Shark Tank episode aired December 2, 2016

This episode featured many different financing techniques and scenarios. Debt financing, down rounds, equity kickers, Silicon Valley valuations, were just a few of the scenarios on this episode. I’ve often said that when it comes to outside investment in a company, you’re only limited by your imagination. This episode proves my theory.

Ryan, Dave, and Chris from Inboard have developed an electric skateboard that sells for $1,400! They had previously raised $2.7 million which they used to develop their unique in-wheel motor technology, and grow the company to the point where they received $5.6 million in pre-orders. Now they needed money to produce and ship their product.

Rather than give up a chunk of equity, they opted for a $750K, 36 month term loan at 9% interest. However, they also need to pay a 4% equity kicker to secure the loan. The hope is that Sharks Lori and Mr. Wonderful can help them grow and are worth the 4% kicker.

Renaldo from PetPlate prepares and ships healthy food for pets. Despite having a great educational background (MIT),  relevant experience in the food industry, and a reasonable company valuation, there was no deal here. With only 100 subscribers, the Sharks weren’t convinced this could be a big enough business to warrant an investment.

Jeffrey and Michael from Nootrobox make chewable coffee. They came into the tank with a “Silicon Valley company valuation” of $40 million (with sales of $1 million). A multiple of 40X Sales is high even by Silicon Valley standards. If this were to be valued as a food company (which it is) the valuation multiple would be closer to 2X sales.

Not only did they have an inflated valuation, their presentation was awful. Although they may be very talented scientists/engineers, they could not articulate or prove their value proposition and left the Sharks cold. No deal here.

Lisa and Abe from Nomiku have created a device which cooks food “Sous Vide” style with the press of button. They have sold $3 million of them since 2012. They had previously received $875K in their “seed round” (early investment by a Venture Capitalist or Angel Investors), and received a $2 million convertible loan at a $10 million company valuation. The problem here is that the company valuation is now just $5 million. This is referred to as a “down round”.

Guest Shark Chris Sacca took a liking to Lisa and was interested in making a deal, but because of the down round, that would have left them with very little equity. He ended up making an offer of $250K for 10% under the condition that Lisa and Abe go back to their current investors and convince them that the Lisa and Abe end up with a 40% interest in the company. Chris’s rationale was that founders need to retain a significant equity position to stay motivated.

It sounded to me like there are too many moving parts in this scenario and the deal may never get done.

  OVERALL RATING OF THIS EPISODE…………….C+

 

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Shark Tank episode re-broadcast on November 25, 2016

This week’s Shark Tank episode was originally aired on September 23, 2016.

Shark Tank episode aired September 23, 2016

Excellent Shark Tank Season 8 premiere!  The show featured two food/beverage companies, one footwear company, and one technology company. Also, for the first time ever, the show  included all six Sharks (normally there are five).

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Shark Tank episode aired November 17, 2016

After last week’s terrific show, this episode was uninspiring….no Sharky Awards will be given this week.

That said, there were a couple of deals.  Ben and Ariel from Pupbox have a subscription- based service that caters to puppy dogs.  Each month they ship a doggy care package with toys, treats, etc. Since most dog owners are crazy about their dogs, this is a good business. They expect to do $2.5 million in sales next year. Most of their marketing efforts are thru social media. In fact, they have 75K followers on instagram. They struck a deal with Shark Daymond for $250K for 15% equity. He is also a dog-crazy dog owner.

Vance from Line Cutters gave a very powerful demo of his fishing line and thread cutters. He cut four lines of varying thickness with ease using his ring-like cutting tool. Like most great innovations, this came out of Vance’s own personal experience as a passionate fisherman. He often became frustrated when cutting his line and so he invented Line Cutters. He did a deal with Daymond for $120K for 33% of the company.

Hunter and Alex from Barbell made denim clothing for weightlifters. The pants contained 1% spandex and that allowed people with large thighs to comfortably wear their pants. These guys have a great business! Their sales are $2.3 million and they have a net profit of $500K per year. They would have scored a deal but they came into the tank with a valuation of $10 million……probably double what it should have been. Also, the Sharks were not crazy about denim clothes in general, because “the older they get, the cooler they look”.  This could hurt repeat business.

Catherine from EnergyBits was totally possessed with the idea of taking 30 (or more) algae pills everyday to increase your energy level. She also came into the tank with an absurdly high valuation of $10 million. With sales of $300K and no proof that this actually works, she was operating in an alternate universe.

OVERALL RATING OF THIS EPISODE……….C-

 

 

 

 

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Shark Tank episode aired November 11, 2016

This episode had the strongest group of entrepreneurs in Season 8. After showing several mediocre episodes during the World Series, the Election, etc. the Shark Tank producers brought their “A” game tonight. Each entrepreneur got a deal! I can’t remember the last time all four entrepreneurs got a deal.

