SHARK TANK – LESSONS LEARNED, April 26, 2013

UPDATE:  Some may remember the   segment where Billy Blanks’ son appeared asking for an investment in his exercise program DANCE WITH ME.  More particularly, some may remember the post-segment conversation with SHARK DAYMOND and Billy Blanks, Jr.  It turns out that following the SHARK TANK episode SHARK DAYMOND’s money was well invested as contract was obtained with a chain of exercise studios which had planned to publish and sell the DANCE WITH ME exercise program.  LESSON: Despite what you see on television, many of the SHARKS do have a soft spot and they do want to see people succeed.

The floating SHELL BOBBER product was first to drop into the SHARK TANK – and it floated.  The product was a recycled shotgun shell attached to a fishing line to act as a bobber…perfect for those obsessed with hunting and fishing.  The margins were good as the cost to make a three-pack was less than one dollar and the retail sale price was $8.99; however, only 440 three-packs had been sold.  There was no business – just the product.  The only protection was a Provisional U.S. Patent Application which the inventors had written themselves.  LESSON:  All Provisional U.S. Patent Applications are not the same.  The best ones are usually written by experienced patent attorneys.  The worst ones are often written by inventors.

            SHARK KEVIN and SHARK MARK seemed to like the product.  In typical fashion, SHARK KEVIN sought a deal which would provide him with a perpetual flow of income once his initial investment was recovered.  LESSON:  A perpetual flow of income means that SHARK KEVIN would receive money as long as the product is being sold.  At the end of the segment, SHARK MARK made an offer which the wantrapreneurs accepted.

            Second was a mother-daughter pair with a product called a WICKED GOOD cupcake?  Each SHARK raved about the taste.  Each cupcake was packaged in a small Mason® jar.  The LESSON came from SHARK KEVIN who realized that there was nothing patentable about the product thereby allowing others to copy and make the product.  (Yes Virginia, copying others in the United States is legal unless there is an intellectual property protection right in place.)  Thus, SHARK KEVIN quickly opined that being the first to mark provided the best market place advantage.

            The problem with the product was shelf-life.  To maintain the flavor, no preservatives were used.  Thus, the shelf life was 7-10 days.

            Having lost out to SHARK MARK on the first segment, SHARK KEVIN made a deal for a perpetual flow of income which eventually resulted in a deal.

            Third into the SHARK TANK was the largest request of the episode and one of the largest for the SHARK TANK show.  The product displayed was a device to generate electricity using the Faraday Effect tied to the motion of a person’s body.  Some may remember a self-winding watch where a swinging weight wound a spring.  Instead of storing mechanical energy generated from the motion of a person’s body in a spring, this device used the motion of a person’s body to generate small amounts of electricity…enough electricity to power a cell phone.  While the product was pricey, $199, with a good margin, the price still seemed high.

            Next was the real reason for the large request for money.  The real reason for the big investment was the wantrapreneur’s desire to create floating devices which transformed wave energy into electrical energy.  His vision was to create wave/electricity farms all over the world.  When asked why he started with the wearable small device, he responded that one needed to CRAWL, then WALK and then FLY.  Thus, the request for lots of money.  No deal.

            LESSON:  While the SHARKS were impressed by the vision of this wantrapreneur and believed in the concept, the SHARKS are looking for a quick return and not a long term play.

            Last, were belts from the MISSION BELT company?  The product was a well made belt that mated with a buckle assembly allowing the belt size to change by half inch increments.  The wantrapreneur had worked hard to reach sales of $39 thousand during the last three months to include selling his belts door-to-door. 

            Despite the fact that the wantrapreneur was a terrific salesman (a politically incorrect term in some states) and made huge personal sacrifices to sell his belts, four of the SHARKS dropped out.  The LESSON here is that personal sacrifice and a focus on success will usually draw the attention of a SHARK like SHARK MARK if the product is a simple one.  While SHARK DAYMOND announced that he would rather invest in a business than a product, he bit and the wantrapreneur got a deal.

SHARK TANK – LESSONS LEARNED April 5, 2013

UPDATE:  Some may remember the ROCK BAND bracelet made of leather with a stone mounted thereon.  The wantrapreneur got a deal on the show because of the appeal of the trademark ROCK BAND.  Turns out that the wantrapreneur waited several months for the details; but, the details never came.  What he did learn was that his deal on the show turned into NO DEAL after the show.  If you don’t already know this, a deal on the show may not become a deal in real life after the financial analysts and lawyers do their reviews.

