Lessons from the Dragons: Scalability and Stickiness Sell

Two fresh new takes on tough lines of business in Dragons' Den Season 10 Episode 4

Written by Murad Hemmadi
Fabian Raso and Mark Scattalon of Hangry. 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 talking to one of the Dragons to get a behind-the-scenes glimpse of their decision-making process and hear what they hope viewers learned. Episode 4 included smart new takes on two difficult lines of business, and an entrepreneur who talked her way out of offers.


Entrepreneurs: Fabian Raso & Mark Scattolon | From: Hamilton, Ont. | Ask: $120,000 for 15%

App that allows users to skip the line at food providers

Hamilton-originating Hangry is based on the idea that time equals money, or at least can be converted into it. In exchange for allowing users to skip long minutes in line, the app levies a 10% convenience fee on their order.

“When we looked at the market, every other player in the space was charging the restaurant a fee per transaction or a monthly fee,” co-founder Mark Scattalon said on the show. But restaurant margins are notoriously slim, so Hangry adopted a different revenue model. It went over very well in the Den—Scattalon and partner Fabian Raso picked up a deal worth $120,000 for a 20% equity stake from Romanow, Michael Wekerle and Joe Mimran.

Services like Hangry have in-built scaling potential says Romanow, in an exclusive interview before the episode aired. “So many of what I would call widget or better mousetrap businesses rely on creating, getting distribution for, producing and manufacturing one item,” she says. “[That creates] a giant inventory problem, and you don’t know if your business is going to be in or out of trend.” Software doesn’t require physical assets to scale, making it less risky and costly to grow.

Foodservice is a tough business in which to turn a profit. Romanow should know—the Head of Marketing at Snap by Groupon and Co-Founder of Buytopia once had a competitor to delivery giant JustEat. “The take-out business is very difficult because it’s hard to get a lot of frequency,” she says. But in the Den, Hangry’s founders cited some impressive numbers. “Over 50% [of] registered users have converted into a sale,” explained Raso. “Even better, 28% of the converted sales became monthly active users.” Hangry also collects data on orders, charging participating restaurants a fee for analytics and the ability to push offers to users. Still, Romanow said on the show that she’d like to see the cost of order go down.

The slick Den demonstration featured a scenario restaurant (and real Wahlburgers), and Hangry’s break-even point and ambitions were all discussed in those terms. But the startup’s real growth opportunity is universities, according to Romanow. At taping time, it had just signed a deal with a campus food service operator, and she revealed before the episode aired that Hangry is currently running a pilot project at the University of Toronto. “You have a dedicated group of students that live in the same place and eat the same food every day, but all of them essentially through one provider,” she notes.

The UofT pilot is being run with food service provider Aramark, which Romanow says operates on a third of North American campuses. “So you have one partner that you can continue to grow with,” she says. And once a contract is in place and the company’s order-taking hardware has been installed, an established industry player like JustEat can’t simply come in and replace Hangry. “It’s very, very sticky because you’ve integrated hardware, technology, and users,” says Romanow. “At that point, JustEat could roll out the same product to independent restaurants [but] it couldn’t roll it out within the university campus environment.”

If anything, Hangry could become an acquisition target for the likes of JustEat, and Romanow is open to that possibility. “That’s an exit strategy.”

Peau de Loup

Entrepreneur: Adelle Renaud | From: Vancouver | Ask: $50,000 for 10%

Button-down shirts for women with the aesthetic of menswear

Personality pays off: Peau de Loup’s line of business was a familiar one for at least one Dragon. “I started my second business off of a white shirt,” recalled Joe Mimran, referring to Club Monaco. The look, packaging and quality of Renaud’s product impressed the Dragons. “This is not a new idea,” noted Mimran. “I think what’s new about it is you’ve injected so much of your personality into it.” The company stitched up a deal, getting their ask from Manjit Minhas in exchange for a five-year, 10% royalty.

Thin Ice

Entrepreneur: Adam Paulin | From: Toronto | Ask: $50,000 for a convertible note

Wearable weight loss technology

Equity over debt: Paulin’s offer to put up his condominium as collateral on the loan he was seeking didn’t go over well. “I don’t want to take you out of your house,” said Michael Wekerle. “Get equity man, don’t get debt. Debt is the worst. Debt kills people.” People’s hunger for weight-loss products notwithstanding, none of the Dragons offered a deal.

Country Chic Paint

Entrepreneurs: Rosanne & Jan Korteland | From: Duncan, BC | Ask: $100,000 for 10%

Eco-friendly furniture paint

Big isn’t always better: Country Chic sells through boutique stores, and the Kortelands were keen to keep it that way. “The bigger retailers, we feel like they cannot give the attention to the product that it might need,” said Rosanne Korteland. “A lot of our retailers offer workshops.” Manjit Minhas suggested arts and craft chain Michaels might be a good fit, but Jim Treliving disagreed. “I think you’re in a very niche market and you’re smart to do what you’re doing.” After a little negotiation, he and Joe Mimran made a deal with the couple of $100,000 for a 20% stake.

Island SodaWorks

Entrepreneur: Mandolyn Jonasson | From: Vancouver Island, BC | Ask: $150,000 for 40%

Naturally fermented soda pop

Be coachable: Jonasson’s exuberance and confidence in her product backfired. “You’re a great businesswoman, but you need to listen a bit,” Manjit Minhas told her. Jonasson’s aversion to moving production off Vancouver Island also proved to be a sticking point. Ultimately, the Dragons determined she wasn’t coachable, and she left with no offers.


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Originally appeared on PROFITguide.com