid-off auto worker team, Jason and Leigh, as they presented their wall calendar. Arlene, being a single mum of four children herself, knows what it is like to co-ordinate family and commiserated that a shared wall calendar sounded good but, like some Nanny 911 ideas, hard to follow through.
Indeed, Kevin wished he could fire his family for their slacker ways over schedules.
When unpacking what went wrong afterwards with Dianne Buchner, the Den’s insightful host who adds helpful hints, Jason said the presentation was not good enough.
Ouchey! I wondered if Jason’s wife, who did the lion’s share of the presentation, was thinking, “Buddy—you’re not getting any for the next month!
There is a great deal of ambiguity in investing and each Dragon has their style. One Dragon might love your product but another one not be remotely interested. Throughout this season, the rookie Dragon, W. Brett Wilson, has been the shining light for entrepreneurs, coming through to invest in people he sees are trying their best or with a unique product. Likewise, we see Kevin O’Leary invest with his strict set of rules which, luckily, he teaches us.
We saw Brett do a handshake deal for a million dollars with a green energy technology entrepreneur, the big prerogative being IF Magnacoaster passes through the due diligence process and does what the entrepreneur says it does. Then Brett returns to Moxy Trades with a reduced offer, and clinches that deal. Finally, Brett and Arlene both shake hands with the First Memories Photobook team. After all, new mums can never have enough pictures of their baby snuggle-muffins.
What happened? Two words.
Clearly, Brett is a Dragon ready to invest and I love the “Kaching, Kaching” noises inserted every time there’s a handshake.
Finally, up comes a magic show, Illusions Dinner Theatre - would Brett sign up another entertainment act? Would we see more of Big Jim’s smooth dance moves which rival the Four Tops? To the bemusement of all, Robert volunteered for the magic act. Whoa! Robert, what were you thinking? By that stage, had the entrepreneur, Don, already sensed the deal was not happening? He could have been planning a horse’s head under Kevin O’Leary’s bed. Now you’re going to let him stick knives in your head?
Repeat: Knives and Dragons are a dangerous mixture—especially when the entrepreneur may be unhappy with the “no investment” decision.
Again, the Dragons enjoyed Don’s talent show but real estate financing is not the typical type of deal that equity investors do. As Big Jim advised, “It was a great show but cabaret acts last twenty months. Get to a bigger place, like Vegas, and don’t get saddled with real estate.”
And that’s all folks.
I’m sure you will agree that Dragons’ Den has succeeded in pulling back the curtain of mystery to reveal what are the features of a business every entrepreneur must be able to discuss with a potential investor. The Den is a gateway into how to be a great entrepreneur and, if you watch the whole season on the website, it’s an MBA course in Entrepreneurship 101—minus the school fees. Many of the presenters asking for investment dollars in the Den are Creative Achievers—people who do not fit the traditional management career track, who take risks and who change the world a little or a lot. Probably all of the Dragons fall into this category. None of this season’s presenters need bother with an MBA, and with Dragons’ Den giving many a jump start, they will be phenomenal.
Kudos to CBC for creating the Dragons’ Den website with the Forum where fans can blog. I think it has elevated the level of transparency and trust – a boost for the CBC brand. Also, the updates on companies from the show as they begin to blossom with a little help from their Dragon investors, is proving to be a terrific platform for Canadian enterprise. We can find out more about EcoTraction, for instance, which reminds me to buy the eco-salt for my doggy’s paws, as well as anything sporting the Dragons’ Den logo. The CBC showcases how an investor might work for your company by cross-selling products. Quicksnap goes to Afghanistan with CDs of a Canadian country singer who also wears Hillberg and Berk jewellery. Here you see three products, two from Dragons’ Den, being cross-marketed in a compelling way.
Watching the video of Quicksnap in Afghanistan though, with the enthusiastic Afghanistan gentleman enjoying the music, was the best Christmas present for me this year, bringing tears to my eyes. That is the true heart of business.
Before I get too schmaltzy, better close.
Dragons’ Den is my (and I suspect for a lot of you too) weekly passion. Now, as the season draws to a close, what are we going to do? Here’s an idea—the CBC has taken a leaf out of the play book of Gene Simmons’ success with KISS, by marketing the band of Dragons. I recommend wearing your favourite Dragon T-shirt to do your grocery shopping on a Saturday morning; it will probably improve your dating odds. Can you see it now—Arlene bumps into Big Jim in the tofu aisle.
