Shark Tank Season 4 Finale……Part 2 aired May 17, 2013

Sharky Awards will be given to three entrepreneurs appearing in this episode…..

Season 4 Sharky Awards

Platinum Sharky Award…..Corey and Trew from Tom + Chee

Just like the “Soup Nazi” on Seinfeld, these two have created a place where people line up for hours just to get a grilled cheese sandwich and a bowl of tomato soup. The only difference is that they’re actually nice to their customers.

So nice that they keep coming back for more, and don’t mind the wait. These two did $1.5 million in sales last year and are on their way to fame and fortune. I personally think they can kick Subway’s butt with the right franchisees and the right partners.

This is, as Barbara put it, “a run away hit” and a  these two are candidates for Best Performance by an Entrepreneur in Season 4. Barbara and Mark Cuban invested $600K for a 30% stake in the business. They were so impressed with this business they wanted the “first right of refusal” on new franchises in Texas (Mark) and NYC (Barbara).

Gold Sharky Award……Ryan and Kunal from Verbalizeit

These two Wharton classmates teamed up to create an internet-based translation service. They have a free App which includes one free call. After that, they charge 50 cents to $1.oo per minute for translation services anywhere in the world.

They generated significant interest from the “Techie Sharks”. Mark Cuban was interested, but talked about the advantages of computer-based translation over human translation services. Turns out Mark is already working on a computer-based translation service and he thought combining the two would make a great offering.

Mr. Wonderful (who sold his software company for billions) also jumped in with the same offer Mark made…..but for less equity. Ryan and Kunal shocked everyone (including me) by taking Mr. Wonderful’s offer. They must have thought the additional 5% equity Mark wanted wasn’t worth it. This will be an interesting one to keep an eye on to see how it plays out.

Silver Sharky Award……Ryan and Daniela from Ryan’s Barkery   

Ryan (11 years old) and his Mom bake dog treats and sell them for $4 a bag. They wanted $25K for 25% of the business in order to build a website to increase their distribution.

Ryan knew his stuff and was a real cute kid. When asked what his friends thought of his business, he said he thought they were a little jealous. The Sharks couldn’t NOT invest! They couldn’t kick this kid to the curb. Shark Barbara stepped up and made it happen. Mr. Wonderful could be heard in the background telling Ryan to take the money and buy a car. Funny!

Shark Chum……Val from Three Day Rule was extremely smart but had trouble differentiating her online dating service from the big online dating services. She was a “pre-revenue company” and so most of her thoughts and answers were based on theory, not reality.  Too risky for these investors.

Shark Tank Season 4 Finale….Part 1 aired 5/17/2013

This episode of Shark Tank showcased four strong entrepreneurs. Two received Sharky Awards for entrepreneurial excellence. This episode’s Sharky Awards go to….

Platinum Sharky Award…..Paige and Ashley from Stella Valle

What a great story! These two sisters graduated from West Point with Business degrees and fought in Afghanistan  for 15 months. After leaving the service, they started a jewelry company with a $1000 loan and designed high-end costume jewelry that sells for $50 to $350.

After seeing these two in action you couldn’t help but want to invest in them and their company! They had a great story and a unique product that was perfect for TV or stores. Of course Shark Lori was interested and could envision these two on QVC. She teamed up with Mark Cuban to make a $150K investment for a 35% equity stake.

Gold Sharky Award…….Robert from Geek Chic

This self-professed geek had designed and built high-end furniture that could easily be converted to support game boards, laptops, etc. The Sharks were initially not impressed. They muttered things like, “furniture is a crappy business”.  Shark Robert Herjavec dropped out, but circled back and ended up investing $300K in the business.

I believe the two Robert’s shared a common vision, and saw Geek Chic more as a brand with long-term potential….not just a furniture company. This investment took a leap of faith for Herjavec, but being somewhat of a geek himself, he IS the perfect partner for this company.

Shark Chum……J. from Jones Scones had been in business for 10 years and his sales had been declining for the last three years. He admitted making some mistakes by not being more involved in his attempt to grow the business. Investors simply don’t respond well to decreasing sales, no matter what the reason.

Brian from Lugless  had a great luggage transportation concept but faced major competition from the likes of FedEx. Brian also used the phrase, “Your wrong!” when responding to several of the Shark’s statements. Better to drop that phrase or get eaten alive!

 

 

 

Shark Tank episode aired May 10, 2013

A very exciting episode tonite. All four contestants were passionate, but only one impressed me enough to win a Sharky Award.

Platinum Sharky Award…….Mary Beth from Kazam

Mary Beth nailed her presentation. She confidently asked for $300K for 20% equity stake in her company that makes kids’ bicycles with no pedals (these are already popular in Europe). Her valuation of $1.5 million was very realistic. She had sales of $611K last year and was forecasting $1.5 million in Sales this year.

