Homesav is a Toronto web startup that sells luxury home décor and furniture at steep discounts. They appeared on Dragons' Den last week, asking for $200,000 for 15% of the company. At the time—nine months ago—they were doing $60,000 per month in sales (growing every month) and had 45,000 members signed up.
The Dragons were impressed by the entrepreneurs and their business model, but not by the valuation (more than $1.3 million for a six-month-old startup that was not yet breaking even). So two Dragons offered the $200,000 for 45% of the company. Homesav accepted.
It's funny, though, because this investment round of $200k—a relatively small number in the world of high-tech startup capital—was only now revealed (and didn't even happen in the end). Yet last September, Homesav raised a much bigger $1.2 million round. That's more than double what the startup was valued at by the Dragons, and the pitch was still months away from ever airing.
So by the time Homesav got its "Dragons' Den Effect" last week—a 3,000% traffic spike that sent the website crashing temporarily—the startup was already at $1 million in annual sales, boasted a membership count of more than 200,000, and had tons of investors behind it. The pitch was nine months old and completely irrelevant by that point.
And that's one of the glaring problems with Dragons' Den (among other time-sensitive reality TV shows). While most viewers won't know about the second financing round when watching the episode, those of us in the tech scene find most of these startup pitches incredibly outdated by the time they're actually on television. Not to mention the fact that many on-TV Dragon investments never actually happen.