Fourth Guest:  Dominique McClain Barteet, OneSole

Dominique bought the same shoe in several colors a few years ago, and thought that there must be a better way. So she invented an innovative concept in shoes: one sole with many tops.

 

She was seeking $500,000 for a 20% stake, a pre-money valuation of $2,000,000.

 

As she pointed out, the concept of interchangeable tops is great for the travelling women – now she can pack one shoe with a bunch of tops and save a lot of space.

 

She invited Barbara to try them out, and she loved them. (Good thing, because her feet were killing her.)

 

The shoes sell retail from $70 to $85. The tops are separate and sell from $12 to $30.

 

She has had $20,000,000 in sales in the last four years, and is in 2,000 stores in 30 countries. Last year, sales were down at “only” $3.5 million. She has been on QVC six times. Her profits last year were over $1,000,000.

 

Her margins are good, and she has two utility patents and two design patents issued, with more on the way. She is trademarked and copyrighted in 98 countries.

 

She wants an investor to help her with sourcing. She is a pharmacist by profession, and started the business as a hobby. Now, she knows she needs a partner to take it to the next level. She is still running a pharmacy out of the shoe warehouse.

 

Robert pointed out that she was selling herself short. Many business owners with far less success exude in confidence, but she didn’t think of herself as a business person. She was under-confident, which is rare and quite refreshing.

 

She wants the funding to fill the big orders she already has – she needs it for inventory. She has lots of demand of which she can’t take advantage.

 

Robert suggested that all of the sharks go in for $100,000 each for a total of $500,000 for 50%. Interesting!

 

Daymond said he didn’t need any partners, and would give her $500,000 for 35%.

 

Barbara said it would take to much of her time, and she was out.

 

Kevin O suggested $500,000 for 51%. He would immediately sell the company and make her rich. She didn’t want to do that.

 

Kevin H wanted to partner with Robert – $250,000 each for 50%.

 

She took Daymond’s offer and was ecstatic!

 

Our Analysis:

• Presentation: She was very poised and professional, befitting of the CEO of a $20,000,000 company, but also sold herself a little short.
• Business Strengths: She has a great concept, and great sales. She has good margins and good intellectual property protection. This appears to be a big winner.
• Business Weaknesses: She needs partners in sourcing (manufacturing) and distribution to take her business to an even larger market. It was very unusual for her not to be focusing on the business full-time.
• The Deal: She asked for $500,000 for 20%.  Robert countered with $500,000 for 50% with all the other sharks. After a little more negotiating, she took Daymond’s offer of $500,000 for 35%, and we think it was the right thing to do.
• Sharks: They were very respectful, except of course for Robert, who we think was just trying to live down to his reputation.

Next Step Suggestions:

• Leverage Daymond’s fashion industry savvy to take the company global, and very large.

Lessons:

• At each stage of your business growth, seek new partners who can help you take it to the next level.

Follow-up:

• You can find out more at http://www.onesole.com/. The product line is very impressive, but the website needs to be redone.

(If you are interested in raising capital for your business, visit us at www.AngelNetwork.com) 

Second Guest:  Kim Preis, Samson Martin

All of Kim’s girlfriends were pregnant at the same time and they were always being asked the same question: “When are you due?”. So she created a specialty clothing line that carries messages such as “Due in the fall” or “Due this April”.

 

She positioned her line in up-scale boutiques, but now wants to reposition the line and take it to mass retail. She wants contacts and money to expand the brand.

 

Kim was seeking $50,000 for a 15% share in the business, a pre-money valuation of $283,333.

 

She sold $90,000 last year, and has been in business 6 years. At her peak, she sold $400,000 per year. She has a trademark on the “due in…” line.

 

Kevin O said the market wasn’t very big, and that concerned him. Robert liked the fact that this was a niche product, but was concerned over the company’s ability to be “hot twice”.

 

Barbara echoed that it was a forced market, too – pregnant women have to buy new clothes.

 

Robert was concerned that she hasn’t made the calls to the big box stores so far, wondering what has stopped her from doing so.

 

Daymond was concerned that the market was down right now. He thinks the environment is poor, and doesn’t want to invest in another fashion brand.

 

Kevin H was concerned over the number of SKUs. It was too complex for him and he was out.

 

Barbara has seen other shirts with just the word “January” or “June”; she wasn’t sold on the value of the “due in” brand and was out.

 

Robert wasn’t up to fighting the battle of growing a company again and was out.

 

Kevin O was the last hope, and really didn’t care about the success in earlier years. He called it the T-Shirt deal from hell (with a lot of good reasons), and he was out. He was unnecessarily very rude, which is his style.

 

All out, no deal.