I’ve said it before but even Kevin will agree Dragons’ Den is a great use of our tax payer moneeeeeeeey.
See you on January 11th.
Job losses in the United States are the early cough of the venerable cold Canada will catch soon enough. Unemployment statistics out of the U.S. released last weak showed jobs are being shed across the whole economy and at a faster rate than expected. Big, infectious coughs, blowing up over the Adirondacks and into our backdoor.
Sure, it's tough times out there and the banks are not helping.
Currently the government is reaching out to the business community to find out if the banks are lending as they are claiming. I was contacted by the Canadian Venture Capital Association (CVCA) to add in our experiences over the past few months as Loewen & Partners places deals.
The banks are stuck between a rock and a hard place. This is not a sub prime crisis – it’s now a credit crisis.
Apparently, the banks are showing the government figures and reports that they are lending - they even had an 11% growth in lending this last month.
When you dig a bit deeper though, and ask if this is new lending or established lines of credit being drawn, the real picture emerges.
Business owners who are established clients are pulling down their lines of credit and tucking it under the mattress. That is not new lending on the books.
Loewen & Partners met with RBC this week and it was refreshing. RBC is doing something counter intuitive to all the other banks. They told us, "We want to lend." They say they are open for business.
As one of the account managers told me, “People remember how you treat them in the tough times.” RBC will probably scoop up some clients for life in this next year with this strategy and it will build a rock solid brand, one customer at a time. Smart work, RBC.
I received a hand written note penned by one of Loewen & Partners’ clients thanking me for getting their company into the Ernst & Young Entrepreneur of the Year awards.
The company owner, Patrick Bermingham, wrote that he was amazed to win in his category, manufacturing. His company, Bermingham Construction, has received a great deal of recognition since, he tells me, from clients and that the award was also a huge moral boast for his employees.
Bermingham recently decided to move his company up a notch and with Loewen & Partners' corporate finance assistance, bring in private equity partners, C. A. Bancorp. This has not been easy sailing to get employees to buy in or even the owner, Patrick Bermingham. To win an award as prestigious as Entrepreneur of the Year helps ease the situation and reminds everyone that the business is doing very, very well. But it does take work for which Loewen & Partners did not get paid to do.
So will I do something extra that I do not get paid for again for Patrick?
At Loewen & Partners, we are using the marketing plan video as the base for doing our plan for next year.
Again, after the Uno letdown, Brett Wilson is left alone holding the bag to finance a great product, Ecotraction, and finally, this is getting noticed by the newspaper journalists. Mary Teresa Bitti, Financial Post writes, "all five (Dragons) agreed to put up a combined $500,000 for a 25% stake." They blame their change of heart on the market collapse.
That's a convenient excuse.
There are two types of investors: those that do it for a living and those who have made it, and invest their own money. The Dragons are supposed to be in the later category. Surely, they can afford $75,000 each on a product with guaranteed sales? Or maybe not?
I have a spread sheet tracking deals declared and deals done. Email me if you want a copy to see how much these Dragons are actually putting into our Canadian entrepreneurs. CBC should be asking Arelene Dickinson and Brett Wilson if they have any buddies who want to be Dragons and kick out the others who don't cough up the dough.
Here’s a challenge for all of CBC's Dragons' Den armchair investors. You have been riveted by these intelligently selective Dragons sifting over the business ventures brought into the Den. Now it’s time to swivel your armchairs away from the entrepreneurs, towards the Dragons.
First up, let’s do a little of our own “Due Diligence.”
If you pull up the CBC Dragons’ Den website and find Trent Kitsch’s record of past episodes, he helpfully lists the dollar value of the deals made and the Dragons who committed capital, making it easy to jot down the investment record of each Dragon. Since Trent’s blog only goes up to Episode 8, I may be missing a deal here or there, but I think there’s enough to chew on the interesting statistics.
I invite you to examine the Dragons’ Score Card (at the top of this blog) where next to each Dragon’s name, you will find the number of deals done and, as Robert Herjavec likes to say, “money put at risk”.
So chaps, how’s the investing going?
From my calculations, our Dragons from Alberta are demonstrating why they are the “have” province and Ontario is the “have not”. W. Brett Wilson and Arlene Dickinson committed to 18 deals and $3.2 million in investments.
And surprise, surprise – what do we have here? The lowest investor is the one with the most bluster. It’s dear old Mr. Kevin O’Leary. Well, well, well.
