Nabeel El Khafif and Karim Sumar pitch InstaRyde to the Dragons on CBC's Dragons' Den

(from left) Nabeel El Khafif and Karim Sumar of InstaRyde. Photo: CBC

More than 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 11 (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. And we’ll be examining the pitches for smart strategies and useful tips that entrepreneurs can use to make their own businesses better. Episode 12 featured an ambitious duo pitching their Uber alternative, a failed attempt to save shoes, and a dog toy that put smiles on everyone’s faces.

InstaRyde

Entrepreneurs: Karim Sumar & Nabeel El Khafif | From: Toronto | Ask: $500,000 for 12.5%

Develops ride-sharing apps

Ridesharing is a new space, but it’s already dominated by a few well-established players. One, really: Uber, a brand so popular it has become the verb for hailing a cab or car via a smartphone. So when Sumar and El Khafif brought ridesharing app InstaRyde to the Dragons’ Den, they faced considerable skepticism about their ability to beat the Goliath of the space.

Manjit Minhas knows all about bringing down giants, though. The presence of huge companies in the alcohol sector didn’t stop the Calgary entrepreneur from building a booming brewing and distilling business. She saw enough promise in InstaRyde to make an offer, asking for a 25% equity stake and a 50% say at the table in exchange for $500,000. Sumar tried to negotiate her down to a fifth of the company, but ultimately the pitchers accepted the Dragon’s terms. (Minhas says she’s spoken to them once since filming, and her people have been unable to reach them since; as far as she’s concerned, the deal is still on the table).

Uber played a major role in popularizing ridesharing. The pitchers didn’t try to downplay their competitor’s success—it worked to their advantage, they argued. “A lot of the work has already been done for us,” said El Khafif. “You don’t have to educate people or tell them what it’s about.” At filming, the app had about 6,000 users and 500 drivers, and was available in the Toronto area. InstaRyde had taken a proven ridesharing model and “tweaked” it, eliminating surge pricing and enabling tipping.

Some Dragons didn’t think that was enough to make customers switch. “I really believe that startups can change and bring down billion-dollar companies, but to do that they consistently need very large product differentiations,” said Michele Romanow. It didn’t help that during the demonstration, the pitchers couldn’t hail a ride using their app because there were no drivers available.

But price, rather than features, proved to be InstaRyde’s biggest selling point. The company takes a 12.5% cut of fares, half of Uber’s reported fee. “I took on the biggest beer companies and vodka companies, and I did it by reducing the price,” Minhas noted in the Den.

El Khafif described standing outside Uber’s Toronto office to hand out flyers, and signing up 30 to 50 drivers a day. In an exclusive interview before the episode aired, Minhas said she wasn’t surprised. “Why wouldn’t they switch?” she asks. “It doesn’t matter to them if they’re driving for Uber or XYZ or InstaRyde—to them, it’s money.”

On the show, app expert Romanow wasn’t convinced, pointing to the then-$9 billion war chest Uber had to spend and alluding to the problem InstaRyde would face with the network effect, in which providers and customers flock to the platform where they’re most likely to find each other. She urged Minhas not to do the deal. But post-filming, the beer baroness says she considered InstaRyde a service business, not a tech play, unlike her fellow Dragon. “I think Michele’s skepticism comes from seeing it from that side of view,” explains Minhas, who has largely steered clear of tech companies in the Den. “In her world, you do have to create and reinvent the wheel entirely.” In the spirits business, Minhas says, that’s not the case.

Still, it’s important to differentiate yourself from the Goliath you’re taking on in some way. Minhas cites her success with Boxer Beer. “Why would somebody take the chance to spend their hard-earned $10 to buy a six-pack of my beer?” she asks. “There has to be a differentiation—whether it be more alcohol, real ingredients, better marketing campaign, [or the fact that it is] your local company.”

Backing InstaRyde is a risk, Minhas acknowledges. But she thinks the company does have a shot at success. “They have a unique angle, and just because there’s already one major [competitor] out there doesn’t mean that there isn’t room for improvement.”

