It's a rare occurrence in the Den, but every now and then entrepreneurs will find themselves in a situation where they receive competing offers from different Dragons. For many, this is a dream scenario, but this can present a challenging situation that some may not have been prepared for. When the dust has settled and all the bids are on the table, how on earth (or in the infernal otherworldly Den) does one decide on whose hand to shake?
This week, Eric Olsen and his sports memorabilia business Vintage Sports Images found himself in a bidding war that featured four Dragons. All offers looked attractive, but Eric made his decision with confidence. How did he know what to do? I suspect Eric had a good idea who his preferred investor was before walking down those stairs. He also must have listened closely to what the Dragons promised they would do for his business if they bought in. Weighing these elements helped him avoid having to go eeny, meeny, miny, moe.
If an investor wants in on a company, they also have some pitching of their own to do - after all, this is an agreement that should benefit both sides. Business interests must align. Early on in his presentation, Bruce gave Eric an important glimpse into what he could provide as a value-added investor: "I can really help you on the Internet side of things," he said. "The site will be designed exactly how you want it... and we'll drive a lot of traffic to that."
Bruce did not make his case simply on the primary issue - money (although it likely did help that he offered exactly what was asked for and agreed with his valuation out of the gate). He made sure Eric knew how he would actively help boost his distribution channel online. This was a promise Eric knew Mr. Lavalife could live up to based on his well-documented success in the digital realm.
Kevin and Jim paired up, offering the opportunity to team with not just one, but two Dragons - plus $150,000 - an additional $50K more than he was asking for (although at the steeper cost of 50% of his company). Kevin also brought in an interesting idea on how to increase profits by commercializing the images. Arlene offered the same as Bruce, but didn't make it clear exactly what, other than cash, she could bring to the table as strategic partner.
Ultimately Eric was wise in knowing that Dragons can not only bring money, but expertise to help a business succeed. He was aware that Bruce's background matched closely to what he was trying to accomplish in going online with his image slide business. While Kevin does have experience in photography as a hobby, this doesn't exactly compare to someone who has lived and breathed the world wide web and social media and made a pretty darn good living from it. What Eric will also discover is that Bruce's network of other wealthy digital start-up investors could be helpful for extra rounds of financing that might be required down the road.
Oh, and Bruce did make another promise. He said they'd have fun. Eric believed him, and actually, so did I.
Jacoline Loewen, MBA, is a Director of Loewen & Partners Inc., a corporate finance firm working with business owners and family businesses. Loewen & Partners has raised over $150 million for owner-managed Canadian companies, as well as managing family business succession, acquisition, and final sale. She is an advisor, lecturer and writer of business strategy and private equity. Her latest book "Money Magnet: How to Attract Investors to Your Business," published by Wiley, was selected by the Entrepreneurship course at The Richard Ivey School of Business.
Jacoline began her career working for Granduc Mines in Northern British Columbia and went on to work with Deloitte in their strategy unit. She developed a strategic planning model and published it in a book called "The Power of Strategy" which went on to be a best seller. She also wrote "Business e-Volution" which helped teams understand the business opportunities created by the Internet. She writes for the National Post, Globe & Mail and hosted Financial Post Executive podcasts (available on iTunes). She organizes CEO Roundtables and other conferences in alliance with Ivey Business School, Rotman and leading law firms.
Jacoline is a Director on the Board of the Exempt Market Dealers Association (EMDA), working with the Ontario Securities Commission to establish transparency in the private placement industry. She is on the advisory board of DCL International, Bilingo China, and Flint Business Acceleration. She was on the Board of Directors of the Strategic Leadership Forum where she ran the Knowledge Café series. Her other roles include serving as a judge for the U.B.C. and the Richard Ivey School of Business' Business Plan Competitions, mentoring for Canadian Youth Business Foundation as well as being a member of The Ticker Club.
Follow Jacoline on Twitter at @jacolineloewen
Posted on Nov 3, 2011 6:00:00 AM