Mary Beth knew her costs, pricing, and margin data inside and out. She was actually so calm and composed in her presentation that Barbara questioned her passion and killer  instinct.

Mark Cuban made Mary Beth an offer contingent on her being able to convince Barbara to participate in the deal. Mary Beth quickly convinced Barbara that she was focused, dedicated, and wanted to dominate her market segment. She then got Mark and Barbara to reduce their equity stake proposal from 40% to 32% for their $300K investment by confidently stating, “We valued our company correctly.” The Sharks knew she was right and agreed to her counter offer.

Shark Chum…….James and Brian from Track Days set a Shark Tank record by getting the fastest “I’m Out” of all time (from Mark Cuban).  They had barely introduced themselves when Mark repeated his lack of interest in the deal. These two asked for $5 million to make a movie about motorcycle racing. Their logic was absurd. They wanted to have $5 million in the bank without having a script, producer, or actors signed. That way they could attract good talent and other investors. To use another show biz analogy….Nice work if you can get it!

Lance and Tom from Pink Shutter Photo Booths somehow managed to get a $300K investment from Barbara despite not having anything proprietary or unique about their business. They took  a deal that required them to pay Barbara a salary of $100K a year. So after three years Barbara gets all her money back and still owns 33% of their business! Barbara arguably has the best track record for helping entrepreneurs, but this deal was too one-sided for me.

Baby’s Bad Ass Burgers wanted to open a brick and mortar restaurant instead of expanding their successful fleet of burger trucks. Every Shark disagreed with their strategy and no offers were made. Lesson learned…..if you carve out a niche with little competition, and you’ve been successful, continue to concentrate your resources on that niche and make every penny you can before moving into another market…..especially one with lots of large competitors.

Shark Tank episode aired May 3, 2013

Two Sharky’s are being awarded for entrepreneurial excellence tonite.

Platinum Sharky Award…….Samantha and Conor from Misto Box 

These two met in college while taking courses in entrepreneurial studies. Their internet subscription-based coffee service is similar to the book of the month club. They started their company by raising $9K on Kickstarter (crowd-funding site) and self-funding an additional $12K.

They were very well prepared and confidently answered all of the popular Shark questions (see my May 1 post outlining the Sharks 10 most asked questions). They ended up getting a deal from Mark Cuban for $75K for 30% equity. This was a great fit because Mark has lots of experience with internet sales of subscription-based products and services.

Gold Sharky Award……..Carole from Mee-Ma’s Louisiana Gumbo Brick

Carole had created a great tasting gumbo and managed to get into a couple of Costco stores. Carole admitted that she had little business acumen and needed help running the business. Normally companies that have limited business expertise don’t attract investors, but Mr. Wonderful (of all people) and Lori Greiner stepped up and will invest $200K for 50% equity. It wouldn’t surprise me if they install their own management team to run the company due to Carole’s weak infrastructure.

I doubt if this kind of investment would be made in the “real world”, but it was a great made-for-TV moment. Carole had worked hard as a truck driver, entrepreneur, and a mother so she and her daughter could make ends meet. Someone said “Mr. Wonderful does have a heart.” Mark Cuban slowly looked up and said dryly, “Let’s not go that far”.

Shark Chum Awards……Michael from Squirrel Boss created a bird feeder that sends an electric shock to squirrels trying to eat the bird feed. It was a scary product and Michael was a scary contestant. After every one of the Sharks said they were out, Michael stated that he wasn’t going to leave until he got an offer……and he meant it. Scary entrepreneurs never get investments.

David from Vermont Butcher Block & Board Company was also a bit odd. He wore a completely tie dyed outfit and told a couple of Sharks they “were wrong” about their analysis.  Crazy looking entrepreneurs also never get investments.

Update: eCreamery was a contestant appearing earlier this year. They are doing very well with their ice cream business. They are now projecting $2 million in sales next year. Despite the fact that they didn’t receive an investment from the Sharks, they won my Platinum Sharky award for their episode. I had predicted, “they would do just fine without the Sharks”. Sharky’s go to the best entrepreneurs, not simply to the one’s getting an investment.

10 most popular questions asked by the Sharks

I have watched almost every episode of Shark Tank for the last three seasons. The Sharks ask every single entrepreneur/contestant one or more of the following questions. To get an investment from a Shark (or any other investor), an entrepreneur needs to be ready to answer each of these questions…….

1. What were your actual sales for the last 12 months?

2, What is your selling price? What is your Business Model?

3. What is your cost to provide the product or service?

4. Do you have a patent?

5. What makes your product or service unique?

6. What does it cost to acquire a new customer?

7.What are you going to do with the money if you get an investment?

8.How much of your own money have you put into the business?

9. How did you come up with the company’s valuation?

10. Is the business easily scaleable  (can the business grow rapidly without lots of my time and effort)?

These 10 questions are closely aligned with those asked by Venture Capitalists, Angel Investors, and other potential third party investors. Any entrepreneur seeking third party investment should have a solid Business Plan, be able to give a compelling presentation, and be ready to answer these 10 questions.

