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-