Sometimes you just can’t convince the Dragons, or other single investors, to buy into your business. In that case, you leave the Den without a Dragon partner — but then what? It’s not necessarily the end of the world, or your product. You can try turning to crowdfunding as a viable option, and if you’re fortunate, it may just pan out.
That’s exactly what happened with Skai Dalziel and Joe Facciolo’s business, Guusto. In season 10, the Vancouver, B.C. duo pitched their mobile gifting app for food and drinks. They even provided a demo of the app, in which they had Manjit gifting Michael money for drinks at a bar.
Unfortunately for Guusto, each of the Dragons poked holes in their pitch. Jim and Michael thought their valuation of $150,000 for seven per cent was too high. Joe didn’t like their business model, which required a hard sell to companies to release Guusto’s 10 per cent cut of sales. Manjit was concerned that they had too much competition, and Michele didn’t have much faith in their user acquisition methods.
Guusto didn’t require a gift recipient to download the app, which Michele thought was a big mistake — if they required a download from both parties, the company would double their users. “That’s app math,” she quipped.
Watch the full pitch!
Guusto left the Den empty-handed, but Skai says the experience was positive and inspired them to come up with a clever way to raise capital and get investors on board. "The Dragons are actually quite nice if you do a good job answering their questions," says Skai.
After the Den
Guusto may have been down, but they weren’t out. Their next step was to launch an equity crowdfunding campaign on FrontFundr, a financing platform for startups. They were able to raise a total of $50,000 — which was twice their goal amount. The company was also the first in Canada to successfully close a round of equity crowdfunding.
“Being the first company in Canada to close a round of equity crowdfunding has been fantastic,” says Skai. “The funds have been helpful, but the major benefit is having a group of small investors who are brand champions that promote Guusto through their networks.”
What else has changed? The company has doubled in size from three to six people. They’ve also added a Guusto web platform for companies to manage larger employee and client appreciation programs, which Skai says is helping to drive significant sales growth.
Guusto is looking to keep growing. “We’re focused on deals with more corporate clients to grow sales, and we’re also in discussion with big merchants like Tim Hortons, Best Buy and iTunes to provide users with more redemption options,” Skai says. Looking ahead to next year, he and Joe are planning to expand to the U.S. market.
Advice for other pitchers
In the internet age, crowdsourcing funding and equity can be a gamechanger. Sometimes you just don’t need to fundamentally change your business to get investors.