Shark Tank episode aired February 1, 2013

I found tonite’s show intriguing even though only one entrepreneur received an investment from the Sharks.  Many lessons can be learned from tonite’s entrepreneurs. Two Sharky Awards and two Shark Chum Awards are being given to tonite’s contestants.

Platinum Sharky……Moshe Weiss from Soundbender

Moshe made a great attachment for the iPad which helped “re-direct the sound” in the direction of the user. In essence, it served to amplify the sound from the speaker. The margins were over 80% and he had sold over 7K units online. Moshe turned down a license deal from Mr. Wonderful and rejected Barbara’s offer to pay her a royalty because it would take cash out of the business when it was needed to support additional growth.

He recognized that he needed help with Marketing and ended up taking an offer from Daymond whom he believed could provide the expertise he lacked. This was a good outcome for Moshe. Tonite he got the cash infusion he was looking for AND the Marketing knowledge he was missing.

Gold Sharky Award…….Steven and Lena from XeroShoes

This husband and wife team did not get an investment because their valuation was way too high. With forecasted Sales of $1.2 million for the year, an appropriate valuation would have been about $2.4 million (2X revenue) rather than the $5 million (4X) they were talking about. They felt their valuation was fair because one of their competitors had just gotten a large investment at an insanely high multiple.

That said, I think these two have a nice company and will succeed. Barefoot running is a growing trend and their “running sandals” might be a big hit within this niche. I think the Sharks may have missed one here. I like their prospects.

Shark Chum…… Susie and Steve from Bibbitec had developed an expensive cleanable bib that required lots of consumer education in order to sell. Any product or service that needs customer education requires huge margins and these guys didn’t have it. They also aired some dirty laundry (pun intended) by talking about their family finance issues. Their emotion and frustration showed….never a good thing to do in front of the Sharks and 6 million other people.

Mike from Cuddletunes had developed a plush bear that could sing songs that were recorded on the internet. He said it could be used to connect with your kids when you’re on the road. Why not use Skype and just talk (or sing) to them instead of paying $60 for a teddy bear? The Sharks disliked him and the whole concept.

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About Shark Tank Ratings

Author of "Unlocking Your Entrpreneurial Potential: Marketing, Money, and Management Strategies for the Self-Funded Entrepreneur"
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6 Responses to Shark Tank episode aired February 1, 2013

  1. Hey, Tim…

    We have a lot of other factors that justify our valuation (in fact, 4 industry experts say $5M is too low for our company, especially since we haven’t broken into retail yet). We were open to a discount… but that offer didn’t show up. (Many people don’t realize that my counter of 10% was a 20% drop in valuation.)

    FWIW, we know companies in this space that had $2-5M valuations before they ever had a prototype, let alone revenue or 30,000 customers.

    What’s been most interesting to us about our product is that while it started as a “barefoot running” product, a large percentage of our new customers are not runners and either love the look and feel, or just like barefoot/natural movement.

    When a pack of teen girls ran up to us and said, “Oh! Those are SICK! Where did you get them?” we knew we were onto something 😉

    We’re now negotiating with some big retailers, and have been blowing up overseas… we think the Sharks missed a good bite here, too 😉

    • Steven,

      Thanks for your feedback on your Shark Tank appearance and on my blog. As I said in my analysis, I think the Sharks missed the boat on this opportunity. You two know your business and gave a great presentation. That’s why I awarded you a Sharky even though you didn’t get an investment.

      On the subject of valuation, we have very similar experiences. When my wife and I started our software company, we saw other companies receive investments from Venture Capitalists that were based on crazy valuations. Here we were with the first web-based eProcurement system….with real customers, real revenues, and real profits, yet others were getting investments and we weren’t (like you, we got offers but they didn’t make sense to us either).

      Why not us? In looking back at it, here’s what I learned. First, investors typically fund 2 to 3 companies in a given market niche. They are willing to throw lots of money at these companies at insanely high valuations. After that, valuations drop way down because they fear you’ll be too late to compete, and the other companies will be the winners in that space.

      Second, there is a hidden bias against husband and wife teams. For example, they thought our company was a “lifestyle company” and would say things to us like, “that’s a nice little company you have there”. They seemed to think we weren’t serious about growing our business. That one really used to annoy me.

      Third, unless you have an MBA from a Harvard or a Stanford, forget about getting a great valuation…..unless of course you are some how connected with the VC community.

      Fourth, they want to invest in companies that will go for broke and either “go public or die trying”. That wasn’t us and it probably isn’t you either.

      I believe that you, like us, will be successful. We successfully competed with three huge software companies with multi-billion valuations for a quarter century. You can too. GOOD LUCK!

      • First, congrats on your success!

        Secondly, we’re not worried about our future… we feel really lucky that we have a great team and the new people we’re bringing on are all first class.

        Of course, there’s a lot of road between where we are now and the island we’ll buy when we get that bajillion dollar buy out offer 😉

  2. xrumerpros says:

    I just added this webpage to my google reader, great stuff. Can’t get enough!

  3. Moshe Weiss says:

    Thank you for the accolades about my pitch and SoundBender Tim! As a self-proclaimed Sharktreprenuer (yes I bought the website) I can now say that I have gone Platinum! I am thrilled with my choice to go with Daymond. He is a branding genius and is going to truly help me build the SoundBender brand. SoundBender is going to do for iPad what lox and cream cheese did for the bagel! And let us say, AMEN!

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