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 15, the family special, featured some worthy wearables, a couple of tasty opportunities, and a mobile canine makeover operation.
Not so long ago, the triumph of wearables seemed inevitable. Glasses, watches, jewelry—even shoes—would soon be replaced by technology-enabled “smart” versions, the futurists promised us.
It turns out they were wrong. The trend began to falter some time around the introduction of Google Glass, a device that brought with it the term “glasshole.” Plenty of companies hawking tech-filled trinkets and connected accessories have since failed. “Wearables had gotten, in my mind, just way, way, way too big,” says Michele Romanow. “[The trend] kind of needed a compression.”
So when the father-daughter Goodman team arrived in the Den to pitch their health-measuring device, skepticism on the part of the Dragons would have been understandable. But the investors saw enough to spark several bids. Manjit Minhas kicked off by matching the Goodmans’ ask, and Jim Treliving did likewise. Romanow went next, asking 25% for the $500,000. Michael Wekerle upped the stakes, offering $1 million for 30% and a 5% royalty until the capital was paid back. “We have to move faster,” he said. The Goodmans chose to shake hands with tech expert Romanow.
Fitness is the one wearables subcategory that has attracted significant consumer interest, with step- and sleep-tracking bangle Fitbit the most prominent player. The iHeart measures heart rate and blood oxygen levels to determine aortic stiffness, a metric which physician Dr. Jess Goodman claims is a “proven indicator” of health. The accompanying app then displays the wearer’s physiological age and pulse, along with other data. “It made so much sense: ‘What does your heart say about your body?’ That concept was really cool” said Romanow, in an exclusive interview before the episode aired. “I thought his science was sound, and I did a lot more diligence on that after we finished the show.”
By the time the pitchers entered the Den, iHeart had shipped its first 400 devices to crowdfunding backers—a crucial step at which many companies falter—and amassed $180,000 in sales. “Even if this isn’t the next big Fitbit, this is a product that has positive unit economics [and] very reasonable costs of manufacturing,” says Clearbanc co-founder Romanow. She belives that with the right marketing spend, the iHeart has the potential to “blow up.”
Hardware is not a category Romanow, who calls herself “a pretty strong software person,” often dabbles in. So it helped that the Goodmans had found a way to monetize their device beyond the initial purchase. “We’ve recently developed a professional [app], and this is for personal trainers, nutritionists, naturopaths, physicians, [and] corporate wellness,” Sarah Goodman explained. The software costs $20 for the initial download, and $9.99 thereafter.
Businesses that balance both one-time and recurring revenue in this way are the best positioned to survive, says Romanow. “You’re protected from the huge swings you get selling hardware, where a million people buy something at Christmas and then no people buy something in February.”
Wearables may not be as hyped as they once were, but Romanow remains keen on iHeart’s prospects. “I wasn’t putting $20 million into the deal needing an IPO exit,” she notes. “This could be an enormous company, but I also think there’s some really early things that they could be doing in terms of their marketing that will really help them.”
Make it easy: Kelsey Johnston aims to take the hassle out of pet grooming, by bringing the salon to you. But though All 4 Paws had a six-month appointment backlog when its owners entered the Den, the company wasn’t booking even half its potential slots, which start at $50 an hour. Once the van was running to capacity, revenue would jump promised Dustin Johnston. But at least one Dragon wasn’t convinced. “No business runs at 100% capacity,” said Michele Romanow. “The greatest restaurant in the world is not full on a Monday.” The Johnston siblings planned to franchise the model, but the Dragons suggested they’d have a hard time signing up partners with just a 20% margin and an unsuccessful model operation to show. “The first question comes out of their mouth, ‘How much can I make?’” said Jim Treliving, the Den’s franchise king. “On the basis of what you’re making right now, you’re not going to make money at the end of the day.” But Michael Wekerle, who owns 14 dogs, saw an opportunity. “There is a huge need for convenience,” he said, offering the $150,000 for a 50% stake. While the Johnstons were deliberating, Joe Mimran decided to join the deal, which the siblings took.
Find a model that works for you: Couple Nicolette and Pierre Richer aim to stand out in the flourising better-for-you food space by designing food they claim is “designed to heal the body.” Between their original Whistler, B.C. restaurant and two smaller franchises, The Green Moustache had put up $920,000 in revenue the previous year. But the Dragons disagreed about how The Green Moustache should set up their supply chain as the network of locations grew. The Richers planned to review invoices and direct partners to appropriate farms to ensure they didn’t cut corners. “I would not let my franchisees buy,” said Boston Pizza boss Jim Treliving. But other investors felt the company’s fresh USP demanded a different model. “This needs to be farm-to-table,” said Manjit Minhas. She offered the $350,000 for 25% of the company, and the Richers took the deal.
Staples have staying power: Long-haul truckers Anna and Chris Hutchson were churning out a Canadian staple by the gallon from their Nova Scotia farm. “Our all-natural, organic, pure maple infusions prove that maple syrup is not just for pancakes,” said Leanne Dobtora, Chris’s sister and the business-savvy member of the team. Demand wasn’t going to be a problem, Chris predicted. “The one thing with maple syrup is there doesn’t seem to be enough of it,” he said. Pure had $400,000 in sales the previous year, but the need to build up inventory before the holiday season meant the company had ended its fiscal year at a loss. “I think the name is terrific. I like the product. I like your story. I don’t like the fact that you’re not making money,” said Joe Mimran. But he made a bid anyway, offering the $225,000 for an 8% royalty until the capital was paid back, and 20% of the business. Jim Treliving wanted a 30% equity stake and a 50% say at the table in exchange for the capital. After Hutchison failed to bring down his ask, the trio opted for Treliving’s deal.
Move fast and make things: Father-and-son team Michael and Brodie Stanfield were looking to make their gaming sessions more exciting, so they built a speaker- and sensor-filled bodysuit. They’d spent $550,000 to build their prototype, using savings, investor capital and government funding. “That’s a lot of money. It’s not like it’s new technology,” said Michael Wekerle, pointing to motion capture as a more advanced form of interactivity. Though the company had the technical setup all worked out, the duo had only a couple of units, called As Real As it Gets, limiting their ability to show off and sell the device. “You have to get this into the hands of [the] 10 big decision-makers … [who] are making the bets on the developers [who] are going to build for pieces of hardware in the gaming space,” Michele Romanow advised them. But Manjit Minhas, whose Spotlight Production studio is working on virtual reality with Samsung, saw some synergy. “[They’re] always looking for the next thing in this hardware space,” she said, offering the $500,000 for a 25% stake. The Stanfields took the deal.