Jack Welsh, the leader who took General Electric (GE) to the top of the stock market, had a firm but simple rule: the bottom 10% performers of the work force got fired – every year!
Well, Kevin has been telling us all season that the market is cruel, so why shouldn’t the market bite down hard on a low investing Dragon? Why should it just be the presenters who have that unwanted feeling of hot adrenaline?
By the current rules, the Dragons are not under any obligation to spend a dime, but surely they should be under pressure? After all, in the real world, investors have their laws of the marketplace too. If they don’t invest, they obtain a low return on their capital, and if they are managing other people’s money and don’t have the ‘ovaries’ (or other body parts) to place it, that cash would be taken back rapidly.
If an investor does not commit dollars to companies, the only return they are making is on their original lump sum of capital and what’s the point of that? Kevin should know better than any as he runs a fund and, for sure, works within this rule. Right now, Kevin has the lowest record for investing capital and for that, to coin one of his favourite phrases, “he should be blowtorched out of existence.”
A common complaint by investors in the real world is that they don’t see good enough deals, and I suspect that the Dragons would say the same about the visitors to their Den, “They’re a little subprime, not likely to profit.”
Pardon me, but all sorts of idiotic things do well. The game Trivial Pursuit got turned down by hundreds of Angel investors who thought it was too dull. I still love mood rings, tiny troll dolls with pink hair, Billy Bee Honey but who would’ve invested in those things at their start? Even Barbie had its troubles getting launched.
That’s an excuse.
With the celebrity of the Dragons, many of the company products could gain some momentum. Surely, with several Dragons pitching in with their skills and rolodexes of global contacts, they could achieve something?
Ah…but Kevin would say he adds valuable entertainment which should be factored in to his score card.
Although, the Dragons’ Den is a display of Canadian entrepreneurship, it has to be watchable and it’s an added benefit that Kevin does an exceptional job of teaching. Our Canadian show is far superior to the British version because we are fortunate to have entrepreneurs with deep experience: Jim Treliving adds gravitas, Arlene Dickinson mixes in marketing sense, Brett Wilson brings formidable gunpowder, Robert Herjavec has spark and it is exciting to see Kevin grasp onto entrepreneurs and drag them flailing around the Den. People going on the show do realize there must be good ratings, but the fair swap is that there is a real cash opportunity too.
If it’s ratings the CBC needs, maybe one of the entrepreneurs could come back on the final show and say, “Kevin, you’re out!” push him shouting across a moat and as the draw bridge pulls up, a sofa-sized dragon could lunge at him.
Is it possible that he could even scream?
You have to admit, that would make great entertainment and since ratings are a factor in this materialistic, greedy, money-grubbing world of ours, a scene of a Dragon’s demise would be of enormous interest to more than a few viewers.
Which Dragon would you roast?
Right – so we are agreed then. Here are the new rules for the Dragons: lowest cash investor, you are the weakest Dragon. In Kevin’s words, “You’re a nothing burger”. You’re off the show!
Now, that’s entertainment.
“Thank heavens Paulson’s doing it,” says this leading investment banker, as we chatted at the St Andrew’s Ball, waiting for the next Scottish dance, Strip the Willow, to get going.
“He knows what he’s doing and this is a situation we have never seen before. He's not going to let Goldman Sachs go because it's the centre of capitalism. If that goes, the very essence of capitalism goes too.”
The banker went on to explain that in the USA, if a business person joins government, they get a once-in-a-life-time chance to sell off all of their business interests tax free. For Paulson, this was reportedly about $600M in tax free savings as he made the switch from Wall Street to the government. Apparently this is a great incentive to get top quality brains working for the government.
It does show you that even in melt downs, who you know and who likes you still counts.
Marketplace Senior Editor Paddy Hirsch gives a superb lesson on how this credit crisis started and may give you a sense of when it may end.
Check it out:
He told us not to tell anyone else, but since the finance industry was in such a crisis, now was the time to stop the madness of 13 separate regulatory bodies and merge into one.
Mr Hockin had travelled across Canada, putting together legislation that everyone - except Quebec - agreed to support.
Appears that The National Post got the story a few days later:
Canadian businesses would no longer have to file securities filings with 13
different provincial and territorial regulators, as they have for decades, and
brings to an end a much-criticized regulatory system described as "convoluted",
"unwieldy" and "Byzantine".
Instead, stock and bond-issuing institutions
would have to file prospectuses and other regulatory documents with only two
regulators -- a national body and its Quebec counterpart.
