Podcast 10 Transcript: Lessons from the Dragons' Den

Written by Ian Portsmouth

Ian: : Welcome to the Business Coach Podcast, an advice-oriented series for Canadian entrepreneurs. I’m Ian Portsmouth, Editor of PROFIT Magazine and I’ll be your host as we tackle the hot issues and opportunities facing Canada’s small businesses. We’ve developed this podcast in cooperation with BMO Bank of Montreal. Over the course of the series I’ll be drawing on experts in a number of fields including some BMO experts in order to provide the credible information and prescription you need to run your small business better.

Whether or not you like or even have time to watch much television Dragon’s Den is one show that you don’t want to miss. Now in it’s second season on CBC TV it mixes business with game show with reality television into an entertaining series that might even teach you a few things about doing business, especially in the area of raising capital. Joining me to reveal some of those lessons and hopefully to share a few behind-the-scenes secrets of Dragon’s Den is Sean Wise. Sean has been a special advisor to the producers of Dragon’s Den for the past two seasons, he’s also Managing Partner of Wise Mentor Capital which provides consulting services to high-growth companies in their search for financing. Sean welcome to the Business Coach.

Sean: Thanks very much Ian, it’s a pleasure to be here.

Ian: : Now for those people in our audience who do not know what Dragon’s Den is, what is it?

Sean: Dragon’s Den is a business reality show that we brought over from Japan. It features five Canadian multimillionaires, listening to the pitches of entrepreneurs from coast to coast and deciding who to fund on the spot. Everyone who goes into the Den is seeking capital to grow their small business into a big business and everyone has an equal shot at coming away with capital. There is no one winner on Dragon’s Den. Every pitch can be a winner.

Ian: : And who does this capital come from? The Dragons themselves?

Sean: Yeah that’s an interesting fact. Some people actually think it’s CBC money that we’re giving out but we’re not. Of course CBC money is tax payer money and we don’t use it for those purposes. The money that the Dragons invest are their own capital. Every Dragon has to bring with them at least $250,000 and be willing to part with that over the course of the season, which in season one was six episodes and season two is ten episodes. But in fact most of them go well over that amount.

Ian: : Now you’ve been involved as an advisor and a producer of the show for both of the first two seasons. What goes into creating the show in terms of, of things like ah reviewing applications and auditioning people and ah how many contestants actually make the cut and are filmed?

Sean: Yeah I was actually surprised at how much work is done prior to entering the set. We go through all the applications which come in online, or which come in as a result of our twenty-city audition tour. So we’ll go across the country and audition contestants, trying to screen them for things the audience will understand, things the audience will relate to as well as good investment proposals. My job is sort of to rank them one two or three. One being something I would invest in myself, two being something that I could see being invested in and three being something that leaves me scratching my head. Then a producer from the TV side comes along and they rank them A B and C. A sort of being good television, easy to understand, a strong person who can explain what they’re doing, B being something which may lose a few people in the audience and C being something that leaves you scratching your head. We go through all the applications which this year was just over 3,000 if you can believe it, and we narrow it down to about 300 people. We invite those 300 people onto the, into the taping which this year took place over ten days, and from that we’ll edit it down to about, about 100 people will make the final cut.

Ian: : Now can you tell us how many people won investment on season two of Dragon’s Den?

Sean: Well I can’t. Well I could but I’d end up being fired. What I can tell you is that last year we did seven deals for just over $1.5 million and I can tell you we only had six episodes. This year we have ten episodes starting October 1st, and I can tell you that there are so many deals that a number of shows in season two have multiple deals in them. So I know the ads are already giving it away but we’ve invested more than $3 million over season two, but you’ll have to tune in to see which ones got the cash.

Ian: : Well we’ll certainly do that. Now what are some of the most interesting business concepts or products that made it into the Den because certainly from season one we know that there are all sorts of rather innovative and sometimes strange businesses being pitched?

