Sunday, May 11, 2008

When to Invest Vs. When to Help

A few weeks ago, I auditioned to be one of the new dragons on CBC’s Dragon’s Den. Now, before any of you purists judge me, let me just say: (a) they called and asked nicely; (b) lunch was provided; and (c) I got fake eyelashes in the bargain. Let him who is without skimpy lashes cast the first stone.

The audition was run like an actual episode, which is where things got interesting. There was one pitch in particular that even now, weeks later, stays with me. If you unpacked the pitch from its elevator formula, it became clear that what the person wanted wasn’t a cash investment but, simply, help in realizing a particular dream. Unfortunately, we as a panel were too busy trying to establish our investor chops; we dismissed the pitch for fairly cursory business reasons. Looking back, I think we missed the point entirely: as an investor, what do you do when someone asks for help, not money?

It’s a question that, as lawyers, my partners and I often ask. How much should we do for X business or Y entrepreneur, if we cannot monetize the effort? We don’t have a good answer; we just know that there are some ideas that are so compelling that they need to be served, even if they seem likely to fail. This is a sentiment we’ve heard time and again from our colleagues in California and Boston, too, and I’ve come to think of this as a fundamental part of the soul of any entrepreneurial community. Have you helped tilt at a windmill today?


Anonymous Anonymous said...

Suzanne, you've hit the nail on the head. My idea is one of the pitches that is up on the website in an attempt to get on the show. Although I have received a good number of indorsements including one from the Canadian Innovation Centre, I haven't sold a single product. Why, because I am the creative mind, I am not the business person at least not in this area (marketing new products), and it seems the dragon's, who I thought were supposed to fulfill the business side, don't want to have to take a risk unless you have a track record. I, as I think many other true innovators, are not in it for the money first and foremost, we saw a need and tried to fill it. For myself, I have a very sucessful career and this just has not been a priority for me, but that doesn't make it any less of a product worthy of the market place and with great potential! I think the shows in the first season, hit closer to the mark - if I remember they seemed more interested in actually debating the merits of the product, as opposed to what the inventor has accomplished so far in terms of selling the product. It seems too, that some of the ideas of late, have been more about business concepts than actual products, and these were conceived purely as money making ventures. These ideas seem to be more faddish and don't have long term potential. If we looked back at the history of great inventions, even simple ones like the zipper or velcro, I think we would find that the inventors first priority wasn't how much money they could make. They had an "ahha" moment when they realized the potential for solving an existing problem, and it had nothing to do with making a boot full of money. The money should back a solid idea, no matter how many you've sold before you get on the show!

11:29 AM  
Anonymous Matte said...

I totally agree. I am a full time entrepreneur since 5-6 years back. I started an importing business (went well, and was sold at a profit). I started a marketing company (failed) and now I am involved with starting a brittish debt salvation company that has not yet taken of. Demand is there, but the management is not.

What I want to say is: Every VC actually need to distinguish the Creator from the ones who are there to manage it. And I saw the very first episode of the Dragon Den today (had never seen the show before actually) and what it lacked from the entrepreneurs side was these things:

1) Proven concept (have you sold or have you recieved signed purchase or membership commitments on paper?).
2) Proven brand (have you sold more than one product/service or have you recieved commitments to buy your product/service more than one time? Repeat purchases that is).
3) The most important part, do you have a proven management (A CEO at least who will make the money making part happen?). Because the VC's are there to make money, nothing else.

These 3 parts are essential if you are to get money from the Dragon Dens or any other investor for that part. I am more than certain, because I do invest as a business angel from time to time myself and those are essential requirements from my side.

And by the way, I am an innovator myself. I never manage my companies. I don't function as a manager. Nothing is more boring than leading a company. But coming up with and proving a concept on the market is very fun indeed.


2:00 PM  

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