A small crowd was gathered inside CBC Television's downtown Toronto headquarters last June to hear the fall schedule being announced.

It was fairly predictable, filled with traditional viewer favourites like Rick Mercer Report, This Hour Has 22 Minutes and The Nature of Things.

Then came another name on the list nobody was surprised at - Dragons' Den. Network executives had decided to invest their money in a third season of the popular reality show that featured entrepreneurs pitching their ideas to five wealthy business tycoons. After listening to the pitch for a few minutes, the Dragons would decide if they wanted to back the idea in exchange for hopes of a lucrative return several years later.

But first, there were the questions. One by one, the dragons would ask details about everything from marketing to profit margins.

Jeffrey Kirk, CBC Television
Dragons' Den regulars Robert Herjavec, Arlene Dickinson, Jim Treliving, host Dianne Bucker, Ken O'Leary and W. Brett Wilson, left to right, are ready for a third year of the successful CBC TV program.

If an entrepreneur was caught not knowing the answers, it would usually bring a sarcastic response, followed by the two dreaded words from each of the panel members: "I'm out."

The concept for the show has gained international attention after it first aired on Japan's Nippon Television in 2001. Called Money No Tora, or Money Tiger, it was an instant hit with viewers. Similar adaptations have since been filmed in Australia, England, New Zealand, Israel, Finland and Nigeria.

Last February, Variety magazine reported producer Mark Burnett was talking with U.S. network executives about doing a show like Dragons' Den for U.S. viewers. Burnett had already gained a reputation for doing hit shows including Survivor and The Apprentice, and teamed up with Sony Pictures Television to make the pitch for Dragons' Den.

Variety said the working title for the U.S. show was Shark Tank and featured sharks rather than dragons. "If you want to be a great entrepreneur in the U.S., you had better be ready to swim in shark-infested waters," Burnett told the magazine.

Canadians, however, had been watching the show for the past two years. It was veteran CBC broadcaster Dianne Buckner that first proposed the idea of Dragons' Den to network programming executives. She had seen the British adaptation on England's BBC network and thought it would be successful in Canada.

"They asked me to take some time and research it more, and then I was surprised when they finally said they wanted me to host the show," says Buckner. "That first season I remember Canadians didn't really know about the concept. The response was a little slow with applicants. The second season we got a bit better response from pitchers, then this season interest has really taken off."

The program is showing signs of making a healthy return on investment for CBC executives. It attracted an average of 503,000 viewers last year, with about 270,000 viewers in the 25- to 54-year-old age bracket most coveted by advertisers. That puts the overall ratings up 32 per cent from the first season and 46 per cent among the 25- to 54-year-olds, according to CBC spokesman Jeff Keay.

Buckner says part of the reason Dragons' Den has been so popular with Canadians is the unpredictability. "Everything can be going well then suddenly someone will ask a question and a deal will disappear off the table just like that," she says. "This season you will see some very interesting companies with much more money being invested," she added, declining to give further details.

Sources did reveal two deals were made this season for $1 million each and one single deal was more than $1 million.

One of the biggest criticisms of the show during the first two seasons, however, is dragons not following through on deals.

After agreeing to a deal on air, the five dragons say they follow standard angel investing practices and investigate everything.

"There is definitely a due diligence process that goes on afterwards. We have to have that," says Jim Treliving, founder of the Boston Pizza chain who has been involved with all three seasons of the show. "If we find out anything is not what they originally made it out to be, forget it."

Treliving said they also look at the personalities of the people involved in the deal. "Life's too short. If someone is constantly giving us a hard time or trying to fight with us, it's not going to work. I would rather just walk away and lose out on a good opportunity than have continuous battles."

Fellow judge Arlene Dickinson, president and CEO of Venture Communications, agreed. "There are some deals that fall through when we look more closely, but that happens in business. The show is really an agreement in principle that we want to sit down and seriously talk more," she said.

Asked how she might react if someone tried to pitch a Calgary-based communications company like her firm, Dickinson laughed. "I would probably not invest in it, no. Service-based companies are hard to put a valuation on. It's a tough one," she said.

About 3,000 entrepreneurs auditioned to be on this year's show, with producers looking through hours and hours of demo tapes before inviting 200 of them to come to Toronto to pitch directly to the dragons.

One of the most interesting pitchers will likely be Carlos Hayes, of Toronto entertainment company Got Ass.

Hayes organizes contests for bars and nightclubs in the Toronto area to see who has the best butt. He says the company has been going strong for the past two years, and now he wants to expand into the corporate market.

The company has even attracted international attention, with Hayes producing Got Ass shows twice a year in Jamaica.

From a business standpoint, what did the dragons think? And which dragon won a prize for most beautiful body part? "I can't tell anyone, but let's just say I'm glad I came," Hayes says.

A few days before each episode airs this fall, producers call selected people to tell them they will be on the air. Business owners who have pitched to the show in the past say even that attention alone makes it all worthwhile.

"It was a great experience with the nationwide television exposure and straight advice from some of the most successful business people in Canada," says Toronto entrepreneur Andrew Applebaum, who pitched his Cereal Bar business on the show last season.

The dragons turned down a deal with Applebaum because they felt his food costs were too high and they couldn't get a quick return. The business was also still in its early growth stage, he says.

Applebaum adds the Cereal Bar has now survived the critical first two years of operation and experiences strong month-over-month growth. Thousands of commuters go by the kiosk every morning in the food court of Toronto's Commerce Court office building.

Jessica Bohrson remembers last season when she appeared on Dragons' Den with her brother Russell. They made a pitch to the dragons for their Calgary-based business, Atomic Tea. "We want to do for tea what Starbucks did for coffee," she told the dragons, handing each one of them a cup of tea at the start of her presentation.

"We got home and everybody was asking what happened. We just told them there were two possible endings that got filmed. In one, we got the deal and in another, we didn't. I wasn't sure which one would get put on the air," she says.

When the episode did finally air, viewers watched as Bohrson did get a deal. All five dragons invested a total of $120,000 for 50.1 per cent of the company. Discussions went on for so long that afternoon that she missed her flight back to Calgary.

"After the episode aired lots of people came in (to the retail location) saying we made a bad deal and we shouldn't have given up so much of the company. If I had to do it again I would definitely bargain a little harder with them."

Despite telling the dragons she wanted to open two or three new locations with their investment during the next year, Bohrson is still sticking with only the downtown Calgary store for now. She says in the city's tight real estate market, it's tough to find good locations.

Viewers will notice one of the biggest changes this season is a new dragon, Saskatchewan native W. Brett Wilson, who was named by the Globe and Mail in 1999 as one of the Top 20 Deal Makers in Canada. "My style of investing is very driven by the gut," he says. "I take a portfolio approach to all my businesses, but I don't believe you will have some underperforming while the others do extremely well. I want them all to do well."

Wilson says he has done some deals this season for less than 51 per cent equity, if it "makes sense."

"My comfort zone is real estate, oil and gas, but don't try and manipulate me when it comes to other areas. The answer I like to hear the most is: 'I don't know, but I will find out for you,' " he says. "I've actually been surprised at the quality of pitches this season. You're going to find they are very sharp and well-prepared this year."

Dragons' Den premieres Sept. 29 at 8 p.m. across Canada.

(David Hatton can be reached at hatton@businessedge.ca)