The Sound of Money (Episode 2.7)
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The Sound of Money (Episode 2.7)

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



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