Ian Portsmouth: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the top issues and opportunities facing Canada’s small businesses. I’m your host, Ian Portsmouth, the Editor of Profit Magazine. And we’ve developed this podcast in cooperation with BMO Bank of Montreal.
Now in its sixth season, Dragon’ Den mixes business with game show, with reality television in a show that has generated huge TV ratings for CBC Television, millions of dollars in equity financing for its contestants and more than a few lessons in the area of raising capital. Right here to share some of those lessons is Sean Wise. Sean is a professor of entrepreneurship at [Ryerson] University and is the founder of Wise Metric Capital, a Toronto based Financial Consultancy. He is also a special advisor to Dragon’s Den and has been working behind the scenes of the show since it launched in the Fall of 2006. Sean joins me on the line from Toronto. Sean, welcome to the Business Coach Podcast.
Sean Wise: Thanks Ian. It’s a pleasure to be back.
Ian Portsmouth: So, for the three people in Canada who do not know what the show is, what is Dragon’s Den?
Sean Wise: Dragon’s Den is a business reality show that came in Canada six seasons ago, it has risen in popularity amongst people. Basically the show is about 5 multi-millionaires listening to the business ideas of entrepreneurs from coast to coast to coast. Some of those entrepreneurs get the funding they need, some of them feel the fire, that’s basically Dragon’s Den.
Ian Portsmouth: Now, those of us who have seen the show see the pictures as very compact and dramatic episodes, the make for great television, and that of course is all thanks to the magic of editing. But when you are standing there in the studio, what do you see, what does the unadulterated investment pitch on Dragon’s Den really look like?
Sean Wise: There are a number of mix about Dragon’s Den and one is definitely what you see on TV is real. So, it is real, these things all happen. But a normal pitch can last anywhere from 45 minutes to an hour, an hour and a half, pitches usually start at CBC really early, like at 5:00AM and they end around 8:00 or 9:00AM and they will take 20 days in the Spring and consistently, you will see 13-14 pitches a day and each one will take 45 minutes to an hour. Unfortunately, if the Dragon’s Den is not roots the saga so you have to show the compact version.
Ian Portsmouth: In the weeks and months leading up to the taping of Dragon’s Den, there are auditions held in various cities across Canada and hundreds if not thousands of people show up to those. How many of those people who actually audition make it to taping and secondly, why are they chosen in favor of other people?
Sean Wise: It really doesn’t work like that. There is no ratio that we try to get. The producers do such a great job, I mean, we start off doing like 8 cities, in an hour we are going to do probably 30 or 40. Now we have relationships with different First Nations, and we are really tapping into entrepreneurship at all part of Canada. So really the number of people who make it to taping is directly related to the people that show up, but the more that show up the better. This show is all about deals and what it takes to get them done. And so the more deals, the better it is. You know, we would like to get a deal or two per show, but really, the more deals the better. So, we want everyone to come out, you can get all that information at cbc.ca/dragonsdens. There is a whole section including kits that will tell you how to get your pitch going. You can also look on YouTube under elevator pitch and you can see how we recommend it’s done. But we go across the country and the more Canadians we see, the better the deals. I think that last year, we probably saw more than 9,000 people try out, in the end, we ended up with 20 or 22 shows maybe. Each show had 10 people, so you can do the math, but I think what’s more important about it is the more we see the better off it is. And we really encourage everyone to. I do very little on that part of the process these days, but the CBC is all over it now and really want people to come out to give their best shot.
Ian Portsmouth: So give us more insight information here. What percentage of the deals that we see on the show that are done on the show actually transpire in real life? And when deals do fall through after the show gets on air or is taped, why do these deals fall through?
Sean Wise: I know that a number of years ago, the BBC version on its most famous Dragon’s Den, there was a very large article in the paper commenting on how many deals were on air, how many deals closed and why they didn’t close. And they got myself and a fellow producer talking one day and we realized that we don’t track that. We only have the anecdotal of it. I would imagine maybe a third come to actual money changing hands, I would guess that the remaining 2 thirds don’t get done for one or two of the following reason and I think it’s anecdotal. Another offer came along that stump the Dragons, one of the best thing about being on the show is that it is so largely watched. There is a lot of investors in the real world, outside of the TV world, they make call and say I don’t like Kevin’s deal, I got a better one. So if the Dragons haven’t close between the time it is taped and the time it is aired, you know, CBC is about good entertainment and good information. They are not going get in the way of a deal. So that kind of spurs the Dragons on to continue to close, and secondly, there is often in the heat of the moment a picture of an entrepreneur, they overstate or inflate a number or have been perceived to have more than they have. So on due diligence, the deals fall apart. But I work in the field on a regular basis and there are the kinds of deals that fall apart.