There were two entrepreneurs deserving of a Sharky Award for their excellent presentations.

Sharky Award

Sharky Award- Chi’ Lantro

Jae Kim from Chi’ Lantro has a fleet of food trucks and three restaurants serving his Korean Barbecue. Despite having college expenses and a failing business, Jae Kim had managed to save $30K to start Chi’ Lantro. This speaks volumes about him and and his determination. Self-funding is THE best way to fund a start-up, but it requires you to cut back on personal expenses and live below your means…..something many people aren’t willing to do. Mark Cuban said Jae had achieved the “American Dream” by starting his own business with his own savings.

His business had sales of $4.7 million this year and will have sales of $6 million next year.Shark Barbara had invested in Tom + Chee (they won my Sharky Award for Best Presentation of Season 5) and has helped them grow from $1 million in sales to $51 million! Since this is a similar business and her experience and knowledge is transferable, Barbara invested $600K for 20% equity……..a great deal for her and Jae Kim.

Shark Tank

Sharky Award-Milk Snob

Equally impressive was Melanie from Milk Snob. Her product is a baby’s car seat cover that doubles as a mom cover-up, allowing them to comfortably nurse their babies in public. She had sold $1.2 million of her product in the last 18 months. She knew her numbers! Her price to consumers was $36 and her cost to produce one unit was $7. With margins like that, and increasing sales, the Sharks became very interested.

Melanie had targeted Shark Lori as her desired partner. She got her wish when Lori agreed to invest $150K for 10% equity. This is another good deal for both parties.

Jack from Jack’s Stands & Marketplaces is a 10 year old dynamo. He builds lemonade stands and trains kids how to run them effectively. So far he has sold 7 stands, but would like to expand his business outside of Denver. He got a $50K low interest loan from guest Shark Chris Sacca. Jack will definitely be in the running for a Season 8 Sharky Award for Best Presentation in the Youth Division.

Junior from Toor had developed an app-driven Real Estate Lock Box. There was some discussion among the Sharks that something very similar to this already exists. Even with the confusion, Junior landed a deal that included some equity and debt financing. All the Sharks agreed Junior was a great salesman, but I have a funny feeling that this deal may not happen once due diligence begins.  Too many unanswered questions, no sales history, possible patent infringement, etc. Looks too risky to me.

OVERALL RATING OF THIS EPISODE…………A+

 

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Shark Tank episode aired November 4, 2016

Many entrepreneurial lessons can be learned from this week’s Shark Tank episode.

First up was Meagan from EcoFlower whose faux flower business was booming (not blooming!). Meagan had great instincts but no money when she started her business. In fact, she started her company with just $700. In order to scale EcoFlower, she was forced to sell 75% of her company to three angel investors for a total of $30K. She has been able to sell $2.8 million of her artificial flower arrangements in 18 months, so this was not necessarily a bad strategy.

However, the Sharks felt like she had given away too much equity (early investors usually don’t like it when there are other investors who then have to agree to sell or be diluted). She had to walk a tightrope (with no net!) in order to grow her business without having her own money. Her strategy proved successful when Daymond made a deal for $400K for 20% requiring each partner to give up 5% of their shares.

THE MORAL TO THIS STORY…..If at all possible, save some money before starting your business. If Meagan could have saved $30K, she would now be worth $2 million vs. $400K and would own 80% of the business vs. 20%. That’s a great Return-on-Investment!

Next into the tank was Pittsburgh native Hilary from Style Club, with a line of clothes and hats for young women. Her line is sold exclusively thru Urban Outfitters. Hilary uses “style influencers” to promote her products. This is a new phenomenon whereby companies pay people with millions of social media followers to wear or use their products (think Kim Kardashian with her millions of followers wearing your clothing). The result so far….Hilary has sold over $400K in 3+  months.. Mark Cuban walked away with a great deal by offering a $500K Line of Credit at 8% interest for 22% of the company.

Sean and Bryan from Safe Catch developed a mercury measuring device for fish. They had previously raised $14 million and spent it all over the course of a decade trying to get fish distributors and government agencies to use it. They then changed their business model to include selling “the healthiest tuna” in cans.

They have managed to get their tuna into 2100 stores but still aren’t profitable. They came into the tank with an extremely high company valuation of $20 million, they have already spent $14 million, and are currently losing $70K per month. Not the kind of business any investor would be interested in.

Kash from #besomebody started out giving an exciting presentation that included ninja warriors, dancers, and a star soccer player. It was all downhill from there. His platform was an online marketplace for “experiential learning”.  The Sharks’ collective BS meter was now running high.

In addition to having a platform of questionable value with limited scaleability potential, Kash was described as abrasive, a poor listener, talked too much, had a poor understanding of business, and was a con man. This got ugly in a hurry. No deal here.

