Blair Beattie got all of CBC’s Dragons to bite, but their offer didn’t have enough firepower so he’s building his workwear business solo.
Blair Beattie did two things very few people appearing on CBC’s Dragons’ Den have done.
Not only did his pitch attract an offer from all five dragons, he also turned them down.
Beattie is the owner of Jerseyville, Ont.-based Meshwear Technologies Inc., a producer of convertible ventilated workpants and workwear. Appearing on the show in March, he sought a $500,000 investment for a 25% equity stake in his Coolworks convertible vented workwear. The ask valued the company at $2 million, which had just come out of 2012 with sales of $1 million and revenues for 2013 expected to top $1.8 million. Margins were about 35%.
All the dragons bit. Serial investors and famed Canadian entrepreneurs Arlene Dickinson, Bruce Croxon, Jim Treliving, David Chilton and Kevin O’Leary countered with an offer of $500,000 for a 33% equity stake, plus a 5% royalty until they recouped half their investment.
In the interest of full disclosure, he accepted the deal on air. But when it came time for due diligence, Beattie backed out, unhappy with the valuation the Dragons’ offer placed on his company. A 2.5% breakout that amounted to $12,500 also didn’t sit well.
“The TV show is a TV show, and it’s not how any business deal would ever really happen. When you get down to doing the things you need to do, a lot can go off the rails,” says Beattie, who leads a team of four working out of a 7,500 square-foot office and warehousing facility.
But he has no regrets about the appearance.
“A lot of people that had never heard of us know who we are now, and there’s a lot of value in that.”
During his Dragons’ Den experience, he was also in talks with a couple of other entities that were interested in partnering. Beattie’s ultimate goal is to break into the US market, where he says there’s major opportunity in places such as the Texas oil patch and on drilling rigs in the Gulf of Mexico where heat stress is an ongoing issue for workers.
The company’s line of vented pants, high visibility t-shirts, sweatshirts and coats are now in 800 stores across Canada, including Mark’s Work Wearhouse. Manufacturing is done in China, a decision that Beattie says was because of the price-driven workwear market.
Unlike many of the companies that appear on Dragons’ Den, Meshwear actually drummed up a lot of business before appearing on the show. Enough to be comfortable making its next step – conquering the workwear and rental-wash markets in the US.
“Going through a distribution model made the most sense to get sourcing costs as low as possible,” he says, adding between 80,000 to 100,000 pieces would be needed to meet his $1.8 million sales target last year.
His experience on Dragons’ Den also speaks volumes to the lengths Canadian entrepreneurs have to go to secure financing for growth.
“To secure the capital we need to get into the US, giving up an equity stake is the best way for us,” he says, now that he has maxed out his opportunities with the banks and Business Development Bank of Canada (BDC).
“It’s tough for a startup to get off the ground, let alone get the kind of capital you need to fund growth, and the banks in Canada aren’t typically the place to go.”
Beating the heat
The Meshwear idea was developed about 10 years ago by a friend of Beattie’s who worked on a production line at a steel processing plant in Dundas, Ont. He was looking for an alternative to work pants he could wear on the factory floor in the summer months because safety rules prohibited wearing shorts. With his mother tagging along, Beattie’s buddy made a quick trip to a fabric store for some mesh material and made another stop for a pair of swim trunks. A few hours later, they had a prototype. Management at the plant approved the pants.
“After his buddies stopped laughing, they wanted a pair,” says Beattie, which is when the two friends teamed up to investigate a patent.
Two and a half years later, Beattie and his partner walked out of the US patent office, lawyer in tow, with the patent for their vented pants. They reached out to a Toronto company specializing in the Scotchlite reflective business, but it didn’t work out. They were going to have a go at it themselves, but during the process had different ideas about the direction the company should go. Beattie ended up paying almost $900,000 to acquire the patent from his former partner.
It’s been an eight-year journey for Beattie, but that patent has turned into a significant competitive advantage as Meshwear moves to enter the US. It opens up a number of options for Beattie. The difficulty is determining how marketable it is outside of the workwear market, but there could be an opportunity in licensing.
“The patent is at the core of what we’re trying to do, and licensing it is by far the strongest approach to pursue, especially in markets outside workwear,” he says.
Beattie is still searching for a partner in the US, and is reaching out to companies Meshwear could align itself with, or other private investment enterprises.
“I believe there’s opportunity with a strategic partner in the US, not only for the experience, but to shorten the time it would take to get any market penetration through existing infrastructure instead of trying to build it from ground zero.”
For Beattie, it’s not always about teaming with the biggest partners in the game, but finding the right ones.
This article appears in the September 2014 issue of PLANT.
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