No superstars tonite. Each of the four entrepreneur/contestants had some real strengths and some glaring weaknesses. I couldn’t justify giving any Sharky Awards for entrepreneurial excellence……nor could I justify giving the dreaded Shark Chum Award to the also-rans. Instead, I will analyze the strengths and weaknesses of each entrepreneur’s presentation.
Matt & Emily from Baker’s Edge…..Strengths: This husband and wife team had generated $5.8 million in revenues from their patented brownie pan. They were polished and gave a nice presentation.
Weaknesses: Baker’s Edge had sales of $1.7 million in a previous year. This past year, sales were down by 80%. Investors hate investing in companies with decreasing sales….even if there is a valid reason for a spike in sales (in this case, Oprah recommended their product and they were swamped with orders). Valuations are typically based on the last twelve months revenues (LTM revenues). Matt & Emily also waited too long to introduce and promote follow-on products. They were perceived by the Sharks as not hungry enough.
As Shark Robert put it (with a tip of the hat to Andy Grove, the former CEO of Intel), “Only the paranoid survive”. Matt & Emily’s time to seek investment and introduce new products was just after Oprah recommended them.
Dr. Sylvie and Nicole from Foot Fairy……Strengths: These two have developed a clever iPad app that measures kids’ feet and connects to Zappos for shoe recommendations. Their strength…….passion, passion, and more passion.
Weaknesses…….The general feeling among the Sharks was that their passion was not enough to warrant an investment. Dr. Sylvie and Niclole had some trouble differentiating their app from other similar apps (they eventually said theirs was more accurate). They hadn’t seen their first commission check from Zappos. They were just too early.
Despite these objections, Mark Cuban took a shot and invested in them because he believes sensor technology will be a big thing in the very near future. He had several contingencies which will be examined in the due diligence process.
Wayne and Scott from Tie-Not……..Strengths: These two have developed a gadget that helps make water balloons easier than ever before. They had increasing annual revenues…..most recently $385K.
Weaknesses: Their profits were only $40K last year. Based on a company valuation of 5X profits or 1X revenues, their company value was somewhere between $200K and $385K. Shark Barbara’s offer was a fair one, but they rejected it because they didn’t want to give her 25% equity. They wanted to give her 20%. This was a very silly reason to reject her offer.
Kaeya from BZ Box….Strengths: Kaeya was a sophomore at Emory U. She invented a flat folding box that assembled in seconds. She had won a large Collegiate Entrepreneur Contest and she was a very, very, smart and passionate person. To Kaeya, failure is simply not an option.
Weaknesses: In Kaeya’s case, her strengths are also her weaknesses. She is very confident and determined. I think this was misinterpreted by Barbara who proclaimed, “You are not an entrepreneur”. I believe some day Barbara will realize what she probably meant to say, “You are not the type of entrepreneur I like to invest in”.
Why? All the Sharks (accept Lori) seemed to think Kaeya didn’t listen to their advice. She probably didn’t listen well enough, but she’s young and inexperienced. She begged Lori to invest in her and her company. She was a little over the top, but eventually she got the deal.