Third Guest: Julie Goldman, The Original Runner Co.

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!

First Guests:  Jason Lucash and Michael Szymczak, OrigAudio

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) 

Fourth Guests: Stuart and David Pikoff, Gamse2u

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!

Second Guest: Andy Humphrey, Ecomower

Andy is wanting to leverage to trends toward eco-friendly products with his Ecomower.

 

He wants $90,000 for 20% of the company, a pre-money valuation of $360,000 (that’s a lot for this show!)

 

He thinks that the usual gas engine lawnmower is dangerous, smelly, and bad for the environment. He stated that the EPA was about to regulate emissions on lawn and garden equipment because they pollute so badly.

 

The Ecomower is an upgrade to grandpa’s mower in that it is frictionless and didn’t need sharpening.

 

Daymond objected to the romantic nature of the claim that “the grass falls gently behind the mower”. He wonders how it is better that the other push mowers in the market.

 

Half a million push mowers are sold each year – he upgrade is that they don’t need to be sharpened. Unfortunately, there are some European products that also have that feature.

 

He started the business as an online store; he has $350,000 in sales of the competing. He hasn’t sold any Ecomowers.

 

The sharks thought it was a licensing play. Robert thought the presentation was a joke; Daymond laughed and was out. So was Robert.

 

Barbara didn’t have that much confidence in the power of the Ecomower brand, and thought there would be enormous competition – she was out.

 

Kevin O admired his goal to expand from being a successful online retailer of push mowers into a manufacturer of them, but was out.

 

Jeff was out because there was no market traction.

 

Much to his credit, Andy asked: “What could I have done better?” and the immediate response from Robert was “don’t ask me to invest in a product that you haven’t sold one of”. 

 

Then he insulted them by suggesting that they weren’t eco-friendly. Ouch! 

 

Our Analysis:

• Presentation: He was confident, but perhaps a bit too serious. And he overvalued the company.
• Business Strengths: He has a successful online business, to which he wants to introduce his own products – that is good!
• Business Weaknesses:. He hasn’t sold any, and the brand isn’t that strong.  
• The Deal: He asked for $90,000 for 20%. He got no counter-offers and no deal.
• Sharks: They were really focused on market traction, and didn’t buy Andy’s claims that the market would really want his innovation.

Next Step Suggestions:

• Focus of getting early market traction. Save your money so you can make and sell 20 of them.
• Find a manufacturing partner who will invest with you.

Lessons:

• Some investors will not even consider opportunities where there is no market traction.
• Don’t insult the people you want to invest with you!

Follow-up:

• You can find out more at www.ecomowers.com. He is selling his Helix Ecomower for $200.

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