Many budding entrepreneurs watch Dragon’s Den and Shark Tank to try to figure out if their idea or product would stand the test of scrutiny of the likes of Kevin O’Leary. The rapid fire approach to pitches and demos separates the winners from losers and the reality TV components ensure some comedic relief.
As more people watch the show to try to learn the ropes of how to get to “I’m IN“, they try to learn to create the best pitch and the best sounding business plan. Anyone who has been tasked with presenting even the most basic of plans will realize that the experienced business managers (finance, marketing, sales and operations managers) can find holes in everything from research projections, revenue forecasts, sales growth and the usual “miracle happens here” presentations.
The problem is there is no way to test or prove that your plan can really work if it is all theory and hyperbolic numbers. Most of the advisory folks in the startup field have typically been some sort of manager running a business, product team, plant or financial operation. Many are highly skilled at managing people, teams, budgets and have had successful careers. Many have business educations and advanced degrees like M.B.A’s.
They are very adept at looking at plans which would typically be “ongoing” concerns in a larger organization. They have budgets, skilled teams and customers to work with and suffer very few consequences if there are some delays or short set backs.
In the solopreneur or small startup dynamic, there is no budget and many middle aged folks set out to build an idea into a dream fulfilling business with cash from their home equity or a early retirement bonus etc. Taking their idea to a mentor group of large scale managers gets them entwined in the business planning process early on.
There is nothing wrong with starting with a business plan to create at least a first stab of what you are trying to do, but the process has an inherently long and high level view of the “business”. The point is, it’s not a real business until it hits a “post validation” stage with customers who are actually paying to use the product and all the people involved in the project are being paid.
There is nothing wrong with starting with a business plan to create at least a first stab of what you are trying to do, but the process has an inherently long and high level view of the “business”. The point is, it’s not a real business until it hits a “post validation” stage with customers who are actually paying to use the product and all the people involved in the project are being paid.Craig Stark
So as it goes on the show, the pitch stops at the “valuation” discussion which paralyses the potential investors as they are looking for multiples of returns on their investments. If they were not, they would go and buy bonds. The problem with most pitches is that they aren’t ready for financing and they go looking for financing to continue with their idea/ product development.
What’s now available is a highly iterative business development process founded on the “Lean Manufacturing—Lean Startup” methodologies that allow folks with ideas get into a predictable stream of thoughts and actions. These steps when done with speed and rigor, tend to bring clarity and purpose to the project in as little as 10 weeks.
We have seen countless ideas/ projects/ businesses get off track due to misinformation and missteps which could have been prevented with even a basic understanding of the process. As it stands, many mentors and investors are unaware of this process and the tendency is to go into “planning” mode long before it’s useful to either the investor or the project leaders.
The good news is, there are many exciting opportunities to be acted upon and there is no reason for people to believe that getting on TV to pitch the stars is the only possible path to becoming a successful entrepreneur. We will be offering some exciting new ideation labs and workshops in the upcoming months which will unlock this potential without the fear and humiliation of hearing “I’m OUT”
Further to this article, there was a comment made by Bruce Croxon regarding the Dragon’s Den along the lines of “Don’t look to Dragon’s Den for Business Advice”, which Arlene Dickinson vehemently defended as “We have done a lot for entrepreneurs in Canada”.
The point of my original post and to Croxon’s support is that there is a huge gap between what the reality is in a startup today vs. the “bank pitching” days when the Dragon’s made their money.
This excerpt from the link referenced above, speaks to the problem in trying to learn from reality based TV:
Q – Some of the Dragons’ comments were pretty blunt; Arlene’s in particular. What did you make of what she said?
A – I think Arlene and the other Dragons, outside of Bruce, have a perspective more around traditional business models, which is understandable, because that’s where they’ve made their money and had their success.
When it comes to consumer mobile, it’s a new world and it’s a different world. If you look at all the success stories, it’s about building massive scale by providing significant value to as many people as possible, and then turning on the monetization, whether that’s through a freemium model, whether that’s through an advertising play, whether it’s through a mix of both, whether it’s through leaving a free consumer product and taking your technology and licensing it, or going B2B with a vertical play.
The key in every successful consumer mobile app or consumer mobile company is scale, and adding a significant amount of value for as many people as possible, and that’s where our focus is at. And we seem to have been doing a good job of that, growing rapidly over the last seven months.