How the 'Dragons’ Den' effect works
Win or lose, just getting on the show can make all the difference for fledgling companies.
Courtesy Slava Vodka
Slava Vodka founder John Vellinga with his wife, and business partner, Katherine.
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.
"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.
MSN.ca Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.