Wednesday night’s episode of Dragons’ Den saw one Waterloo-based startup that we’ve covered go into the den and pitch their personalized workout app to the five wealthy investors. What transpired during the scene represented the good, the bad and the ugly in startups and mobile apps looking for seed money.
A lively pitch saw PumpUp CEO Phil Jacobson bring out a huge, muscled-up fitness buff who forced former LavaLife cofounder Bruce Croxon to do ten pushups in a military-style tone, but just one investor offered money. David Chilton,” the wealthy barber”, offered $100,000 for 20 percent equity, plus a big 25 percent royalty upfront. Jacobson and cofounder Garret Gottlieb countered for no royalty and Chilton sent them packing.
What really demonstrated investors’ moods towards tech startups was the exchange between Dragons Arlene Dickinson and Croxon just as the pair of cofounders headed towards the exit.
It all began when the good sport Croxon told them they have a “heck of a battle” in terms of user adoption- he said they need millions of users, and their paltry one percent conversion rate from their freemium to “pro” subscription just wasn’t good enough. Jacobson responded that PumpUp has some “really interesting strategies.”
It must have irked Dickinson, who told Croxon, “that’s whats wrong with the technology market: they’re so full of ‘we know everything and we’ve got the best thing since sliced bread,’ and it’s ridiculous. It’s why no one wants to invest.” It was a parting shot not necessarily directed towards Jacobson and Gottlieb, but none the less one that may have stung.
No one said entrepreneurship is easy and the PumpUp guys clearly know this. But it’s the game they have to play, the same game that startups like Facebook, Twitter, Hootsuite, Shopify, Frank & Oak and many others have had to play. If they can somehow catch on with users then the investors who bet on them can get really rich, really quick. Croxon echoed these sentiments:
“Here’s the thing Arlene: if these ideas catch, the beauty of these ideas is that they can scale very very very quickly.”
It was an accurate depiction of how unrealistic valuations of companies that haven’t earned much (PumpUp said their startup was worth $1 million) can irk investors when entrepreneurs pitch them. But it also perfectly depicted the same dance that so many Canadian entrepreneurs have had to engage in on their way to eventual success.
Granted, its hard to convince someone to bet on you when you’re not immediately earning cash. But one could argue that one reason for the euphoria and constant interest surrounding tech startups all over the world is the “homerun potential”. If the PumpUp app can get in front of enough people, provide them with a solid experience that makes them come back again and again, then that app can catch fire. And from then on startups don’t look back.
Dragons’ Den is an entertaining tv show that leaves out much and portrays only the sexy parts, but from time to time its a show that bluntly tells the truth about why investors refuse to write cheques after watching a pitch.
Nevertheless, the publicity value alone should land PumpUp a few thousand more users. Regardless of outcome, a trip to the den can never hurt. While they may not have wowed the Dragons, the PumpUp guys got their message across smoothly.
Any PR is good PR, right?
