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The Den Report: Demo’s Can Help Or Hurt

When approaching potential financiers, many entrepreneurs like to demonstrate their products in the hopes that it will engage investor interest and swing a decision their way.

Obviously, entrepreneurs who appear on a televised investment show like Dragon's Den are going to inject more showmanship into their pitches to the Dragons than would likely be typical in the office of a private investor. But the principle is the same, no matter where the pitch is delivered.

The demo, as this show-and-tell is known, is taken from a typical marketing technique. In the investment area, a demo can illustrate a hard-to-understand product or convince an investor who may be sitting on the fence about the product's potential for success.

Unfortunately, a demo can also destroy any credibility the entrepreneur may have while making a pitch.

It should be pointed out here that we're talking about products. It's very difficult to use a demo for service or online businesses, which depend more on numbers and value propositions than usage. Every investor or lender has war stories about pitchers who forced them to sit through absolutely meaningless (to them) presentations of their software or services.

At its best, the demo provides drama, surprise, and engagement in the person viewing it. At its worst, it provides proof that the entrepreneur's concept is vague, too narrowly focused, or he or she hasn't got the chops to bring it to market. It is only an illustration - it can't make up for bad numbers, dodgy execution plans, or entrepreneurial hubris.

Last night's Dragon's Den episode was a perfect illustration of the power of the demo to enhance or demolish a pitch. Every pitcher had some kind of demo for the dragons. Some got a further hearing, and some were dismissed almost instantly.

The two best examples were Sunny and Brian.

Sunny showed off his product - a waterless car cleaning washing material called Go Clean - by letting the Den's resident car freak, Robert, try it out on the hood of a slick car. Robert liked it, and Sunny had all the Dragons in his hand within minutes.

He had solid sales, a good company valuation, and a clear execution plan, which included a social component that appealed to some of the Dragons. All made offers, and Sunny eventually took Robert's. Did the demo swing it? Maybe, but Robert's comment that he was "like this guy many years ago" was probably more illustrative.

Pitcher Brian's demonstration of his invention -- a can of shaving cream with a brush attached - brought out the boy in some Dragons. It also brought out the investor in them. Even Kevin wanted in on the deal, and Jim made him a solid offer.

But Brian, clearly a feisty entrepreneur, refused all deals, saying a deal had to be on his terms or not at all.

This was clearly a case of a great demonstration wasted by entrepreneurial obstinance, arrogance, and an unclear concept of the value of his product. No matter how good the pitch, nothing can make up for that.

"Good idea, wrong guy," summed up Bruce.

Tony Wanless is Certified Management Consultant (CMC) who concentrates on the SME segment. He is a frequent business plan writer, pitch guide, and business plan judge for competitions. His businesses include Knowpreneur Consultants, a provider of Content Marketing strategy and services to SME's, Reinventionist, an innovation consultancy to professionals who form their own independent businesses. He is currently launching tonywanless.com, which provides communication guidance and real-time digital editing services for leaders in the technology, finance and academic sectors. Tony is also a columnist and blogger for BC Business Magazine and the Financial Post. A former financial journalist and editor, Mr. Wanless has a long history as a communicator, writer and advisor with Venture Capital and angel investors in Canada. He is a frequent business plan writer and pitch guide for technology start-ups and often acts as a mentor and judge in business plan competitions. Follow Tony on Twitter at @reinventionist