I’ve been doing this for years for friends on Facebook, and with their encouragement, I’m bringing my Shark Tank thoughts to everyone else.
Pitch 1: Beebo, a hands-free baby bottle (Website)
Ask: 200K for 20% ($1M Valuation)
Cathy’s Thoughts: There’s a million baby products on the market. Many of them are good ideas. It’s a cluttered, competitive space though. Lots of trendy stuff that appears and disappears. Any idea that takes hold gets tweaked slightly and knocked off by competitors. I’ve looked at a lot of stuff in baby goods and very, very little has staying power. I like investing in stuff that’s more trend setting and staying. Beebo wasn’t a bad idea at all, but certainly wasn’t something I would invest in. Even with the Dragons Den Effect of having more interest in the product because of the show. As of this writing, the official Beebo website is down due to increased traffic. Safe bet to say they’re going to do okay.
Cathy is: Out. If none of the other Sharks had made an offer, I would have offered them an operating line so they would at least walk away able to fill their inventory needs if they had come prepared with documentation that they had inventory needs they were unable to fulfill.
Result: Lori and Ashton chopped 30%, Kevin was rejected for a third. Good deal for him.
Pitch 2: Acton, like personal transportation “rocket skates” (Website)
Ask: $1M for 3.5% ($28.5M Valuation)
Cathy’s Thoughts: Acton’s pitcher was cagey about his numbers, if not outright didn’t know his numbers. Neither is a satisfactory situation for those taking a pitch asking for a nearly thirty-million valuation. I don’t take pitches that big normally, but if I did, I would expect the presenter or someone on his or her team to know every single number off the top of their head, forward and backward. They had a $2,000,000 seed round and a follow-up round of $2,500,000, which means the $1,000,000 ask they came in for is behind the eight-ball and leaves too little wiggle-room without causing a down-round and devaluing equity for their existing investors. They’re burning $100K a month and say they’re breaking even right now, though again, the guy seemed non-committal on these numbers. Lori called him out on a weak pitch that sure seemed like a television commercial, and she was spot on. I don’t think he went on looking for a deal. I think he went on hoping to sell units to people watching.
Another big problem for me is that I’ve seen a LOT of stuff like this. Not just in my career but Brian and I are fans of this kind of technology and watch lots of videos and social media stuff related to novel and new transpiration / extreme sports rides. The pitch he gave the Sharks wasn’t exciting. In fact, Ashton said he wasn’t inspired to try them on. Stuff like this needs really enthusiastic, dynamic, and talented presenters for social media campaigns. I would expect someone pitching a product like this to get the kind of people who Red Bull signs to do cool tricks during the pitch, or a video of more advanced techniques. Are they capable of such a campaign? Nothing in the pitch suggested they were, leaving it up to the imagination.
His numbers weren’t good, he valued too high, and I just didn’t think the product was cool.
Cathy is: Out
Result: No deal. Kevin offered the money for 11.5% but that would have been too dramatic a down-round for Acton and they probably couldn’t take it even if they wanted to or needed the money. Kevin wouldn’t shake on 11.5% because he knew further rounds that would be needed would require dilution of his equity down to around 7%, not enough skin to keep him interested or positioned for a proportional return. This had almost no chance of getting a deal.
Pitch 3: McClary Bros, vinegar-based beverages and mixers. (Website)
Ask: $100K for 15% ($650K+ Valuation)
Cathy’s thoughts: This is a pitch I wish I could have been sitting in on, so I could have asked more questions. Like, “how popular are these throw-back vinegar mixers now? How frequently do they happen? What parts of the country do they take place in?” My problem with the product is I don’t see it blowing up as anything but a novelty. The Sharks certainly had a mixed reception to the product, with some of the SKUs being so potent in their odor that the Sharks didn’t want to hold them to their nose. The taste test split right down the center too. Right now, these old-fashioned vinegar-based mixers are on the fringe of drinking culture in America. The company is hoping it blows up and they’re there when it happens. While that could be a viable strategy, and they certainly had good branding and labeling, they can’t protect it. Major producers of mixers with better resources could jump in and take their market share, especially if it grows past the novelty-level I think is the ceiling for the product. Good pitch, but too low a ceiling for me.
Cathy is: Out
Result: No deal, nobody seemed interested at all.
Pitch 4: Signal Vault, a signal blocker for credit cards. (Website)
Ask: $200K for 12.5% ($1.6M Valuation)
Cathy’s thoughts: This is hugely on trend and had a satisfying pitch. I suspect the interrogation was one of the longer ones, with lots of technical questions about the nature of the product, the extent of protection offered, and future modifications that I would have needed to hear to fully judge the value. From what little I saw, and based on the enthusiasm of Robert (a securities investor), I would have likely been interested. However, I’m not in this sector and have no strategic value. Robert and Lori wouldn’t have cut me in on it (though Kevin might have).
Cathy is: in on Kevin’s deal if he would have had me (20% or 10% each for $200K), but Lori and Robert chopped a better offer and had more to offer that I would not have been allowed to cut in on. I could have made a spoiler offer of 10%, but there would have been no value besides the money in taking it for the entrepreneur.
Result: After a little negotiating, Robert and Lori chopped 25% for $250K, which was offered by the entrepreneur. I think he made a mistake. If he had offered 20% (10% each) they would have taken it. They all seemed happy with the deal made though. Best of luck to all of them.