Flamed in the Dragons’ Den
FREDERICTON—Asif Hasan, Keelan Gagnon and Lionel Fernandes were students at UNB when they launched SimpTek, a company that helps homeowners and electrical utilities better manage electricity consumption.
The young entrepreneurs started strong, finishing second in NBIF’s 2015 Breakthru event, earning $220,000 in cash and services. As part of that competition, they also won the Viewer’s Choice Award, which gave them a chance to pitch their business on CBC’s Dragons’ Den.
While some businesses, like New Brunswick’s Sussex Beard Company, have a great experience on Dragons’ Den, success, as the SimpTek team quickly found out, is not guaranteed.
The timing with Dragons’ Den can be tricky for tech startups that are aiming for a “hockey stick” growth curve. There is a gap of nearly six months between the pitch and its broadcast date, and six months can be a lifetime for a startup.
SimpTek’s advisors told them to account for that, telling them, “Put yourself in the position where you are going to be in six months – put in the higher valuation,” says Hassan.
“At the very beginning we were confident, but we were hesitating a bit because Dragons really nail entrepreneurs who don’t have sales. We kind of expected to be questioned and mocked a little bit.”
So he and Gagnon came in boldly with a $3 million valuation, looking to sell a 6.6 per cent share of the company for $200,000.
And that’s when the Dragons started spitting fire.
“Oh my God guys, you want a $3 million valuation with no contract signed. It’s unbelievable,” said Jim Treliving of Boston Pizza fame. “Right now your valuation is zero.”
Then it got worse. “Please stop,” said Manjit Minhas, the owner of Minhas Breweries and Distillery. “Go get electrical engineering jobs where you can have a future.”
Michele Romanow called SimpTek’s product a “half-baked tool.”
Michael Wekerle piled on too, saying, “I look at this and say what a waste of a bright mind.”
Ouch.
It was a long, quiet trip back to Fredericton admits Hasan. And while lesser entrepreneurs might have given up in the face of the Dragons’ withering criticism, it actually motivated the team at SimpTek.
“The whole journey that we went through around the Dragons’ Den was actually a good experience for us,” says Hasan.“It gave us a boost to prove to them that the vision we are sharing and the problem we are solving actually needs to be solved. We took it as a challenge.”
When asked if they ever considered Minhas’s suggestion that they give up on the company and get “real” engineering jobs, Hasan says, “We didn’t think twice. We believe in SimpTek.
“The challenge is part of what inspires entrepreneurs.”
A fired up SimpTek kept plugging away. Since that unpleasant day in Toronto, SimpTek signed its first customer, NB Power, for a pilot project and is currently in active talks with four other utilities, two in the United States and two in Canada. It’s also grown its team, expanding from the original three founders to a team of eight people.
And, most tellingly, it’s found investors. SimpTek is about to close a $600,000 fundraising round at a valuation of $2.5 million, not too far from what they projected during their Dragons’ Den appearance.
At the end of this month they are taking part in a trade mission to the United Kingdom.
“We maintained ourselves consistent with the story we wanted to portray,” says Hasan. “Today when our investors look at this [Dragons’ Den] video, they’re not disappointed because that’s where we envisioned ourselves six month ago, and that’s exactly where we are.”
Watch SimpTek’s recent appearance on the Dragons’ Den: