This was one of the most thought-provoking Shark Tank episodes ever. I had so many questions after watching this episode.
How can a company with no sales and with no product experience be worth $10 million? How can a company with $80K in sales be worth $14 million dollars? Are we entering a new Wall Street bubble like circa 2000? Has the whole investment world gone mad? Does this mean I just don’t get it (even though I co-founded an internet software company myself)?
I couldn’t give any Sharky Awards tonight, even though the entrepreneurs were very talented. Here’s why…….
David from Fixed billed himself as the “Ticket Hero”. He has created a smart phone App that helps people get out of paying parking tickets based on administrative errors on the ticket (wrong model, wrong license plate, etc.). He has ticketed people take a picture of the ticket and email it to him. Then his software analyzes the ticket for errors and gets many of them dismissed. He gets paid a 35% success fee.
The cost to acquire a new customer is $5 and his average profit per customer is $5. This didn’t sound like a winning formula to me. He valued his company at $14 million with $80K in annual sales. Somehow he got Mark Cuban to invest $700K for 7% of the company. The whole thing just didn’t smell right to me. I’ll be surprised if this deal gets past due diligence.
Ann and Dave from Hatch Baby had tons of relevant domain expertise in the baby care information industry. In fact, Ann gave one of the best verbal presentations I’ve ever witnessed. They have developed a smart scale that is designed to weigh the baby before and after feeding to determine how much breast milk he/she has consumed.
Ann said when she was a new Mom, she always wanted to know why her baby was crying. In the previous generation, parents would say, “Let the baby cry, its good for their lungs”. Now parents don’t want babies to cry, and are willing to spend big money to comfort them. Ann forecasted 20,000 units at $300 per unit for Year 1. Very optimistic.
Ann was so persuasive, that even with no sales and no product, she convinced Shark Chris Sacca to loan them $250K (part of an existing convertible note capped at a $7.5 million valuation).
I really like twins Antonio and Tasha from Village Scholarship. I think they have a great concept that can help kids raise money to pay for college, but they hadn’t finished their website and were too early to the tank.
As Chris Sacca said afterwards,” Ideas are cheap. Execution is everything”. I actually think these two will do very well on their own once they tweak their business model and scale back their short term vision.
The comic relief was provided Nicholas and Alessia from Beard King. They have created a beard trimming bib to prevent hair from messing up the sink. Unlike the hi-tech contestants, they actually had real sales, a real product, a great marketing campaign (including a viral video that got 20 million views!), and big margins. They ended up leading a chant to entice Shark Lori to invest in their company, and Alessia abdicated her throne and dressed Lori like a Queen (of QVC?). Very funny segment.
Lori was so taken, she took a 45% equity stake in their company.