Did you know you can find past Dragons’ Den some of these people blogging on the CBC website, commenting on the deals and the Dragons?
It’s all very impressive.
In another reality show, The Bachelor, the girls who compete to win the heart of the single male return for one episode to confront the poor fellow.
Unlike The Bachelor, Dragons’ Den does not dedicate a show to the entrepreneurs returning to roast the Dragons - Arlene, Brett, Kevin, Jim and Robert.
To give the CBC credit, it lets fans know how the entrepreneurs and their businesses progressed and gives past winners, like Trent Kitsch of SAXX, their own blog too. But here’s the thing: participants can get in their two cents about their deal by blogging on the Forum just like TomChalker of dataSentinel who helpfully answered other bloggers’ questions. If you are expecting mildly depressed, dejected entrepreneurs who harbour ill will, forget that.
There are the budding armchair venture capitalists, like Dannolin and Pinebox, rating the merits of each business or venting about their own Den experience. Reading the past contestants and their often provocative takes on current pitches is fascinating because these guys know their stuff. It’s as if they’ve been through the miracle of entering the Dragons’ Den as innocents and emerging as venture capitalists (with tougher comments than Jim or Arlene would ever utter.)
The leader of the blogger pack is Ralfcis – he of the “sharpened keyboard” – was an engineer at Nortel. With his quirky wit and prolific writing, Rolfcis could make a career change from engineer drop-out to ad copy writer. Ralfcis describes his experience on a previous season of Dragons’ Den and as I read, it all came flooding back. Rolfcis was expecting a display table where he could spread out his samples. Instead, he had to stand up and pull out each item from the bag. Needless to say, things did not go well.
Rolfcis blogs about the good natured reaction to the pitch by Dragon Laurence Lewin, who sadly has just lost his battle with cancer.
Allison of Ariel Angels blogged all the way from Dubai to recommend a book called What Makes Things Stick. At first I was dubious and thought she just wanted to make Kevin O’Leary stick to the wall. In fact, the book’s inspired by Malcom Gladwell’s best seller book, Tipping Point and is a must read for anyone selling a product.
Maybe the bloggers could run a book list?
My happy browsing came to an abrupt halt when I read the name of a blogger called Darryl Koster. Hang on a mo. Isn’t he the pleasant CEO of Buster Rhino, that delicious sauce signed on with Brett Wilson and Robert Herjavec?
In the CBC Forum, Darryl Koster, the CEO, reveals to us that he turned down Brett and Robert’s deal. When I read that I went oooh nooo!
Where was the spoiler alert, Darryl?
I know there’s that six month delay from filming to the airing of the show but think about it, if you found out before season end of The Bachelor that the final girl has split and is living cheerfully with someone else, wouldn’t that be a huge let down? Darryl does make up for it by giving great website and technology advice to other presenters which may mean I have to vote him the season winner. Darryl, can you check out my website and give me some feedback?
There are many financiers who build their careers from the engineering profession and one of those people is the Big Kahuna blogger, Dragon W. Brett Wilson. How great is that to have a Dragon cruise around the Forum and drop in to blog?
Brett does not do much chit chat on the TV show except when he revves at warp drive to do a deal. Fasten your seat belts, ladies and gentlemen. The bloggers do appreciate how Brett shows up on the chat forums explaining why he made decisions and answering issues raised. He also says that he is not as the CBC portrays him – quiet and thoughtful.
Are you kidding, Brett?
That’s like describing Clint Eastwood as quiet and thoughtful. You are in the entertainment industry for a reason; it’s not because of your bookish ways. But don’t worry, your secret’s safe with us.
The bloggers do spend a great deal of time debating whether the show is better or worse with Kevin’s dramatics. One blogger calls Kevin a troll hiding under the bridge waiting to trap entrepreneurs which is a gross insult and unfair to trolls worldwide. Yet, I do believe Kevin really does the fairest exchange on Dragons’ Den as he teaches while he makes his decisions. After going through the hour meeting with Kevin, not one entrepreneur could possibly say, “I do not know why he did not invest with me, why my business needs to be changed, how my revenues might not reach the amount I expect or what I need to do.”
Not one Angel investor out in the real world would give anywhere near that much information for an entrepreneur to take away. In fact, investors say, “I like your plan but could you give us a call in a year?” That translates into au revoir. Most entrepreneurs would prefer to get more feedback than that.
I notice many bloggers have picked up Kevin’s key phrases too – the sign of a great teacher:
Let me use my time machine, slash, crystal ball and visit the future to imagine how the business revenues go.
