I worked behind the scenes on the first five seasons of Dragons’ Den (Canada’s Shark Tank), getting entrepreneurs ready to pitch their businesses to investors with a ravenous appetite for deals. During my tenure, the show featured the Croatian Sensation himself, later known as the “nice guy” on Shark Tank: Robert Herjavec. Herjavec made his fortune in the digital security industry and is now an investor, rumored to be worth more than $200 million.
Here is the biggest lesson I took away from my hundreds of hours with Herjavec:
Customers before investors.
During tapings of Dragons’ Den, the judges would see up to 18 pitches a day. One can imagine they’d quickly get frustrated hearing founders make the same mistakes over and over. The mistake that seemed to tick off Herjavec the most was when entrepreneurs sought investment before seeking out customers. I heard him call people out on this dozens of times. To paraphrase his words: “You don’t need $25,000. You need 25 cents.”
For anyone under 30, this may come as a shock, but before smartphones, there were landline pay phones all over the world, and they cost 25 cents to use. So what Herjavec is suggesting is that before asking for investment money, founders should always invest time in customer discovery: simply talking to customers on the phone.
“Customer discovery” is a term made famous by Steve Blank, the grandfather of the Lean Startup method. Blank tells entrepreneurs to “get out of the building,” which means using customer interaction to test assumptions under your startup’s business model.