This blog reviews each episode of the Shark Tank from an Entrepreneur’s point of view. “Sharky Awards” are given to the entrepreneurs with the best overall performance.
Platinum Sharky….David and Stuart from Games2U
These guys have a great business and gave a great presentation. They asked for $500K for 10% of the company. In the end, they turned down Kevin’s offer of $500K for 51% of the company. They made a very good decision!
Investors have a way of finding your weakest attribute and using that as justification for their low-ball offers. In this case, despite the fact that Games2U had growing revenues of $5 million, they only had profits of $125K. Kevin valued their business at about 8X profits ( EBITDA). This is not an unreasonable multiple. And so Kevin thought the value of the business was $1 million not $5million.
The investors also believed the company would have to continually come up with new products to attract new customers. Of course this would also be a drag on profits.
The investors also believed people would be unwilling to spend $400 on their kid’s birthday and this would slow revenue growth. Nothing could be further from the truth! Most people today would do anything to give their kids a great birthday party. Foxworthy disagreed by saying his father would “turn on the sprinklers and tell him he was at a water park” on his birthday. That was my generation too. The world is different now Jeff! I was happy to bowl one game and get one slice of pizza. Today parents hire entertainers, clowns, and DJ’s for their 5 year olds and their friends.
Gold Sharky…..Chris Spencer from Hydromax
Chris had a great product (hydration system for football players to avoid heat illness) and presented himself very well. He was passionate about his product but had to “mothball” the company so he could earn a living for his family by working for a big company.
Foxworthy saw the merit in his idea and took a flier by investing $50K for 50% of the company. I think this may work. I kept envisioning a military application for this product too. Good job, Chris and Jeff.
Shark Chum Awards…..First, Les from Carsik Bib. He invented a barf bag for kids in infant seats. The highlight of his presentation was when a dummy puked a combination of split pea soup and corn. Les, I think you may have a future in special effects. Second, Andy from Ecomowers. The investors actually became hostile towards Andy when they realized he was demonstrating an existing push lawnmower with a new, eco-friendly name. He admitted he had never sold one and ended the session by insulting the investors when he accused them of not loving the environment. NICE WORK ANDY!