Here comes Kevin and his bus.
How do we make moneeeeeeey.
Brett on the other hand chooses to share his investment strategies after the fact on the blogs. Either way, I think this sharing of knowledge is a fair swap between presenters and Dragons.
There is the trade theory that when people show each other their goods, it creates more perceived value, even though money may not have exchanged hands. The Dragons’ Den has entrepreneurs show their businesses and Dragons give their analysis and, sometimes, cash. Maybe this does create good will.
Several bloggers, like sslondon, liked the Dragons giving away cash in cheap loans because they had sympathy for someone’s situation. Brett Wilson and Robert Herjovec have done this so far and the Forums fans eat it up. I hate to rain on the parade, but if venture capitalists and Angels practiced this style of investing, they would be bankrupt within the year. Most businesses have their investing rules and deal structures. Doing venture capital and then veering abruptly to the left to give a loan or two means way too much complication for your average VC to manage.
Firms tend to do their philanthropy separately and for good reason. Maybe a philanthropy option should be built into the Dragons’ Den rules as a life line to be given once during the season, but Kevin O’Leary is right: feeling for a business owner is generally not the way the prickly world of investing works.
Kevin is teaching entrepreneurs how to fish; actually, he’s teaching how to spear gun and he doesn’t just hand over the darn fish.
For all you past contestant bloggers – here’s an idea for you:
What about a road show? You could call it, Lessons Learnt in Dragons’ Den. (Ralfcis, I’m sure you could come up with a catchier title). Maybe the sponsors like Profit magazine or EDC would be interested in supporting an event? Perhaps the School Boards may like you speaking to their high school students taking business classes. There are many entrepreneurs out in Canuckland who would benefit from hearing more from your side. I know I did.
Just a thought.
Sure, I thought - two slices of bread, ham, cheese and maybe a piece of tomato.
"What would be the price of that sandwich?"
Well, depending on where you are buying all the parts making up that sandwich, but probably several dollars.
Mr Lajeaneusse then asked, "Now, what about a pencil. Can you make a pencil?"
"So why is the cost of a pencil so much lower than that of a sandwich?"
Adam Smith explained this concept of specialization back a few centuries when he used the example of the cost to an individual to make a pin. There are economic clubs trying to do just that but Mr Lajeanesse makes the point just as well.
The tasty sandwich example illustrates why specialization of skills pays off in bringing down the time and price for making something. He also showed how trade is of benefit to us all. Instead of our neighbours, today we trade around the world and there is talk about trade barriers going up again.
Here's a video clip of Milton Friedman Mr.Lajeanesse shared, explaining why free trade is a great thing for the world. I particularly like it when Milton Freidman talks about world peace. Now if only we could get beauty queens to discuss how world peace and free trade work together!
As Ricky says, “If you are paying and someone says no, that is going to reduce the experience. Even if it’s just a little, it’s still not the best.” This week, listen to how you speak to clients. How about a week where we all take a little training from Ricky Bhang and say, “Yes.”
This week, Paul of Moyer Farms found himself in the foul Dragon's pit, blinking at the lights and trying to pretend with all his heart that this was where he wanted to be.
How Paul actually saw his situation was that his industry - agriculture - was in the dumps, his back was up against the wall. He needed cash to support all the orders flowing in for his added-value product of candied apples or he was in serious trouble.
As a business owner, before you decide to enter the Dragons' Den, do us all a favour and answer: "Do you want to be rich or do you want to control your business?"
You will thus spare the feelings of those sensitive viewers who think Kevin O'Leary is running a college frat house hazing ritual designed to humiliate. In fact, Kevin is sniffing out who really wants a Dragon as a true partner and who is there just for the cash.
I go over this issue in Money Magnet as it is critical.
The reason to be clear about your decision - get rich or keep control - is because it does determine what type of money you seek. If, like Paul, you want to keep the reins of the family business, then debt is fine. If you want to take your business up several notches and increase the cash flow, partner with a Dragon, but get ready to move over to let them share the reins.
Many family businesses have discovered that taking on a finance partner and sharing decision making does not mean their Granny gets turfed out of the family farm, a concern I sense was niggling Paul's family.
The JM Smucker Company, for example, has fifth generation family members still running the business, but hold a less than 8% share of the company. Did I mention that Smucker's is now the sixth largest US food company worth more than even Kevin O'Leary? Their steep growth did not start until they took on outside finance partners.