 

Our Analysis:

• Presentation: She was poised and well spoken. And very disappointed. But she was polite and said “thank you” anyway.  
• Business Strengths: She had a good company before the recession, and has established the brand in many outlets.
• Business Weaknesses:. The IP was not strong, and her sales fell excessively (75%) during the recession. That makes me think there are other factors at play, such as the emergence of strong competition.  
• The Deal: She asked for $50,000 for 15%. She got no counter-offers and no deal.
• Sharks: Robert was totally rude and obnoxious. He really makes the other sharks seem very professional.

Next Step Suggestions:

• I think going down-market is a mistake. I suggest she try to grow organically again, and perhaps offer some complementary products.

Lessons:

• Sales are everything.
• It can be very difficult to convince investors that they will rise again once they have fallen.

Follow-up:

• You can find out more at http://samsonmartin.com/. She has a small line, and it doesn’t look like she received funding from other sources. But she has expanded with a couple of new lines: one for new mothers and another for the kids.

(If you are interested in raising capital for your business, visit us at www.AngelNetwork.com) 

First Guest:  Rebecca Rescate, Citikitty

Rebecca is focused on helping cat lovers everywhere. She was living in a tiny apartment, and needed a way to eliminate the smells from the litter box.

 

She was seeking $100,000 for a 15% stake in her company, a pre-money valuation of $566,667. She wants to money for marketing and for hiring staff.

 

This is a big market – there are 200 million cat owners around the world, and cleaning up after the cats can be, well, a crappy job.

 

So she has invented a way to train cats to use the toilet! No more litter boxes! Life at home is better for the cats and their families.

 

It works really well – cats soon realize that the water of the toilet covers the scent of their waste, and they adapt very well.

 

The initial reaction was that the sharks didn’t want to share their toilet with their cat!

 

But down to business: CitiKitty sells for $29.99, costs $4.66 to make in quantities of 10,000, and she has sold 40,000 off her website alone. She has sold $1.4 million in these kits and she has never advertised. She has had some good exposure on Good Morning America and CNN and other programs.

 

Robert was not interested in the business and was not a cat person. He was out. Kevin O hates cats (and many humans, we might add), so he was out.

 

Kevin H looks for products that solve problems and have a big market – and this does both. He countered with $100,000 for 40%.

 

Daymond thinks that Kevin H was a better partner and was out.

 

Barbara said her partner “As Seen on TV” would love the product, and she would take the original offer; but there was an issue – she was only going to do it if her partner said yes. 

 

Kevin O summed it up: with certainty, she had an offer to sell 40% for $100,000 with a great partner, or a chance to sell only 15% for $100,000 with a riskier deal.

 

She countered with $100,000 for 20%, Kevin’s final offer was $100,000 for 25%. Barbara pulled the “you should do business with a woman” card. And she sweetened the deal to have no contingencies.

 

Rebecca liked the offer but looked Kevin in the eye and said “$100,000” for 20%, and he said “yes”! Wow! Barbara was bummed she didn’t get the deal.

 

Our Analysis:

• Presentation: She was very strong, poised, and polished. And it turned out that she was a fantastic negotiator.
• Business Strengths: She has great market traction, and the market is very large. I think she also has a compelling value proposition.
• Business Weaknesses:. None that I could see. There is a lot of competition in the kitty litter business, but very little (none?) in the cat toilet training business.
• The Deal: She asked for $100,000 for 15%; Kevin H offered $100,000 for 40%, and ended up with $100,000 for 20%.
• Sharks: Kevin O was his usual obnoxious self, and I was not surprised to learn that he hated cats. Kevin and Barbara did a little sparring over the deal, which put Rebecca in a a great position, and she took advantage of it.  

Next Step Suggestions:

• Let Kevin H do his magic! I think this is going to sell a bundle.

Lessons:

• In this crowd, market traction is everything.
•  A bidding war between potential partners can be a very good thing!

Follow-up:

• You can find out more at www.CitiKitty.com. This is a very good selling website! And she has complementary products to increase her sales and lifetime value of the customer.  

(If you are interested in raising capital for your business, visit us at www.AngelNetwork.com) 

Fourth Guest: Jeff Stroope, Hyconn LLC

Jeff is a full-time captain of a fire brigade and in charge of maintenance. He realized that it was taking way to long to get water to the scene of a fire, so he created a product that will revolutionize the fire safety industry.

 

He has invested 11 years of his life on the project and he cannot let it fail.

 

Jeff was seeking $500,000 for a 40% stake, a pre-money valuation of $750,000.

 

Hyconn is a patented rapid connect and disconnect system for hoses. In the demonstration, it seemed to save 15 seconds on connection, and less than that in disconnecting. My first reaction was that the difference wasn’t that big.