OVERALL RATING OF THIS EPISODE………….B-

 

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Shark Tank episode aired October 28, 2016

No sense airing a great episode when competing with a World Series game. When the highlight of the show is two grown men dressed as potatoes, you’re certainly not in danger of wasting your “A” material!

Although this eclectic collection of entrepreneurs was weak, they were entertaining! I’d give this episode a D for entrepreneurial content but an A for entertainment value.

Jorrae and Kelly from Lulu Bang led off this show with their barbecue sauce. Their provocative pitch was fun (“Our product will make you want to bang everything”) but generated no interest from the Sharks. Although they are carried by 170 Walmart stores, the Sharks felt their initial sales were a little light. They also felt a product like this would be hard to sell online because of the low cost and high shipping weight of their products.

Despite not getting a deal, I feel like the two sisters (and daughter) will succeed. As Shark Lori said, “Some women fear the fire, and some women become the fire”. They are already the fire.

Aaron and Andrew of Unpack gave a great comedic, suspenseful presentation. The problem was, no one knew what business they were in when they got done pitching. They ship a customized box of used clothes to a customer’s travel destination so the customer doesn’t have to pack their own clothes. So far they have a grand total of 38 customers.

Mark Cuban told them “your name sucks” and “you don’t know what your business is”. Other than that, it was a great day for Unpack.

Dave from SunScreenr is a credible scientist with two PHD’s but not such a great businessman. He had invented a device that shows you if you’re protected from harmful UV rays. Both Mark and Robert thought people wouldn’t have the discipline to use it. Although Dave had sold 1200 units on Kickstarter, he hadn’t shipped the product so he had no proof that the Sharks were wrong. Dave valued his company at $8 million.

For some unexplainable reason, Mr. Wonderful (Kevin O’Leary) struck a deal with Dave for $800K for one-third of the business. Dave went from a $8 million valuation to a $2.4 million valuation and took the deal. This deal didn’t make sense to me.

The normally dour Mr. W. must have had a couple of glasses of his own wine before the show, because he was downright giddy when Riad and Alex from Potato Parcel came out dressed as human potatoes. He was so impressed, he struck yet another nonsensical deal with these two who ship potatoes with a message thru the mail. Riad (who is Jimmy Kimmel’s doppelganger) bought the business from Alex for $42K with the hope that he could “takeover the world of potatoes”. Riad, like Kimmel, can ask a totally outlandish question with a straight face.

When he asked Shark Robert and Mr. W how they could help him, I almost fell off my seat laughing.

I quickly switched over the World Series and watched the Indians win a 1-0 thriller.

OVERALL RATING OF THIS EPISODE ………..C

 

 

 

 

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Shark Tank episode aired October 21, 2016

The four entrepreneurs appearing on this episode are a good representation of “real world” startups…..one-man (or one-woman) shows, underfunded, in business two or three years, not profitable, and full of energy and confidence.

Melissa from Sandi Lake Clothing is an awesome designer. Her line of kids tee shirts were very cool, and she had sold over $340K in two years.  She received an offer from Barbara that called for her to invest $100K for a 40% stake. Barbara wanted one of her portfolio companies  (Grace and Lace) to take a minority position in Sandi Lake to help Melissa with back-office management tasks, but Melissa declined the offer because she didn’t want to “team up” with another company……a predictable response from a young entrepreneur. The entrepreneur’s passion overtakes the rational thought process of thinking through the benefits of having a Shark and a complementary company leveraging their collective resources. Sandi Lake is like Melissa’s first-born!

18 year-old Joshua from Parker’s Real Maple had Sales of $360K and had an overly optimistic forecast of $1.5 million for the current year…..typical of many young entrepreneurs. Joshua had also made the mistake of buying the materials to support a P.O. for $125K, but the order never came through. This prompted Shark Robert to make this profound comment, “It’s never a done deal until their check clears your bank”. This is particularly true when selling to larger companies that make decisions “by committee” and are subject to “de-committing” if their situation changes.  Joshua will be successful when he gains some more real-world business experience.

Cindi from SafeGrabs has a great sense of humor. She did a nice job presenting her multi-purpose kitchen accessory. She had sales of $310K over the past three years. She ended up getting a deal with Shark Lori for $75K for 25% equity.

During her pitch, Shark Lori said,” Entrepreneurs are the only people who are willing to work 80 hours a week to avoid working 40 hours”. So true!

Mikey from SiliDog is one year out of college and he makes customized dog tags. He was very poised and confident in making his pitch. He had sales of over $140K in the last 14 months. He was so good he got the Sharks to bid against each other, and eventually landed a deal from Lori that called for a $100K investment for 30% equity and 50 cents a tag until she recoups her investment.

                          OVERALL RATING OF THIS EPISODE………… B-

 

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