You may have noticed another trend.
The Dragons do tend to want more than 30% ownership. Jim Treliving asked Paul for 50% and could have settled at 40%. Imagine one year into the future, as the apple business progresses. Jim wants a say in how his money gets spent and his plans do not jibe with Paul and his family, the majority shareholders. If Jim only has 30% ownership of Paul's apple business, he may find his ideas voted down by Paul's grandma and young daughter who also share the 70% ownership.
But that is what happens and the Dragons have been there, done that and not doing it again.
As an owner, do understand that the higher the ownership that you dare to share, the more heavy lifting the Dragons will do for your company. Frankly, I would rather have 30% of a $10M company than 100% of a $1M company.
Maybe Paul got spooked by W. Brett Wilson's growl, "I want to own this town...errr...this business," or the first words out of Arlene's mouth, "I want to marry you!" For an initial conversation, these can be extraordinarily unsettling statements but again, if you are showing your business to the Dragons, get ready for fast, immediate action.
Foreplay is optional.
So if you just want a cash loan and not the skillful partnership, skip the Dragons' Den and go straight to EDC. Do not pass GO.
At the end of the discussion with Paul, the irresistible Robert Herjavec seemed to get confused and think he was in another type of reality TV show, nothing to do with venture capital. He threw Paul a life line of a cheap loan against inventory and tipped over Jim Treliving's applecart (sorry... really tried to resist cheap "apple" word play.) Even Robert's joke buddy, Kevin, sniffled, "You have offended the rules of capitalism."
Robert gave Paul the gift of cash because he knows the hard, painful struggle of owning a business. It struck me that Robert's kindness just delayed the inevitable. Agriculture is one of Canada's many industries coming to terms with the global marketplace. Those family businesses who embrace the big changes required will be the ones who thrive. Problem is that rarely do the ideas for this seismic change come from within the company. Paul is better than most farmers, but who does he have to help him make big decisions?
Here he had a chance to partner with a food mogul. There are many sharks out there claiming to take owners to new markets but Big Jim's pedigree shows that he is in a class of his own. Jim's not a shark, he's a whale!
Compare Paul asking Jim for marketing advice from his grandmother? Who do you think will help his company prosper more? What would Paul pay for an advisor with Jim's experience? A lot more cash than the cost of 50% of his current business. I can only shake my head for Paul. What a loss.
For the other big deal of the show, Essentia, we got to observe Brett up close, in his natural habitat, investing the way he does best, like a blackjack poker game. As usual, he holds back and waits for Kevin to run his course, Robert to stop, Jim and Arlene to give their points of view and then - wham - he slaps down his hand with a full house. Instead of alerting the other Dragons to his interest (unlike the loquacious Kevin O'Leary), he plays it cool. Since the other Dragons were already out, they did not have the opportunity to bid up his offer.
Did you see that one coming?
Mattress manufacturing can be a solid business. With its competitive advantage of patented safe and hypoallergenic materials, Essentia could find a proprietary spot in the industry. Brett recognized a winner and is sure to help Jack, founder of Essentia, well on the road to becoming rich. That's riches worth sharing with a Dragon.
Jacoline Loewen raises capital for companies and is the author of Money Magnet: How to Attract Investors to your Business.
Immediately, he stood out and I remembered his face.
Later, Darryl sent me a PowerPoint by Sequoia Capital presenting their take on the market and impact to entrepreneurs. Great way to make Brand You stand out and when PollStream is out looking for capital, if they have Darryl Silva helping – they will get their cash.
Tough lunch time audience too.
ACG stands for Association for Corporate Growth and is really a networking event for the people who supply the money to companies wanting to grow. These are the private equity types, myself included.
During the speech by Stephen Lewis, Professor in Global Health, I was walking around the booths, collecting business cards and dispensing my marketing materials. Over the loud speaker, Stephen Lewis described in detail how in Africa it is normal for 8 year olds to be raped and far worst descriptions of the treatment of females.
The money men from New York visibly cringed.
Interesting message but wrong audience. At a time when the conference was half the usual number of people, surely we all needed an upbeat pro-capitalism message?
I have Colin.
Colin likes to play computer games and fret about his future.
Sounds like my younger son, except he does not worry about anything except to ask when can he get a Hoodie with pictures of his industrial Metal rock band all over it. (Horrors!)
I brought Colin home and my son loved him. At first, he wanted to punch Colin - what is it with teenage males and rough play? Anyway, today Colin is off to school with my son and will be spending time in the media lab. So I guess I may have lost Colin…
Check out Monsters at Monster Factory.