 

Robert and Barbara picked this up right away, but, surprisingly, he is selling them to other fire departments with a very high closure rate per sales call. He is selling locally in Arkansas, so it is tough to tell whether folks in other states will make such positive decisions.

 

Kevin O doesn’t like the idea of selling to the government because they don’t have budgets. Barbara agreed.

 

Robert suggested that it would be cool to get some sort of “required” status that mandated usage. Jeff is working on that. 

 

He has tried to work with distributors, and they have agreed to put it into their line. Daymond didn’t like the idea that they were asking him to put up the money, so he was out.

 

Barbara didn’t like the 8-second savings, and was out.

 

Robert suggested that there might be other markets, such as oil and gas and home use and – wow! – he had already developed the residential / light commercial version. Cool!

 

He hasn’t been marketing the residential version because he has been focusing on the fire-fighting market. Kevin O says it may only take a few calls to talk to all of the big hose manufacturers.

 

Mark surprised me and the other sharks by offering him $1.25 for the company and a three-year employment agreement at $100,000 to run the show. Wow! And he would pay him a percent of the profits once they hit agreed upon numbers.

 

Kevin O called that “madness”. He just wanted 100% of the garden hose business for $500,000, and he would also pay a royalty of 3%.

 

That’s when Kevin O and Mark got a little “sharky” with each other and really began competing for the deal. The word “pahooey” came up at least once.  

 

Robert said he was going to make an offer similar to Mark, but wasn’t going to be that generous. He was out.

 

Mark sweetened the deal to 7.5% of the royalty and Jeff took it!

 

Our Analysis:

• Presentation: He was very convincing and authentic. I really wanted to work with him right away. The professional firefighters at his side were a nice touch.
• Business Strengths: There are a lot of hoses out there! And the residential market is huge.
• Business Weaknesses:. The only weakness I saw was Jeff’s focus on the fire-fighting market. And that ended with the deal and the dual focus on the residential market.
• The Deal: He asked for $500,000 for a 40% stake. Kevin O offered $500,000 for the residential business alone, and Mark offered $1.25 million for the whole business. Jeff and Mark made the deal.
• Sharks: They really got testy with each other. I think Kevin O and Mark are perfect for each other – both of them are rude and aggressive.

Next Step Suggestions:

• Focus on building the business through licensing deals with major hose manufacturers.

Lessons:

• Intellectual property is very valuable.
• Bidding wars are great for those who are selling!

Follow-up:

• You can find out more at http://www.hy-conn.com/. The home edition is only $19.99, including shipping and handling.

 (If you are interested in raising capital for your business, visit us at www.AngelNetwork.com) 

Julie has a company that makes aisle runners for weddings and special events. Like many entrepreneurs, she needed a product for her own purposes and couldn’t find anything but cheap paper and plastic versions – so she made her own and started a company.

She was defensive again, saying that she knew the industry. Kevin O invited her to “get married” to him, and she turned him down.

• Presentation: She was very poised and confident, with a scripted and memorized presentation. She blinked a lot, which took away from her strength. And later, she got defensive and argumentative. She was very smart, but unfortunately, didn’t understand the different between “margin” and “markup”.
• Business Strengths: The wedding industry can be highly profitable, and she has a great market position.
• Business Weaknesses:. The high-end wedding market is not that big. She can expand by developing other territories (e.g., Europe), but can never grow huge without additional brands.
• The Deal: He asked for $250,000 for 15%. Kevin O countered with $250,000 for 51% and she declined. No deal.
• Sharks: They were testy, especially Kevin O. They didn’t fight with each other, but I think they knew they would be fighting with her a lot.

• Consider creating additional products with new brands to leverage existing marketing channels.
• If you must go down-market, do it with a different brand.

• Know the difference between margin and markup.
• Don’t argue with your potential investors.

• You can find out more at http://www.originalrunners.com/. She has a great website. She has also been on The View.

Second Guest: Johnson Bailey, Man Candle

Bailey Johnson came on like a hawker at a carnival, smiling broadly with his new twist on a familiar product.

Kevin O said the product fell into the category he called “crap for tourists”, essentially a novelty product, and he was out.

• Presentation: He was really funny with high energy, and was obviously a very good salesman. The presentation was well scripted and he thought ahead with the candles he handed to each shark. Well done!
• Business Strengths: This is a cool idea with an obvious appeal to a small market (single guys who care about how their place smells for other guys).
• Business Weaknesses:. The market is probably not that large, and the concept can be copied very easily. This wasn’t said on the show, but is a huge risk.
• The Deal: He asked for $50,000 for 25%; he got no offers, no counter-offers, and no deal.
• Sharks: They were courteous, but all out very quickly.

• Focus on the college and singles market.
• Get a partner who is already distributing products to colleges.