Sean: I don’t think it asks that question. People always want to know if, if you’re the person screening them for deals how do the more strange ones get in? And, and something is lost on the audience that I’d really like to sort of focus on for a second if I might Ian, and that is the show illustrates not only what it takes to get capital, but it also illustrates some really common mistakes people make in getting capital. So yes it’s entertainment and yes you know Dragon’s Den has as much to do with venture capital investing as the Apprentice has to do with HR practices. It is still television but there is things you can take away from it. As for interesting pitches season two is really, really good because we had more than double the applicants we were able to choose really interesting pitches. We had a new Canadian wrestling league, we had punk clothing for babies, we had a number of high-tech plays that were just ingenious and that’s an area that I work on mostly so I was really pleased to see that come out. You know we had pitches from Victoria to St. John’s, we had people doing mobile platforms for classifieds, we had on-demand custom printing of books for kids. There’s just really good stuff in season two.

Ian: : Now what are some of the common key mistakes that contestants made this year when getting into the Den and pitching their products, and€¦ on the flip side, what are a couple of the key things that seemed to win over the investors?

Sean: Well Ian I think that’s a great question. You know just like in real life most pitches fall on deaf ears. People don’t realize that typically investors only fund one or two out of a hundred deals they see, so you have to go through a lot of crap to find the diamonds in the rough. And again like, just like in real life, those people who pitch the business instead of a product did really well. People have to realize that investors look to back entrepreneurs that are growing a business, not inventors that have created a product. That’s a big difference. Those people who were able to show their business had vitality, had growth potential, could give the sort of ten times returns that Angel Investors and Dragons Alike seek, did really well. Those people who sort of pushed products or businesses that were just an idea didn’t do so well. One of the other big mistakes that people make is they don’t realize the role they play in. So while the show only shows ten minutes per pitch, the pitch itself usually takes 45 minutes to an hour. In that hour our Dragons, our Angel Investors if you will, have to evaluate the business as well as the business person, and they want to go into business with people that they’re going to want to work with for five years. So the people who presented themselves the best, that had the most industry knowledge, that understood the business realities, they ended up walking away with cash, and, and those people that didn’t, well I guess you know how that turned out. Some get the gold and some feel the fire.

Ian: : Now last year ah the vast majority of pitches were rejected on the show by the Dragons and, and some were simply painful to watch if you were a seasoned business person. Did you notice any change in the quality of the contestants or their pitches in season two over season one?

Sean: Absolutely we also invested a lot more time and effort with our friends at Concrete Equity into providing material to our pitchers so they wouldn’t come unarmed. We actually send them you know lists of possible questions, we give them copies of articles, we give them copies of my new book, we try to get them up to speed, but you know the old saying is still true, you can lead a horse to water, you can even put the horse’s face in the water but sometimes you can’t get people to drink. So I don’t think it’ll come as a surprise that some of the people who got on the show had similar results to that which they found last year.

Ian: : Now you have a great blog about Dragon’s Den Sean, where can we find it?

Sean: You can find the blog at insidethedragonsden.com or by zipping over to cbc.ca/dragonsden and clicking on the tab for the blog. I usually share behind the scenes stuff, I share where are they now, I like to promote our pitchers, I like to make sure that everyone who comes on the show walks away with something. Last year that was a big result that we liked a lot. We found that people who went on the show regardless of whether they got a deal or not, had some business benefit. They either got an offer from another investor, or they saw more product sales or their website got a larger hit. So if we can do that with the blog or with the site at cbc.ca/dragonsden I think that’s absolutely wonderful.

Ian: : And I agree Sean. Thanks for joining me today.

Sean: Thank you Ian. I look forward to seeing you in the Den.

Ian: : Will do. Sean Wise is the Managing Partner of Toronto based Wise Mentor Capital, and is the author of a new book which he just mentioned and which I heartily recommend. It’s called “Wise Words, Lessons in Entrepreneurship and Venture Capital” and it’s available at Amazon.com. Season two of Dragon’s Den debuts October 1st on CBC television.

Thanks for listening to this episode of The Business Coach Podcast. I hope you discovered a few insights that will help you grow your business. You can download this podcast series at bmo.com, profitguide.com and from iTunes. Until next time I’m Ian Portsmouth, Editor of PROFIT Magazine wishing you continued success.

Originally appeared on PROFITguide.com