MaRS Discovery Centre is the first place to start for a new entrepreneur like John. They hold conferences and networking events with a cost of $25. Investors hang out at these events and if you collect business cards and do follow up coffee meetings, you will find out who has money for your medical product.
But looking at John, I could see he would not be taken seriously by anyone unless he got a serious makeover.
The good news is that it is quite a simple thing to achieve. The secret weapon is a navy blue blazer. Team that up with a white shirt and your credibility goes up 100%. Human beings are funny beasts and we do make judgements about people by how they look. I still have my favourite 20 year old, blue blazer which has travelled around the world with me and whenever I wear it, it lends a whole level of gravitas to me and pays off in many ways.
TBDC have business plan mentors.
These TBDC mentors will poke, prod and push you to get your business plan done.
Writing a business plan is hell. Doing the financial plan is worse. Most entrepreneurs love their product but the numbers and big thinking are like having to eat your vegetables. To have an outsider help you along the path to getting your plan “investor ready” is the winning way to raising capital. I have added TBDC to one of my favourite links on the side of this blog so you can find it anytime you visit.
Another key to moving your business out of your brain and basement into the real world that I discuss in my book Money Magnet, is to interact with other like minded business people and the people connected to TBDC are inspiring. They set up networking events which will prod you along. The journey of business can be lonely and getting around other people also struggling is a good motivational boost.
Try one of TBDC's networking events for yourself and get going with that business plan (and those pesky financials).
I found out later that I was supposed to roll down my window to listen to the union’s side of the story. No wonder they made me sit there for ages!
But as I hear of Polar Capital being closed and more on Bay Street, I just wonder about this model of government workers voting themselves higher pay raises during bad times. The Union at Ford is hanging in until that old cow is dry so I guess the same for Canada.
The students made it to Bob Angel’s marketing class and I was impressed with the level of interest. Cindy asked me if marketing using a photograph of an old, white man in our brochure (our Chairman, Chuck Loewen) was a good idea. She thought it would put off people as the world is now more diverse. Maybe one day we will get beyond identity as a decision making criteria but for now it seems that it is an issue for marketing.
Date Posted: Wed Oct 15, 2008 6:27PM
Toronto Business Development Centre is very excited to have Jacoline Loewen, author of Money Magnet - How to Attract Investors to Your Business, as featured speaker at our November Networking event.
Toronto Business Development Centre is very excited to have Jacoline Loewen, author of Money Magnet – How to Attract Investors to Your Business, as featured speaker at our November Networking event.
Jacoline is an experienced corporate consultant, lecturer, and writer of business strategy. She is currently a partner at Loewen & Partners where she advises owner managed companies seeking capitol - venture capitol and private equity.
Ms Loewen sits on the Advisory Board of the Women's Post and on the board of the University of Toronto, Rotman MBA IMC. She is a mentor for the Canadian Youth Business Foundation and a member of the Canadian Association of Family Enterprises, Women in Capitol Markets and The Ticker Club.
Join us Wednesday November 12th at our 1071 King Street West location as Jacoline talks about what is required to get the money you need for your venture. She will discuss strategies and how to pitch potential investors for capitol. In addition Jacoline will share business development strategies and success stories.
Don't forget to bring your business cards.
Admission is free, but requires registration. You can register online, or contact our Advisor on Call at 416-345-9437 to register by telephone.
5:00 - 5:30 PM: Registration with light refreshments
5:30 - 5:45 PM: Welcome and introductions
5:45 - 6:15 PM: Money Magnet - How to Attract Investors to Your Business - Jacoline Loewen
6:15 - 6:30 PM: Questions and Answers
6:30 - 7:00 PM: Networking continues
Click here to download flyer.
“Succulent,” is not a word you think you would hear from Kevin – where’s the money – O’Leary. Of course he was describing profits, not his favourite roast beef, but there was not one, “You’re crazy” or “What a stupid idea” to be heard during the presentation by Creative Hair Solutions.
It all began when Brenda, the flight attendant, arrived in the Den with her hair extension business. At first, Kevin did look like he was measuring Brenda for her coffin but then, what a turnaround, as soon as the magic words “1000% mark up” were spoken.
After that, Kevin was lying on the ground letting Brenda tickle his tummy, purring, “I like your numbers, I like your product, I want to buy your product, I want to wear your product.”
