Shark Tank Recap: Mark Cuban Offers $1Million to Peel-off Face Paint Owner; Entrepreneurs Reject Deals from Kevin O’Leary (01/04/13)
The Christmas season may be over but Shark Tank continues to shower creative entrepreneurs with big financial support. Tonight, Lori Greiner joins Mark Cuban, John Daymond, Robert Herjavec and Kevin O’Leary as they spot profitable investment opportunities.
Doug Marshall is the owner of the Game Face Company, an enterprises that sells peel-off face paints. He needs $450,000 in exchange for a 25% stake in his company. Doug is currently devoting his time to the company on a part-time basis.
In the previous year, Doug’s sales has reached $102,000; this puts his company valuation at $1.8 million. A unit of the face paint costs between $0.25 and $0.60 and is sold at $2.50 per unit (wholesale). Given his sales record, Doug has only made $32,000 for himself. The sharks ask why the numbers don’t add up.
Doug reveals that he will be using $300,000 for salaries in the next three years, getting an MBA and license acquisitions.
Daymond question why Doug needs an annual salary of $100,000 for the next 3 years (which the latter has imputed in his earlier answer). For this matter, Daymond pulls out of the negotiation table. Robert feels follows Daymond’s decision.
Kevin offers $ 450,000 for a 30% stake in the company. However, he will treat $300,000 of the total amount as a loan. As such, Kevin is asking for $0.25 royalty per unit sold until the loan is paid back.
Lori offers the same amount for a 40% stake and with hopes of doing this as a joint venture with Mark. The latter takes the venture with a revised offer: $1million to buy out Doug. The latter will be retained as a full-time employee with an annual salary of $80,000 for the next 5 years. Lori agrees to join Mark’s offer.
Kevin cautions Doug on Mark’s offer: it entails selling his soul. Robert pitches in and advises Doug that anybody can make it big on one’s own merits.
After deliberating with his wife, Doug provides a counter-offer to Mark and Lori: in exchange for the $450,000 investment, he will offer 35% equity plus an annual salary of $80,000.
Mark and Lori take on the salary guaranteed for the next 3 years but want 35% equity and 10% royalty until the investment amount is earned. Doug takes the deal.
Brant Myers and Dan Grimm are the owners of Arkeg, a product that merges a video arcade game with a beer dispenser. The men need $100,000 in exchange for 33% stake in their company.
The product retails at $4,000 per unit. For the past 2 years, Brant and Dan have sold only 20 units. The sharks fail to get inspired by the product and the sales pitch; they refuse to invest in the enterprise.
Daniel Rothweil is the owner of Dura Tent, a full-enclosure screen that shields food served outdoors from flies. He needs $50,000 in exchange for 30% equity.
Daniel’s unit cost ranges from $4.65 (medium-sized tent) to approximately $7 (large-sized tent). Over the past 3 years, he has sold 50,000 units, most of which were wholesale. He currently has a patent for the product.
The Sharks question the company’s value which doesn’t add up to Daniel’s numbers. This sets-off the entrepreneur, forcing him to revise the number of units sold to about 40,000.
Daniel claims that he will add the investment money to his $50,000 worth of inventory in order to bring his product to the national arena. Failing to see the product’s value, Robert, Daymond and Mark pull out of the negotiation table.
Lori asks why the product’s name doesn’t give any inkling on its purpose. Daniel claims that this has been well-thought. For this matter, Lori opts out.
Kevin is willing to give the investment amount without any equity but demands a royalty per unit sold: $2 for the medium tents and $2.5 for the large tents.
Daniel feels that Kevin’s deal doesn’t take him to the next level; he needs an investor who can help him come up with a marketing strategy that will put him in the national market. He rejects Kevin’s offer which annoys the latter.
Megan Gage is the owner of Hot Tot, an array of hair-care product designed for children. She claims that her product doesn’t contain harmful ingredients. She needs $50,000 in exchange for a 15% stake in her business.
Megan claims that she needs the money to get her product into market shelves. Her products have been in the market for the past 15 months but she thinks that her main avenue would be the salons. During this period, her sales have reached about $20,000.
Lori feels that the packaging is too mature for its intended user and feels that this needs to be revised. Megan disagrees and wants to retain its current look especially since she feels that mothers are the ones who eventually decide on what hair-care product would be good for their children. Megan’s answer prompts Lori to decline to the investment proposition.
Kevin thinks that Megan’s sales is too small and puts him in a quandary as to whether this is in fact a business. For this matter, he opts out. He’s joined by Robert and Daymond.
Marks sees a potential in the product and offers $75k for 40% stake. Megan takes it.
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Image courtesy of Shark Tank