How the Dragons' Den effect works

How the Dragons' Den effect works

This article by Jason Buckland appeared on MSN Small Business Centre on April 19, 2012

Win or lose, just getting on the show can make all the difference for fledgling companies.

Some three years ago, John Vellinga, suit pressed and goatee trimmed, walked in front of the country's five most famous investors. On the set of "Dragons' Den," Vellinga came armed with Slava Vodka, his own brand of ultra premium vodka. He also brought a tray of glasses. Martinis were served. While Vellinga looked the part of the businessman, he took his lumps, swallowing hard and wiping sweat from his brow as the Dragons peeled back the layers of his company.

"The vodka market is like heroin, the margins are spectacular," Kevin O'Leary said on the show. "Everybody wants to be in it." "You know, when I smell rotting flesh, I want to pounce," O'Leary continued after Robert Herjavec noted Slava was running low on cash. Arlene Dickinson objected to O'Leary's interest, and Jim Treliving quipped, "But you're going to end up with a rotting case of vodka." Vellinga turned. The verdict was in, and the Dragons were out.

Two years later, Zane Caplansky, a deli owner from Toronto, entered the Den. With him was one of the largest props ever to appear on the show, a towering food truck with Caplansky's Delicatessen in lettering on one side. "Best smoked meat in town" was on the other. Though the Dragons savoured the sandwiches he served — Bruce Croxon, a customer even before Caplansky appeared before him in the Den, recalled it was "unbelievable smoked meat" — they were scared off by Caplansky's desire to franchise. "That scares the heck out of me," Treliving, who grew a mini-chain called Boston Pizza into a national franchise of more than 325 restaurants, said, pointing at the truck. "I'm going to call you 'Insane Zane,' " O'Leary remarked. Caplansky walked out of the Den empty-handed.

The Canadian incarnation of "Dragons' Den" has been on the air since 2006, and innumerable products and services have been pitched in front of the show's panel, a rotating cast of the nation's top venture capitalists.

The greatest success to come from the show has been an all-natural breakfast cereal with a name you can't forget. Holy Crap, the organic health food brought to the Den by a husband-and-wife from British Columbia, blew away franchise baron Treliving, who leapt at the chance to invest in the company.

After the episode aired, company founder Brian Mullins hoped for $600,000 in sales within a year. Instead, Holy Crap sold $5 million worth. "It's the 'Dragons' Den' Effect," Mullins said later.

His cereal is now available in more than 600 stores across Canada. While Holy Crap is the show's gold standard, the show's contestants mostly left the Den with no deal in place.

It is a growing fraternity of the rejected, though perhaps they deserve your envy, not pity.

Dragons' Den tasting
"I'm the luckiest guy in the world," Caplansky says today from his College St. restaurant, which you might be able to spot from the lunchtime lineups spilling onto the sidewalk. Since his original pitch aired on "Dragons' Den," from which he received no investment from the Dragons, Caplansky's Deli has carved sales growth that's the stuff of dreams. In the month after his show aired, sales rose by about 50 per cent, and Caplansky says that by converting one-time customers into repeat diners, business continues at the heightened rate.
Weep not for Vellinga, either, who has also benefited from his "Dragons' Den" appearance despite not reigning in a deal. Sales of his ultra premium Ukrainian vodka slowed after his appearance on the show, but after he was invited back for a "where are they now?" update special (Caplansky appeared on the same show), business boomed for Slava.
Vellinga says there would be "no way to measure" what the exposure of twice appearing on "Dragons' Den" meant, but indeed there is one gauge he's happy to report: before he became a recurring character on the reality show, he moved some 1,200 cases of Slava each year. Today, Vellinga says his vodka is on pace to sell more than 1,800. "Before I was on the show, if I asked a roomful of a hundred people if they'd heard of Slava Vodka, maybe two hands would have gone up," Vellinga says. "Now, 25 hands go up, a quarter of the room. There's nothing quite like that!" *
Gallery: Most memorable winners & losers on "Dragons' Den" How is it that such rejection — remember: both Vellinga and Caplansky were rebuffed in their attempts to attract investors — could afford business glory?
It all speaks to the magnitude of the Den. By industry numbers, "Dragons' Den" is the country's top-rated entertainment program, having reached two in five Canadians over the course of its most recent season. "It's the best-case scenario for any business to go on that show," says Faythe Pal, chair of the Canadian Institute of Marketing and CEO of Hands of Time, Inc., a Toronto management corporation. "All of that exposure, all of the commercial lead-ups, all of the promotional marketing.
Even if you don't win, to get that full engagement where your products can then be sold on [the CBC] website and your story can continue being told. It's amazing."
Caplansky and Vellinga won't disagree. Caplansky said if he had to buy the P.R. he received for free by appearing on "Dragons' Den," he guesses it would have cost hundreds of thousands of dollars. Vellinga says he once had an advertising source estimate the value at $1.5 million.
"What's happened here, because of the platform 'Dragons' Den' has become, it's the 'American Idol' of venture capital," noted O'Leary on the show's sixth season finale. "You get a product or service on this show, sales go up 30 per cent. Everybody knows that." Surely, while O'Leary is on point, he can't speak for all past Den contestants.
Darren Brown, a Nova Scotia maker of kitschy cigar box guitars, impressed the Dragons on one episode which aired near the end of the show's sixth season. Brown left the Den without a deal, though admits his appearance hasn't brought the sales success others enjoy. When reached by phone, Brown said only 12 customers, many of them friends and family, have actually purchased a guitar since they were shown on national TV. The house builder says he has no plans to leave his day job. But what's clear in talking to Brown is that his Den appearance, while not yet having resulted in tangible success, brought a significant spike in interest in his product.
The Nova Scotian admits he fields far more inquiries about his guitars today, but he does not yet have the infrastructure to capitalize on the business: an online store and the ability to receive payments. "I've looked into it," he says. "Maybe soon."
In the meantime, entrepreneurs like Vellinga and Caplansky plan to exploit their "Dragons' Den" fame into lasting business success. Slava, which competes with primo labels like Grey Goose and Belvedere, is among the five highest-selling ultra premium vodkas in Ontario,
Vellinga says. Caplansky, for his part, was actually invited back to the Den earlier this month to re-pitch his deli business. Due to a confidentiality agreement he's signed with CBC, he can't reveal the results of his latest offering to the Dragons until the episode airs this fall. However it goes, perhaps the stakes are much lower for the 40-year-old, who's already received franchising requests from across Canada, "Halifax to Vancouver," he says. It's the latest sign that, even if the Dragons say "I'm out," it doesn't matter so long as the rest of the country is in.

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