Brenda created this positively oozing love fest because she knew her clients and her competitors, she went to market well prepared, she had proof of concept with an impressive sales track record and she could quote her financial numbers and key ratios. It was clear she was competent in business and was sane enough for an entrepreneur.
One of the investors, Dragon Robert Herojovac, allowed Brenda to use him as an extreme makeover model, going from plain millionaire to heartthrob Braveheart warrior in minutes. Lay on a kilt and axe and we could see Robert heading for the battlefield. I must admit, I felt a thrill going up my leg. Then Robert flicked back his hair and asked Arlene in his usual charming way, “This is one of the few times I actually do care what you think. What’s your opinion?”
Arlene was so overcome, she said, “I can’t even look at you, Robert.” See the affect of men with long hair on women? Imagine all those male office workers who could change their lives: during the week-they are Dilberts in their cubes, but by weekend – they morph into manly Fabios.
Kevin licked his lips as he talked about what drives the cash flow of a business and he was mesmerized by the fact that sales for Creative Hair Solutions would be driven by female vanity. Revlon sells “Hope” which has translated into billions of dollars spent on lipstick by ever hopeful women. “It’s a recession proof business,” Kevin said, glowing at the thought.
Then Jim Treliving put it in a far more eloquent and may I say, poetic way, “It’s about big boobs and big hair.”
W. Brett Wilson agreed. He shared a quaint story that in Texas, where they like everything big, a woman with large tracts of land is appealing and big hair also helps.
All the Dragons could see Brenda did not need their money to grow her business which is a big vote of confidence for her long term success. And then Kevin did the most extraordinary thing. He offered to make a phone call to change Brenda’s life.
Here you see the benefit of getting out of your comfort zone and talking to people who are not from your usual group of colleagues. By taking out your business presentation to people who scare the heck out of you, there is fresh information to gain. As the book Money Magnet will show you, they may turn you down but at the same time, they may put you in contact with someone who would invest in your business.
Kevin said, “Usually I take a slice.”
A slice of what exactly, Kevin? That sounds alarmingly Lock, Stock and Smoking Barrels.
But it is true that rarely will you gain access to a Dragon’s Rolodex without first selling a piece of your business or paying an introduction fee. It must have been the effect of Brenda wearing her big hair or perhaps Robert looking so caveman or even Big Jim’s naughty talk, but Kevin seemed to have been rolling in catnip and was feeling particularly generous.
So Brenda, if you do get a deal as a result of Kevin’s phone call, remember to pay it back – perhaps give Kevin his own succulent hairpiece?
“Today, green awareness means winning and keeping clients is no longer just
about saving money. If you can demonstrate how you are can help be part of
reducing the carbon footprint, you will have a loyal and grateful client.”
Packaging seems to be an obvious place to start but in large companies, it is a major part of the supply chain. The package does not belong to one department and can be a complex process to change. Wal-Mart reduced packaging and achieved a $3.4B savings in the first year that they introduced the program.
Case Level Optimization
Currently, many companies are shipping a great deal of air. A few quick checks to see how to reduce carbon imprint are:
- Know Your Fill Rate: When asked in surveys, managers will say they are shopping with a 80% fill rate, often it is more around 60%. That is a great deal of money to ship 40% with a zero value.
- Check your Packaging: To mitigate damage, the thick corrugated box is used to save the product. You do not need a big, fat box to protect the product. Instead, you can rework your SKUs and there are experts who can help with this process.
- Reduce Pallets in Play: There are more pallets out in the system than required which allows for easy decisions rather than a smarter approach to reducing costs. If you bring down the pallets, you can force savings.
- Spacing on Each Pallet: There are underutilized spaces on the pallets. This is valuable real estate, with every centimetre worth money. By watching for underutilized pallet real estate, employees can look for ways to stop shipping empty air.
With these programs, you will develop a good strategy for shipping. You will ratchet up the density of shipping, reduce your damage and find savings for yourself and clients. As a result of focus on case level optimization, Ed Rucel says his clients have achieved up to 40% savings on transport, storage and handling. This adds up to a great deal of carbon reduction and a greener happier customer.
Edmund Rucels, Regional VP Supply Chain Optimizers. Edmund’s management experience during the startup and rapid growth of Northern Telecom and Sears Canada has made him the expert on delivering real time solutions for the logistics professionals wanting to drive down costs through better shipping practices.
Jacoline Loewen raises capital for growth companies with Loewen & Partners and she is the author of Money Magnet: How to Attract Investors to Your Business.