Dawg Grillz

Entrepreneurs: Scott Luscombe & Marina Vander-Heyden | From: Toronto
Ask: $70,000 for 50%

Manufactures, distributes and retails canine toys and accessories

Too creative for your own good: Dawg Ballz will put a smile on a pet’s face—literally. The toys bear toothy graphics, and were inspired by creator Scott Luscombe’s own dogs. Pet owners certainly seemed to like them—Dawg Ballz had fetched $71,000 in sales, primarily online, in the seven months before appearing in the Den. It wasn’t the first creative idea Luscombe, a product designer by trade, had developed. But his success worked against him with the Dragons, who worried that his consulting work for other brands would distract from the pet toy business. “You’re giving away an awful lot of the company, which tells me that this business is a one-product deal,” observed Michael Wekerle. “The other ones are for clients, so I make sure that they’re all different,” Luscombe assured him. Dog lover Wekerle—he has 14—was convinced enough to offer the pitcher $100,000 for 50.1% of the company. “I think you’re a great product designer,” said Michele Romanow, offering $70,000 for a 10% royalty, a 40% equity stake and first rights to invest in Luscombe’s next product. Jim Treliving and Joe Mimran then both matched the original ask, and the pitcher chose to shake hands with Treliving.

Shoetsy

Entrepreneur: Marian Shaghory | From: Montreal | Ask: $40,000 for 15%

Manufactures and retails protective coverings for shoes

Is your product see-through?: It takes just one scuff to ruin an $800 pair of heels. Tired of discarding hers, Marian Shaghory developed a clear protector that users can stick onto their shoes. But her pitch to the Dragons fell apart quickly. “This feels like an arts and craft project,” said Manjit Minhas, struggling to get the transparent plastic film onto the shoe in her hands. The full Shoetsy kit sells for $14.99, and the company had posted just $10,000 in sales over the six months before Shaghory entered the Den. “Who’s your target customer here?” asked Minhas, suggesting no one spending hundreds of dollars on shoes would use the product. And fashion mogul Joe Mimran was unsparing in his feedback. “You’re taking this sticky, cellophane looking thing, and you’re putting it on the shoe, and you are ruining the look,” he told the pitcher, comparing the product to scotch tape. Shaghory received no offers.

Blender Boyz

Entrepreneur: Jim Jackson | From: Markham, Ont. | Ask: $300,000 for 10%

Manufactures and distributes single-serve beverage mixes

What the mass market wants: Jim Jackson entered the Den seeking a complicated deal: $300,000 in the form of a loan to be repaid at 6% interest, as well as a $1-per-case royalty and a 10% equity stake. While he led with his fruit smoothies, the Den’s resident alcohol titan saw more promise in the entrepreneur’s pina colada mix. “Ready-to-drinks in the liquor market are big these days,” observed Manjit Minhas. “Everybody wants a cocktail but doesn’t know how to make it at home, and/or they don’t have the ingredients.” But Michele Romanow was put off by the components of the mix, including corn starch and carrageenan, “things that consumers really don’t want in their products today.” And the sugar in the fruit smoothie sachets caught Joe Mimran’s attention. “I think sugar is going to be out of our diets,” he predicted. Minhas disagreed. “People talk about it for sure, but [they’re] still consuming it like there’s no tomorrow.” Wekerle made the first offer, asking for a 30% equity stake and a 50¢ royalty. Minhas suggested the single-serve cocktail sachets would work well as on-packs to her company’s vodka and gin. She offered the capital for a quarter of the company and the half-dollar levy. Jackson tried to get the two to partner up, but when they declined he took Minhas’s deal.

Premier Tire

Entrepreneur: Carmen Moushikh | From: Woodbrige, Ont. | Ask: $150,000 for 10%

Distributes and retails car rims and tires

The limits of the gift of the gab: To hear him tell it, Carmen Moushikh rose from 12-year-old tire changer to Canada’s foremost purveyor of wheel fittings. “When you talk about rims and tires in Toronto, in Canada, I’m the guy,” he told the Dragons. Moushikh’s company is a cross-country rim and tire distributor, and operates a retail location in Toronto—the first, he hoped, of a national chain. Premier also provides driveway service for customers who don’t want to come into the shop. “If you’re going to be mobile purveyor, then do you really need to have more than one location?” asked Joe Mimran. More shops, more money, Moushikh assured him. At taping, he was projecting $3.12 million in revenue for 2016. “I love your energy, I love that you built it all from scratch, I love that you figured out really basic competitive advantages,” Michele Romanow told him. But she, along with Michael Wekerle and Mimran, chose not to invest because they didn’t have any strategic insight to offer. One Dragon did: Jim Treliving, who co-owns the Mr. Lube chain of auto shops. “I think you’re a great salesman,” Treliving told Moushikh. But he too declined to make an offer. “I was in the rim business once, I don’t want to be back in it.” Moushikh left without a deal.

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