• Many investors are not interested in small companies, even if they could be highly profitable.

• You can find out more at http://test.originalmancandle.com/. He has a lot of products!

Jason and Michael are travel junkies who love great music and are revolutionizing the portable speaker industry. They found that their were a lot of audiophiles who were frustrated with the low quality of small speakers and the large size of high-quality speakers.

Their latest technology is the Rock-it, a very small speaker system that uses vibration technology to turn anything into a speaker. Wow! They demonstrated using an oatmeal can, a cup, and a trash can. They said it even works on upside down fishing boats!

 

They were seeking a $150,000 investment for a 15% stake in their company, a pre-money valuation of $850,000 (that’s a lot!).

 

Their first product was a folding speaker that travels well (very compact) and sounds quite good. In their first year of business, they had $750,000 in sales. They are being sold in stores around the company. They netted $150,000 but didn’t pay themselves.

 

The need the money for inventory, fulfillment, repaying debt, etc. They are still working out of their house and need some expansion dollars.

 

They have a five-year license with a manufacturer in China for the original speaker technology, which is a problem. That means the business could collapse in just a few years when it comes time to renegotiate the deal.

 

But they are on QVC which was very interesting to all of the sharks.

 

Kevin O noted that consumer electronics was a very competitive space and he was out.

 

Mark didn’t want to negotiate; he offered $150,000 for some percent they would specify, yes or no. And they had to deal with him only, and ignore the other sharks. This was very sharky and very strange. He gave them 24 seconds.

 

Robert called it right – Mark was being a bully. Then Daymond offered $300,000 for 100% of the company and Barbara offered $150,000 for 25% of the company. Mark’s bullying tactic really inspired the other sharks! Then Robert countered the other sharks by agreeing to the original request – $150,000 for 15%.

 

Barbara reminded them that she had a partner who was an expert in marketing, and thought she could generate $50+ million in sales.

 

And Cuban was out – the 24 second clock expired. I say good riddance. Robert continued the hammer on him, even making fun of him at one point. I say well done!

 

The partners exited the room to discuss the offers, and when they came back, they took Robert’s deal! Great job!

 

Our Analysis:

• Presentation: They were both very strong, with a lot of humor. Well done!
• Business Strengths: They have strong sales in their first year and the Rocket is one heck of an innovative product. They really did a great job setting up distribution channels, including being on the shelf at a lot of stores and QVC.
• Business Weaknesses:. The license deal with China is a big problem. And their market is very competitive.
• The Deal: They asked for $150,000 for 15%. Daymond offered $300,000 for 100% of the company and Barbara offered $150,000 for 25%. Robert countered the other sharks by agreeing to the original request – $150,000 for 15% – and they took it.
• Sharks: They were very competitive, and really didn’t like Mark’s bullying tactics.

Next Step Suggestions:

• Focus on developing technologies to replace the problem-child deal with China.
• See if you can renegotiate the China deal right now.
• Use Robert’s money and connections to expand distribution.

Lessons:

• Sales are everything – the sharks were far more impressed with the sales record than they were the technology. They really didn’t even care what the speakers sounded like.

Follow-up:

• You can find out more at www.OrgiAudio.com. They have new product called the Doodle, which allows you to design your own speakers (because their flat folding speakers have a paper / cardboard case).
• This looks like a fantastic company!

 (If you are interested in raising capital for your business, visit us at www.AngelNetwork.com) 

They made what has to go down as one of the greatest entrances in the history of Shark Tank, with a sound-making, fog-generating, nerf-ball-shooting 7 ft. tall robot. Wow!

Daymond couldn’t get his arms around the numbers and he was out. Barbara thought it would take continued investments in innovation to keep the revenues going, and that was expensive, so she was out. Robert agreed and he was out. 

• Presentation: The presentation was fantastic. Robots! Boogers! Kids! What’s not to like?
• Business Strengths: Lots of market traction in a terrible economy. I think they have real sticking power.
• Business Weaknesses:. Not very much profits, probably because of the high cost of innovation and the continued investment in expansion.
• The Deal: They asked for $500,000 for 10%. The counter was $500,000 for 51%; they countered again for $500,000 for 25%. No deal.
• Sharks: They were out quickly because of the excessive valuation. I think they really missed it on this one – many rapidly growing small companies have very little profit, because they are investing a lot of their profits in marketing programs and staff.

• Focus on organic growth and cost control to increase profits.
• License other inventor’s products instead of developing everything in house.

• There is incredible power in a great entrance!
• At some point, you have to tighten up and make a lot more than 3.5% profit to be attractive to those who would invest or purchase your business.
• And for the investors: it is the future earnings potential of a business, not the current profit picture, that truly determines the value.

• You can find out more at www.games2u.com. Makes me want to party!