A: First there’s the person’s vibe. At this stage of my life, I need to enjoy the people I’ll be working with, because we’ll be spending a lot of time together. We need to share a common set of core values. You can get a feel for that relatively quickly.
When you’re doing investments on Dragons’ Den, you don’t have much time to make the first level of decision. So if the idea addresses a need in the market, and the person’s vibe and the core values line up, it’s worth putting in some time to see if you can come to terms.
Q: Are you prepped on the pitches before the show?
A: No. They’re very strict. They don’t even let us peer into the room if they need to set up the pitch with a prop.
Q: How long should a verbal pitch be?
A: They call it an elevator pitch for a reason. If you can’t explain the idea in five minutes, you’ve got to refine it. If it’s an interesting pitch and hits some of those initial criteria, you don’t need more than 15 minutes.
Q: What kind of due diligence do you do?
A: We go very deep. It’s ideal if the investment going in is to do more of what’s already been proven and the money is just being used to expand. That’s really where all the diligence is headed. If you want to do something different with the money or trying to prove a concept, that’s where risk comes in. So it’s all about trying to mitigate that risk as best you can.
Q: Have many of the deals you’ve made on Dragons’ Den worked out?
A: I’ve held up my hand for 18 deals and am still working on some of them. I’d say I’m going to close on seven or eight.
Q: Why do some deals fail?
A: The most common one for me is the company changing their story once we got into diligence. It could be the valuation has changed in the three weeks since the show was taped. That’s happened to me because some are digital businesses and they’ve just grown that much in the previous month. The entrepreneur’s need may have changed and they need more money than they asked for originally. Other people, I’ve come to believe, don’t want a deal when they come on the show. It’s become a very powerful marketing platform.
Some don’t survive the diligence process because when you get under the covers of some of these businesses, they don’t look as good as they sounded in the seven minutes. If we close seven or eight deals out of 18, that’s a lot higher percentage than real life. In the capital company, we’ll look at 50 to do one.
Q: What turns you off a pitch?
A: Once you take nervousness into account, it comes back to a feel. Sometimes you just smell something isn’t consistent or quite right with the idea or person. It starts with a feeling of how much the entrepreneur has their act together and the kind of person they are. Do they have a good grasp of their numbers? Do they have a realistic idea of what their business is worth? I don’t worry too much about that because Kevin [O’Leary]takes care of it.
Q: What’s your top tip to entrepreneurs making a pitch?
A: Rehearse. Make sure that you can get a stranger to understand it in five minutes or less.
Q: How do you like being a Dragon?
A: My inbox is a lot fuller than I need it to be right now because of it. Ask me in six months. But no regrets yet. I’m a serial entrepreneur. At least I’m spending my time dealing with other dreamers.
Special to The Globe and Mail