Ian Portsmouth: So let’s get into some of the lessons from this show. What are the Dragons or any other sort of professional equity or angel investors looking for in an investment opportunity? What do you need to tell them about your business that gets them interested and gets them to hand over the cash?
Sean Wise: First and foremost, entrepreneurs need to understand how to give an elevator pitch, how to really get someone’s interest. They don’t realize that while they’re pitching the Dragons this one time, the Dragons have already seen a hundred other pitches before you. So you need to quickly and concisely state what problem you are solving, how is it that you solve it? So you are going to do it for Viagra, it would be, people want to have sex longer than what their bodies will allow, our blue, aspirin-size table allows them to do so in a proper effective FDA approved manner. So the Dragons really like that because in three seconds or less, it’s telling them you are solving a big problem which is something they want, big problems, big markets to sell to. And here is how the solution works. And here is your solution ten times better. You know, email became so widely adopted because it was ten times better than what we now call jokingly snail mail. If you have a product or a business that solves a big problem and does so in an exponential way, that’s definitely something the Dragons want to see.
Ian Portsmouth: And it’s important to know your numbers, correct?
Sean Wise: Yeah. Jim Treliving always says to us that being prepared isn’t just for boys scouts. It is amazing, we publish on the website and I have published elsewhere lists of questions, the 14 questions investors will always ask. And you can Google on them and see them. And we give them out in the green room and when people come to the audition, we can show it to them. And still they don’t know the answers to some things. What is your competitor’s advantage, how much does it cost you to produce the product? How many products would you have to sell to break even? Better yet, what are you going to do with my money? That is a question that always amazes me that people can’t answer. People come on to the Dragon’s and they say, “Hi, my name is Ian, I am from Oshawa and I am selling this new mousetrap. And I want $20,000”. Instead, they should be saying “Hi, my name is Ian, I am from Oshawa, I am looking for $20,000 investment which will allow me a patent on my brand new product. I already have people interested in licensing it but without the patent I am concerned. So my name is Ian, I am from Oshawa, I am looking for $20,000 for a patent on my new invention, the mousetrap 2.0.” The little differences are, you are telling them what you are going to do with the money and even if you can get a patent within three months, how long is it going to take you to get there. When people just come in and they’re asked “What are you going to do with the money?” and all they can say is “huh¦”, it doesn’t go well Ian.
Ian Portsmouth: So, tell me, what was the best pitch you’ve seen recently and I know you can’t divulge anything about any pitches that are on upcoming shows, but take us back to a pitch that you’ve recently that went really well and tell us what made is so good?
Sean Wise: I’ll go back to one of my favorite pitches, all the way back to season I. Gelfast was three brothers who had a hand sanitizing device, it wasn’t the chemical that was unique, it was the dispenser. And what basically they sold where to hospitals these branding dispensers that nurses and nursing staff can hang around their neck when they go from patient to patient. Because currently, the Ministry informs the nurses and health care professionals that in between beds, they need to go back and clean their hands. But that is at the nursing station. So can you imagine a ward of 10 or 20 or 30 or 40 patients having to go back and forth 40 times. It doesn’t seem like it is likely to happen. And that unfortunately can lead to infection. So while they are only selling a $2 piece of plastic, they are actually selling the Chief Financial Officer of the hospital lower liability, lower insurance, Chief Medical Officer, better health care numbers, and the nurse, she doesn’t have to walk back and forth. So that little thing really sung and I remember that pitch so well because they knew the problem they were solving, you can tangibly feel it, imagine you are going to a hospital, to try to get your gallstones removed and as a result, you catch some kind of infection. This is not what we want with the health care system and Gelfast allows to help to address that problem. That stuck with me ever since.
Ian Portsmouth: Sean speaking with you is always informative and entertaining. So thanks for joining the Business Coach Podcast to talk about Dragon’s Den.
Sean Wise: Thank you Ian, it’s a pleasure to be here.
Ian Portsmouth: Sean Wise is a special advisor to Dragon’s Den and a professor of entrepreneurship at Ryerson University.
That’s it for another episode of the Business Coach Podcast. Be sure to check out other episodes which you can download from BMO.com, profitguide.com and iTunes. For other tools to help you build your business, visit BMO.com/coach. And until next time, I am Ian Portsmouth, the Editor of Profit Magazine, wishing you continued success.