Innovation

Lessons from the Dragons: Know Your Customer

Some fiery pitchers stoke the flames in Dragons' Den Season 10 Episode 12

Written by Murad Hemmadi
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Cliff Floyd and Adam Pauzé of Ball Cap Liner. Photo: CBC

Almost a decade in, Dragons’ Den continues to inspire and amuse Canadian TV audiences. But the CBC’s hit show isn’t just meant to be entertaining. It’s a televised school for entrepreneurs. For each episode of Season 10 (which airs Wednesdays at 8 pm ET), we’ll be examining the pitches for smart strategies and useful tips that entrepreneurs can use to make their own businesses better. Episode 12 featured a couple of game-changing sportsmen, and some fiery Dragon feedback.

Snowboard Addiction

Entrepreneur: Nev Lapwood | From: Whistler, B.C. | Ask: $100,000 for 10%

Snowboard training videos and products

Passion alone won’t build a business: Geography and weather prevent many snowboarders from practicing this addictive activity. “A lot of snowboarders only get the chance to snowboard two weeks a year, because they don’t always live close to a mountain,” Lapwood noted in the Den. He should know—the New Zealander spent six years shuttling between Canada and his homeland in search of snow to ride. But while his passion shone through, there was some concern about Lapwood’s ability to establish a repeat customer base and market physical products. “It sounds like you’re a one-man band and you’re doing it all your self,” Joe Mimran told him. “How do you take the next step?” Nevertheless, Mimran made an offer, asking for a 10% royalty until the initial capital was paid back in addition to the terms Lapwood came in for. He wasn’t the only one—Michael Wekerle and Jim Treliving partnered to propose $100,000 for a 20% equity stake, while Michele Romanow offered the same money for 15% and a 5% royalty. “I offer you all the online experience of how to grow this business,” she told Lapwood. “The biggest thing is I can help you monetize your community today.” Lapwood asked if she would drop the royalty, and she agreed.

SmartyPantz

Entrepreneurs: Dan Civiero & Chris Ricard | From: Vancouver | Ask: $500,000 for 10%

Escape room games

The numbers have to add up: Enter the Den seeking a seven-figure valuation, and the Dragons are going to expect you to back it up with some seriously impressive results. So they weren’t at all amused when it took several minutes and questions to extract SmartyPants’ financials from its founders. And when they came, the numbers proved a let down: $58,000 in monthly revenue versus $40,000 in costs at the company’s existing Vancouver location. While Civiero insisted scale would improve matters, Manjit Minhas had heard enough. “This is not the Dream Den, this is the Dragons’ Den,” she said. “You come in with real numbers, real plans, and a real revenue model.” And it didn’t help that SmartyPants had only been in operation for a few weeks. “You guys should have done a lot more homework before coming into the Den,” Joe Mimran told Civiero and Ricard. “You may be onto something [but] two months doesn’t make it a success.” The entrepreneurs received no offers.

Ball Cap Liner

Entrepreneurs: Adam Pauzé & Cliff Floyd | From: Aurora, ON | Ask: $150,000

Protective liner for ball caps

A proven track record pays off: Floyd knows baseball, and he has a 16-year career in the majors and a World Series ring to prove it. So he sounded plenty credible when he told the Dragons that his product solved a real sporting problem. “I think that it’s great engineering of the product—you’ve thought it through from start to finish,” Manjit Minhas told him. Equally impressive was the track record of father-in-law son-in-law duo Pauzé and Floyd, whose DryWall Axe won an investment from Arlene Dickinson in Season 9. “You guys proved your business, you proved that [last] season,” Michael Wekerle told them. But wary of the valuation, he offered to meet their capital ask for a royalty instead of equity. Joe Mimran and Michele Romanow joined him, giving Pauzé and Floyd their $150,000 for a 15-year, 10% royalty.

Heat of the Moment Express

Entrepreneurs: Roberto Piazza & Nella Figliano | From: Maple, ON | Ask: $40,000 for 33%

Adult toy delivery service

Everything’s moving to the Internet: Online shopping has been shuttering bricks-and-mortar stores in plenty of retail sectors, and adult toys is no different. But Heat of the Moment’s selling point isn’t just convenience—it’s discretion. “They don’t have to go in-store, there’s no embarrassment,” noted Michele Romanow. Despite some heavy teasing from Joe Mimran, she commended Piazza and Figliano for their efforts.”Look, this is a sensitive topic, but it’s also just a business, and there is a business here for this,” Romanow said. “It’s a high-margin business [and] you guys have clearly tapped into a niche.” But none of the Dragons wanted to get into this particular space, and no offer was forthcoming.

Haven

Entrepreneurs: Shawn Pringle, Matthew Perry & Michael McManus | From: Ottawa
Ask: $100,000 for royalty of until original capital repaid, then $1 in perpetuity

Fire-safety suppression device

A product worth backing: Watching her brewhouse go up in flames made Manjit Minhas a dedicated proponent of fire safety. “I’m always looking for something to not only save people’s lives, but to save businesses and to save livelihoods,” she said. And Haven’s fire-suppression device, which slides into the ceiling and covers a 16’x16′ room, certainly fits that category. “You’re a firefighter that saw a problem and really came up with a very unique solution, so I applaud you for that,” Michele Romanow told Perry. When the time came to strike a deal, it was no surprise to hear Minhas offer the pitchers what they had asked for. Jim Treliving did the same, sparking some one-upmanship between the Dragons. “I’d like to look at it for our restaurants, and there’s 400 of them,” Treliving said. “I can help you get into all the home builders in the country, and down south too,” Minhas countered. After a little more in this vein, the Haven trio came back with a counter-offer: the same capital, but royalties of a dollar to each Dragon after it was paid off if they would partner up on the deal. Treliving and Minhas were happy to accept.

MEET THE DRAGONS THEMSELVES:

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Originally appeared on PROFITguide.com