Say No to a Million Dollars – Again
Last March, a pair of entrepreneurs from Toronto surprised viewers by turning down a potential investment of a million dollars on the show Dragons’ Den. In this week’s episode showcasing entrepreneurs who have been given a second (and in one case, a third) chance on the show, the same pair turned down yet another offer of a million dollars.
Brian Crozier and Joseph Iuso have now presented their business, UseMyBank, twice on Dragons’ Den asking for the exact same investment, at the same valuation – $20 million. The first point of contention is therefore the fact that their previous valuation a year ago was clearly wrong – a company that does not change in value over the course of a year is quite unusual.
Once again, they turned down the offer, which was for a 50% equity stake in the company, or a $2 million valuation. Clearly, the difference in opinion as to the value of the company was quite high. What I found interesting, though, is the fact that they got any offer at all.
When I wrote my previous review of their pitch, I looked at their website and was not impressed. The current website, though, is a lot more sleek and polished, which was a significant problem with the prior version of the site. However, based on my research, at the time of their most recent presentation, sometime mid 2010, they were still using the old website, which did not bolster confidence. Various technical details about their current site also leads me to question their credibility with the volume of exposure they claim to be getting.
At a more fundamental level, I do not believe that the market wants their product. With the increasing number of stories of fraud, the use of a credit card, or any kind of intermediary service, can help reduce the risk of fraud. If someone uses my credit card, I can dispute the charge with the credit card company before I actually pay any money. With a debit service, I need to dispute the charges after the money has left my control. While some people may accept the risk, more people will look for ways to use existing intermediaries to handle their online transactions.
The fact that they turned down the offer is not surprising – it was a massive difference in valuation, even worse than last year. The fact that they are still in business, and claim to have high transaction rates, and yet continue to seek an investment of 20% of their income for the previous year, however, begs questions as to their true ability to run a proper business.