Inside a Dragons' Den Deal

As one B.C. company recently found, a deal made on air doesn’t always mean it’s sealed behind the scenes

When an entrepreneur scores a flush of five offers from all the investors on CBC’s Dragons’ Den—and a handshake deal on exactly the $200,000 ask he wanted—you’d be forgiven for thinking that solidifying the partnership might be just as seamless.

Paul Underhill, the founder of Rumble—a meal-replacement protein drink—went on Dragons’ Den with his colleagues last week seeking an investment in their growing company. Underhill conceived of the drink after he was forced to go on a liquid diet a few years back because of his diminishing lung health—he was born with cystic fibrosis and received a double-lung transplant in 2011.

His pitch elicited all the right responses: entrepreneur David Chilton thought it “very compelling,” and it was a “great story” according to Arlene Dickinson, with whom Rumble accepted the offer of $200,000 for a 20 per cent equity stake in the company, which saw $100,000 in sales in its first few months.

But it turns out, the drama continued behind the klieg-lit scenes, too. As due diligence kicked off after the filming in March, Underhill revealed the situation was more complicated. The company was already in negotiations with Toronto-based investors BrandProject, and he adds that the valuation of the company had increased.

“The increase in deal size was simply an evolution of the deal,” explains Underhill’s co-founder James McQueen. “As we went through the due diligence process and started to see the future better, which happens month by month as entrepreneurs, coupled by the fact that we were fortunate enough to have multiple groups who were interested in investing alongside our strong friends and family group (that had backed us up until that point), we elected to be prudent and raise additional funds to accomplish our strategic goals for this round.”

Dickinson brought Chilton in on any potential deal at this point, but the end investment was dragon-less. For Underhill, it was “really a mutual parting of ways with a lot of mutual respect” as Rumble chose the new investors in Toronto, especially to help with the regional U.S. launch this spring.

With BrandProject’s focus “on early stage, disruptive consumer brands that have high growth potential”, according to McQueen, Rumble felt it would do a good job of helping to crack the Stateside push for the lactose-, sugar-free shake. “They have an individual on their advisory team that was the CFO and COO of a fast-growing U.S. beverage brand,” he says, without naming the person. “He was instrumental in the overall growth and success of that brand and is very knowledgeable when it comes to what it takes to be successful in the U.S. beverage market and has experience working with early stage brands in that sector.”

Adding that the company will also use the money for working capital and marketing, Underhill says, “We knew that the scales were tipping in favour of our second investor.”

While heading into the dragons’ arena was always about the money and the potential to open doors for Underhill, he concludes, “Certainly given our lack of marketing budget at the time, exposure is a critical factor for us. It was an incredible experience—adrenaline-inducing.”