Dragons’ Den last night was mostly a disappointment - with one fascinating highlight. The season finale was a look back at some of the dragons’ most outrageous moments, along with several superficial updates on some of the show's most memorable “pitchers.”
The updates emphasized how resentful (or regretful) the entrepreneurs were regarding their Dragon Day experience. We learned almost nothing about how their businesses have advanced during that time, or what the owners learned from the experience. Probing how they retain their confidence after the tongue-lashings they received from the dragons would have been fun and possibly educational, but the interviews never scratched the surface.
The highlight, though, was the blow-up of one deal, on-camera, when the normally jovial Robert Herjavec ripped up a cheque after the dragons’ strategic plan was questioned by a current director of the company.
Here’s what happened: all five dragons had agreed to invest $40,000 each for 50% of JobLoft, a Toronto-based job-site company founded by four friends from Ryerson University. The deal was just being signed when Ryerson prof James Norrie, who had taught the students and was made a director of the company, took issue with the dragons’ plan to market mainly to employers (he thought the company should target job-seekers, too).
Based on what we saw on the tube, things got out of hand fast. The dragons wanted to know who this guy was and why they hadn’t heard about him before, and Norrie started belittling the price they were paying. He also sniped about how insignificant that amount is to people who fly to meetings in private jets (well, how else is a busy guy like Jim Treliving supposed to get around?).
That was it. The three dragons in the room (the third was Kevin O’Leary) bristled at that last remark, and Herjavec tore up the $200,000 cheque.
You can follow the fallout at JobLoft’s blog, where the four founders posted an official explanation last night after a month of (CBC-imposed) silence. The guys themselves seem not unhappy with the outcome; for one thing, they weren’t getting as much of the dragons’ time as they had been led to believe. (On the original show, O’Leary had warned the kids he’d be “in their face” every day.) But then, the deal hadn’t been done yet: how much time were the dragons supposed to be giving them?
Here’s how one founder, Lee Liu, sized up the problem: The dragons, he noted, “are just very busy people and having a board meeting once [in] a blue moon and at their convenience just doesn’t cut it for a 50/50 partnership. Experience, contacts and business knowledge is great but only if you have time to give it.”
Even better than this debate are the 30-odd (Update: more than 50!) comments that follow, with visitors split pretty evenly between those who think JobLoft had a narrow escape, and those urging them to go back to the dragons on their knees to try to resurrect the deal. It’s an exciting, real-time discussion on an important issue: the role of angel investors/VCs in startup businesses.
Should the guys have saved the deal? They originally agreed to it because they thought the dragons could help them grow their business by leaps and bounds. If they still believe that, the size of the initial investment is almost irrelevant: the pie should soon enough be big enough for everyone.
If the guys had changed their minds and grown disillusioned with their new mentors, they should have either called off the deal or raised their concerns, in person, prior to the cheque-signing. They should have taken control of the process, instead of letting their professor do the dirty work, or letting dragon-sized egos upset the deal.
Although the four founders were stuck with a legal bill they call “huge,” they still come out winners. JobLoft has received tremendous exposure, and the founders got about four years’ worth of learning in three months.
“Communicate” is the No. 1 lesson I would take away from this.
No. 2? The lawyers always get paid.
UPDATES, Thursday at 10 am
The blogosphere is buzzing about the DD/JobLoft meltdown. If you want to follow up:
* Sean Wise liked the finale episode more than I did. Plus: more JobLoft reactions and a survey.
* Kempton in Calgary offers some wise perspective.
* The CBC's DD site is abuzz. (Scroll about halfway down to pick up the latest comments.)
More to come, I'm sure.
3 pm update: Blogger Ryan Coleman of Found in Translation has some thoughts about the show.
JobLoft Gets Out of a So-So Deal But Still Needs to Dump Norrie says Ben Yoskovitz
On your #2, just curious as to why you (seem to, by singling it out) think the lawyer in a case like this shouldn't get paid. Any service provider who spent their time to provide a service (and who was not getting paid on a contingency basis) presumably ought to. One wouldn't expect a painter to rip up a bill because one changed one's mind about colour and wanted a new coat.
Rick's reply to Rob Hyndman:
Hi, Rob. Thanks for your note.
I really didn't mean to imply that the lawyers shouldn't be paid. I meant that they HAD to be paid. Which was my way of reminding people that there is a real cost to dithering.
Please bear in mind that it was the Joblofters who brought up their legal bill. The adjective "huge" was theirs as well, not mine.
Great post Rick.
I especially agree with your thoughts on...
"If they still believe that, the size of the initial investment is almost irrelevant:"
At the end of the day these guys had the opportunity to have two retail giants with a vested interest in their organization - that alone is worth a bit of a premium.
Their concerns about time etc. are somewhat valid but at the end of the day a guy like Jim could pick up a phone and make more progress in five minutes with his relationships then four entrepreneurs might be able to make in months (if at all).
At the end of the day no one can say whether or not this is for the best - at least they got a heck of a lot of "free" coverage out of it. But now they're $200K + "huge" legal bills are behind the curve.
Generally I am quite dissappointed with this show it doesn't get at any of the real issues that erupt when attempting to get a business going. When I saw this episode I thought the Dragons got a real steal. While I would not say that the youngsters got a raw deal, I do believe the dragons seriously discounted their potential. However, they are quite young and I thought they should have stuck with the deal. At their age they would have had plenty of time to recover (if they needed to recover from any diasaterous decisions)and go out and do something else truly exciting with the experience they would have gained.- Ev
1. Great post. don't completely agree. but its one of the best ones I've read. You really say the best on either side and situation
2. correction: James Norrie is not their director. He is an advisor - along with their MANY other highly-credible advisors in the IT/business realm.
James Norrie was invited to be one of the board of directors.
3. The boys DID speak up numerous times, but of course it was edited out.
4. Your comment that "the deal hand't been done yet: how much time were the dragons supposed to be giving them?" Well if you re-watch the episode, Herjevec's $250 000 investment into GelFast hadn't closed yet - but the owner made if very clear that Herjevec has made his "due diligence" and he has been in on a FEW occasions to check on their operation.
That makes me to believe that INDEED the dragon's time is directly proportional to the money invested. In Jobloft's case, Herjevec (alongside the other dragon's) only put in $40 000. So if the deal went to zero - do you REALLy think he'd be hurt
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