Investor Takes a Bite Out of a Business
Last week was the premier episode of Dragons’ Den, the CBC show where entrepreneurs pitch their business ideas to five investors. The point of the show, from the perspective of the entrepreneurs, is two-fold. First, there’s the exposure on national television and the chance to get a fair bit of marketing value with minimal risk. While I don’t under-rate this purpose, though, there is another which is the topic of this series of articles.
The second purpose of the show is to land an investment, and to that end, the pitches are meant to showcase the business as a lucrative investment. As a result, there are many lessons to be learned from the show for any business owner looking to attract a bevy of investors over to their company.
When the father and son walked onto the Den to talk about their business, they were introduced as running a waffle business. From past observation, food generally does not perform well on the show in terms of garnering an investment, for a variety of reasons. Part of this is the fact that one of the five investors is Jim Treliving, owner of the Boston Pizza chain, among other businesses. He knows about the difficulties in selling and marketing food, both at the wholesale and retail levels.
Renaat Marchand of Wannawafel, however, wasn’t pitching food. He was pitching a franchise, something else that Jim Treliving knows about. But in order to get Jim and the other dragons talking, he fed them the product.
The unit looks much like a hotdog stand, which can be hitched behind a trailer or car and set up pretty much anywhere. Capable of serving about 100 waffles an hour, the business is intended to operate as a franchise, with the owner of each unit operating in a certain area independantly of all other units.
Renaat served the dragons a sample waffle, and they were all hooked. Using a Belgian recipe that results in a recipe that had all five dragons smacking their lips, he was able to convince the dragons to listen to the idea for the business. As he runs a successful unit in Victoria, BC which has gotten favourable reviews, Renaat didn’t need to go any further than explain why he was talking to the dragons in the first place.
As it turns out, Renaat needed the money to enter the franchise business, to set up the legal side of things, and to get more branding that would be recognized everywhere. While the cost of the trailers is not insignificant ($20,000 each), that money was to come from any potential franchisee.
The dragons saw that Renaat knew what he was about, and once Jim Treliving expressed an interest, there was little the others could do to become involved. While Jim asked for 50% of the company for his money, he made it clear that he wasn’t planning on running the business.
Although, with 50%, he can exert significant influence on the company if necessary. But he’s coming in as an investor, not a business manager.