Snowboard Addiction carves deal with digital savvy dragon
Each week, Financial Post contributor Mary Teresa Bitti revisits CBC’s previous week’s episode of Dragons’ Den. She captures what the cameras didn’t and in the process provides a case study for readers, zeroing in on what pitchers and dragons were thinking and what the challenges for the deal are going forward.
The pitch Nev Lapwood hopes to take Snowboard Addiction — a platform that teaches people how to start and improve their snowboarding techniques — to the next stage of growth by manufacturing products to complement its downloadable tutorials.
Passionate about snowboarding since the age of 10, Lapwood travelled to Whistler, B. C., after graduating university, and quickly found himself dividing his time between New Zealand and Canada working as a snowboard instructor. Teaching came naturally and he discovered he was good at it.
“I started to think bigger, about how to teach more people to snowboard without having to teach each one personally,” he said. In 2008, he created a digital program that people could purchase via download or on DVD. Now you can either download or buy an annual streaming membership for US$ 59 through the website that gives you access to hours of tutorials.
In 2008, digital was just taking off and his YouTube channel, where he shared best advice on snowboarding had garnered millions of views. “When I started there wasn’t much competition in the tutorial market. Today there is a lot. At the same time, there is growing resistance globally to pay for digital products,” he said.
From 2008 to 2013, the business was strictly digital. “When I train people, there are tools I use that didn’t really exist in the marketplace,” he said. “We were jumping on trampolines with skateboards attached to our feet to simulate snowboards tricks so when you go on the mountain you’ve built muscle memory.”
That led to the idea to manufacture a balance bar (US$99) that lets users simu- late body movements and build strength in the comfort of their homes; a training board (US$159); and training board bindings (US$129.)
Two- thirds of Snowboard Addiction’s sales are now physical products and onethird is digital content. Only 10 per cent of sales are in Canada, with the rest divided between the U. S. with 35 per cent, Europe at 25 per cent and the U. K. at 10 per cent. Its client base is 80 per cent male snowboarders between the ages of 15 and 30 looking to improve as well as become recreational instructors. Cli- ents land on the site via Google, YouTube and Facebook.
When Lapwood appeared on t he Den, Snowboard Addiction, which has three full-time employees and uses manufacturers in China, had sales of $ 350,000, up 55 per cent from a year earlier.
“We are trying to bring the company to a new level. I wanted the dragons’ advice and to learn from their experience to build this better, faster, stronger,” he said about going on the show. The deal Lapwood asked for $ 100,000 in exchange for a 10 per cent stake valuing the company at $ 1 million. He received offers from Michael Wekerle, Joe Mimran and Michele Romanow.
He accepted Romanow’s offer for a 15 per cent equity share and the deal has been finalized. “She is the most experienced in the digital world. She knows how to leverage Internet marketing. I felt like that was the most appropriate area to help grow my business,” he said.
Even before t he deal closed, Romanow’s advice on how to grow via paid advertising helped Snowboard Addiction hit $ 100,000 in sales for November alone. “We ran out of product in December,” Lapwood said. His goal is to exceed $ 1 million in sales in the next year.
Lapwood recently hired a general manager, which lets him focus on making Snowboard Addiction the go- to for snowboarders looking to improve. “We are still creating tutorials because it ties in with our products,” he said.
Members can access a new tutorial each month, as well as the entire library.
New products are being developed and Lapwood would like to start working with trampoline facilities where one of his new products is designed to be used. The dragon’s point of view “This is one of my favourite deals of the season,” Romanow said. “The entrepreneur i s on top of his game. He built this business from scratch, with no debt and has navigated a significant pivot. He is committed and a really good business person. I can really help him engage the digital audience.”
The next move is to expand the user base in terms of sales and to improve the price point. “I’ve spent a lot of time talking about how to improve margins and increase distribution,” Romanow said. “I’m on the board of Whistler Blackcomb. My connections there can help. I think there is a big play at resorts looking for tools. I’m excited.” An expert’s option John Cho, partner at KPMG Enterprise, thinks the business and its prospects are good. “The entrepreneur is smart and has found an interesting niche overlapping digital and manufacturing. If resorts do become a distribution channel, they will help build awareness. He’s doing all the right things.”
I THINK THERE IS A BIG PLAY AT RESORTS LOOKING FOR TOOLS.