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Startups beware: Here be dragons
On the so-called Lenox Globe, one of the oldest known maps from the 15th century, there was a Latin inscription on one unexplored region that said “Here Be Dragons.” Maybe the CBC should have inscribed that over the stage door leading to their venture capital reality show The Dragons’ Den. A Toronto startup called JobLoft certainly got chewed up during the filming of the show — although there is some debate about who did the chewing, and whether they deserved it or not.
As Rick Spence outlines on his blog, the JobLoft guys got a $200,000 cheque from the four venture capital “dragons” — and a commitment that they would get lots of great advice and assistance — in return for 50 per cent of their company. On the final episode of the show last night, however, the company’s advisor (a professor from Ryerson) criticized the dragons and their offer, and the dragons tore up the cheque. Ryan Coleman of Clay Tablet has a video clip and some thoughts about the show.
A couple of things strike me about this situation. The first is that while all this makes for great TV, I’m not sure it’s a great way to raise money. In other words, it’s a sideshow. Just as going on Who Wants to Date a Millionaire isn’t a great way to find true love, Dragons’ Den probably isn’t a great way to find a good VC match. The JobLoft guys say on their blog that they’re glad of the experience and that it got them publicity, but in the long run I’m not sure that it was worth it.
A lot of people in the comments at JobLoft’s blog take them to task for blowing the deal, and argue that their advisor was wrong to confront the dragons, etc. Waiting until the last minute to raise concerns is certainly not a great approach — and I would agree with Kempton that the insults that their teacher lobbed at the dragons were also totally offside in my opinion — but at the same time the JobLoft guys note that they got very little face-time or input from the dragons, contrary to what was promised.
In the end, it’s also worth noting that $200,000 for half of your company seems to me like selling yourself pretty short (as Toronto entrepreneur Austin Hill noted in this excellent post on the show). Maybe it’s just as well they got out of it. Ben Yoskovitz has some thoughts too.
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12 comments for “Startups beware: Here be dragons”
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One of the things that really bothered me about the show is that every deal that was made was for control of the company and in most cases for what strikes me as an insanely small amount of money for that amount of control.
I agree, Rob. I would much rather see startups getting good advice and some help with the things they need to grow rather than simply selling what amounts to control at the first chance they get.
Hi Mathew,
Thanks for your linkback to my post and also your interest in Dragons’ Den. I disagree with some of your points in your post and I will drop you a comment later today.
Cheers,
Kempton
P.S. Nice to see Globe and Mail writers blogging and communicating with readers directly and by-passing the good-old “letter to the editor” approach. (smile)
Thanks, Kempton. Happy to have your comments, positive or negative. That’s what I’m here for :-)
[...] Startups beware: Here be dragons » Mathew Ingram: mathewingram.com/work Says: November 23rd, 2006 at 10:14 am [...]
Hi Mathew,
Dragons\’ Den may not be a *great way* to great way to raise money but it is definitely *one way* to raise some money. For people without rich relatives nor an extensive network of VCs ready to tap for some investment, Dragons\’ Den is a one way (and I will even say, \”a good way\”) to be exposed to some prospective investors. Hard-working entrepreneurs need help sometimes and if Dragons\’ Den is their way to that path of success, then take it.
And I would say raising money is part of the show and not just a \”sideshow\” which is loaded with some slight negative connotations that I am not comfortable with.
I have a comment about the JobLoft entrepreneurs\’ blog entry that you and your reader may find interesting, which is here.
Getting very little face-time or input from the dragons may be unfortunate but does it make the deal completely not workable? After all, if the JobLoft entrepreneurs have specific concerns, are there better ways to handle these issues than blowing-up right at the \”cheque exchange and welcome aboard\” meeting? I beg to differ from the events transpired on that faithful 2006 Halloween morning.
Finally and most importantly, I take issue with your last point completely. If the JobLoft entrepreneurs (and Dr. Norrie) engineered the harsh treatment of the Dragons to get out of the deal to get more money elsewhere, then they have just sold off their reputations. And if that was really the case, I like to use a quote from Warren Buffett to respond,
“I want employees to ask themselves whether they are willing to have any contemplated act appear on the front page of their local paper the next day, be read by their spouses, children, and friends … If they follow this test, they will not fear my other message to them: Lose money for my firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.“
Thanks for your interest in Dragons\’ Den.
Now, can you call up the big bosses at CBC and tell them they have to order a Season Two of Dragons\’ Den now? (smile)
Cheers,
Kempton
I’m going to dispute the idea that one needs “an extensive network of VCs ready to tap for some investment” any more. Every VC I know worth his or her salt is easily accessible, generally has a very visible face on the web, and has often posted in quite a lot of detail on a blog on how to approach the VC for investment. And every entrepreneur I’ve met in the last 2 years had that figured out.
Thanks for the comment, Kempton. And I would agree that Dragons Den is a way of getting some profile and possibly some money — but not a very efficient way, and one that can be very messy, which is where the sideshow aspect comes into it. I used that term because that’s what most “reality” shows are.
They rely on cheap titillation and prurient interests and manufactured tension, and they thrive on emotion, whether positive or negative. I would argue that’s not a great environment for raising money or promoting your business, unless you like to bite the heads off chickens or show off your tattoos.
few blogs online that he doesn’t subscribe to (in all seriousness I remember the number 500 being floated with respect to his sub list). While I’m at it - Thanks also to Matthew Ingram from the Globe and Mail for his links (Globe & Mail post / Personal Blog post) earlier this week on my post regarding Jobloft’s second appearance on Dragon’s Den (where their deal fell apart). A little link love is always good and I’m glad to know that people I enjoy reading are also keeping an eye on my stuff. If you aren’t
No matter what, I’d be happy to see a 2nd season. At minimum it was entertaining if not entirely realistic…
I think MOST reasonable entrepreneurs (with or without experience) will recognize that Dragons’ Den isn’t a really legitimate place to raise money / get successful … although perhaps there’s 1 diamond in the rough.
Thanks for the comment, Ben.
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