 

Shark Tank episode aired April 26, 2013

To use a baseball analogy, the entrepreneurs appearing on tonite’s show didn’t hit any homeruns…….but they did have two solid singles. Jeff & Dusty from Shell Bobbers and Nate from The Mission Belt Company are the recipients of this week’s Sharky Awards.

Season 4 Sharky Awards

Platinum Sharky Award…….Jeff & Dusty from Shell Bobbers

These two did a solid job presenting their unique fishing bobber. They had previously run a very small “proof of concept” test and sold 440 units which (only) generated about $1000 in Sales Revenue. This wasn’t enough proof to interest the Sharks….except for Mark Cuban.

Mark was so impressed with these two he proclaimed, “You’re out there hustling and doing everything exactly right!”  Mark is the type of investor who will sometimes invest in an entrepreneur he believes in, even if they don’t have a long track record of success. He put his money where is mouth is and invested $80K for a 33% equity stake.

Gold Sharky Award…..Nate from The Mission Belt Company

I thought Mark was going to do it again…..this young man was a clone of Mark when he was the same age. Nate sold his “belt with no holes” door to door, he had tremendous confidence in himself, he ate PB&J’s to conserve cash for the business, etc. He truly had great focus and passion.

But in the end, Nate took an offer from Daymond. Even Mark had to admit Daymond would be a better partner for Nate due to his retail and branding expertise and contacts. Nate even negotiated a slightly better deal by getting Daymond  to lower his required equity stake from 40% to 37.5%.

Shark Chum Awards…….Tracey and Danielle from Wicked Good Cupcakes have a nice product that is shipped in mason jars. They took a deal from Mr. Wonderful that will cost them too much…..both in the short-term in the long-term. They agreed to initially pay a royalty of somewhere in the neighborhood of 15-20%. That will take too much cash away from them and their business……5-10% is more typical. Once Mr. W. gets his initial investment back, they then agreed to pay $.45 per cupcake in perpetuity. That’s a lot of cake!

Aaron from Tremont Electric is simply brilliant. His Personal Energy Generator concepts and his portfolio of clean energy ideas/patents is impressive. However, Aaron needs a business oriented partner in the worst way! Perhaps then he wouldn’t have made the mistake of asking the Sharks for a $2 million investment without having a strong track record.

 

 

 

Shark Tank episode aired April 12, 2013

At the end of each Shark Tank season, I present Sharky awards to the best entrepreneurs in various categories. Tonite, I have a potential candidate for Most Intriguing Entrepreneur of the year……… Michael from Platetopper.

First, let me say that Michael has a killer product….. plastic covers that easily adhere to plates of various sizes. These covers replace Saran wrap and aluminum foil and can be re-used a number of times. The Sharks were extremely interested in investing in his company, but Michael outsmarted himself. He succeeded in getting an investment that was 70% less than what he had already been offered by the Sharks!

His strategy was baffling. He came in asking for $90K for 5% of the company (a $1.8 million valuation). Understandably, he wanted to give up as little equity as possible. He was in the driver’s seat as he had booked over $1 million in orders on QVC.

Daymond offered him $1 million for 25% of the company following Lori’s offer of $900K for 30%. This valued his company at $4 million which was more than double his initial valuation! Rather than accepting one of these great offers, he played it too cute and waited for the other Sharks to make an offer. The Sharks pressed him for his “new” valuation. At first he (correctly) refused to quote a number, but he eventually relented and said “something around $14 million”!

Whether Platetopper is worth that is beside the point. This is simply not how the investment game is played. First, the entrepreneur should always present a valuation that is a little on the high side and be willing to negotiate from that starting point. Second, investors typically want 30% equity (or more), so starting at 5% is unrealistic.

That said, if you ever get an offer based on a valuation more than double yours…..take it!

Michael ended up getting a revised offer of $90K for 8% from Lori. On second thought, maybe I should nominate Michael for the “Worst Negotiator Award” at the end of Season Four. He succeeded in turning down a $4 million offer and accepted a valuation a little over $1 million. I’m sure that didn’t teach him that in college (Princeton University!!!).

Shark Chum….Ginelle from Coolwazoo has made some very bad business decisions. For example, she pays $30 per unit and sells it for $32…..she received orders for 14,000 units as a result of an appearance on the Today Show and couldn’t fill them….. and she received 85% rejects from her supplier. When all the Sharks passed on the opportunity (see above), she started crying. I was surprised to see Lori change her mind and offer her $65K for 25% equity. Puzzling!

Bruce from No Fly Cone brought his buddy Seth MacFarlane with him to impress the Sharks. This product requires dog poop to attract flies. This repelled the Sharks and they passed on the opportunity.

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