 First into the tank was simply an invention…there was no business…hope for all of you inventors out there without any sales.  The cooler with LED lights contained therein was called LIDDUP.  Allegedly there were three issued patents on the product.  LESSON – issued patents, NOT patent applications which are a big deal to the SHARKs when there are no sales.  Since the show format requires a request for money plus an offer of a share of the company, the SHARKs quickly divide the requested dollar amount by the percentage share of the company requested.  The solution to this simple math problem equates to the value put on the company by the wantrapreneurs.  The wantrapreneurs can then expect to be put on the spot by the SHARKs to defend this valuation.  Interestingly, SHARK Robert knew that there are only three cooler manufacturers.  Even more interesting, SHARK Robert had a relationship with one of the three.  One doesn’t get much luckier than that.  Accordingly, SHARK Robert made a good offer.  SHARK Mark saw the connection and recommended to the wantrapreneurs that they take SHARK Robert’s offer.  But they didn’t.  As the ownership of three patents was appealing to SHARK Kevin, he offered a license deal for the money requested.  The LESSON here is important.  SHARK Kevin is not interested in starting a company, arranging for a manufacturer, or marketing a product.  Rather, SHARK Kevin simply made a loan to the wantrapreneurs which will be paid back by 1/3 of any royalties from manufacturers.  Then once the loan is paid off, SHARK Kevin will continue to get 1/3 of any royalties as long as there are royalties.  NOTE – apparently, there will be no effort on the part of SHARK Kevin to make introductions to the manufacturers of coolers; thus, all the time and effort needed to convert this product into a stream of revenues remains with the wantrapreneurs.  Think about this.  By appearing on the SHARK TANK show, the wantrapreneurs obtained the opportunity to work a lot harder than they had been working for the obligation to create an ongoing string of royalties for SHARK Kevin.  If the product is popular and takes off and if the patents are well written, then this could be a very lucrative deal.  However, if the patents are not well written and when the patents expire, competition may come in, and the product will fail thereby reducing the monies coming to the inventors.  BOTTOM LINE – understand licensing as this is the vehicle that most inventors use to monetize their inventions.

Second into the tank was a wantrapreneur whose product was called ECHO VALLEY Meats.  All the SHARKs favorably commented on the meat products.  So favorably that it looked like there was going to be another deal.  SHARK Robert even commented that sometimes it is good to feed the sharks.  Sales numbers, profit margin, market growth all looked good.  Apparently, the quality was better than the competitor, and the price point was lower.  All of this appeared to be representative of a lucrative investment opportunity.  But then the SHARKs turned to a line of questioning that seems to pop up frequently when the product is food.  That line of questioning relates to the cost to acquire a customer.  LESSON…expect questions on the cost to acquire a customer.  Sadly, the wantrapreneur was totally unprepared with numbers regarding the cost to acquire a customer.  Even worse, there appeared to be no plan regarding increasing the customer base as it seemed the foundation of success was that the products would sell themselves.  This is not what the SHARKs like and they swam away.

            If you don’t know the word outré, you should.  It means strikingly odd.  Enter a normal looking guy with what appeared to be purple looking gloves and a floppy turtle neck shirt.  BOOM!  Suddenly joining the wantrapreneur before the SHARKS was a group of humanoid forms all in a variety of full body stretch outfits.  The wantrapreneur’s outfit included the purple gloves and the floppy turtle neck that pulled up over his face.  This product was called a ROOT SUIT.  LESSON – investors always look for an advantage in the marketplace.  Such advantages can be a patent, a great trademark, or something protectable with the rights afforded by copyright.  If none of these apply, there is one more.  This one more is called “first to market”.  Oftentimes, being the first to market coupled with a great trademark can be the key to success.  Recall the story of the SNUGGY®, a robe put on backwards and heavily advertised.  Customers sought out the SNUGGY® product because of its catchy name and its early presence in the market.   Despite no barriers to competition, the product made millions.  Thus, if there is no intellectual property protection available, always consider the advantage of being “first to market”.  Understand that being first to market does not protect one from competition nor does being first to market provide long term protection; but, being first to market can provide some short term profits.  The wantrapreneur had some nice numbers to report which initially interested the SHARKs; however, the SHARKs were not convinced that their investment would quickly improve the reported numbers.  Thus, NO DEAL.

            Most episodes of the SHARK TANK end up with two deals and this show was no exception despite the apparent confusion of the inventor about his simple product.  The trademark for the product was GOBIE WATER.  Simply the product was a semi-rigid water bottle with soft plastic side portions.  Good Idea!  But there is more.  Included within the water bottle was a charcoal filter which worked very well.  The wantrapreneur demonstrated that the soft plastic side portions enabled squeezing the semi-rigid bottle…a feature which was attractive to the SHARKs.  Despite this interest from the SHARKs the wantrapreneur wanted to show how the pressure build up within the bottle from squeezing the side enabled the use of charcoal filter.  Unfortunately, the wantrapreneur was not fast on his feet and was unable to go with what the SHARKs really liked – his bottle design.  Instead, the wantrapreneur kept coming back to the filter.  LESSON here – many inventors see a single feature of their invention and thereby become blind to what others see.  Thus, when someone really likes a feature of a product heretofore deemed secondary, then the inventor has just learned a lesson about a product.  Go with the lesson.  All the SHARKs dropped out but SHARK Daymond.  SHARK Daymond prefaced his offer with a big contingency that the wantrapreneur get a deal with a big box store.  SHARK Daymond also wanted a large share of the business.  Since some money is better than no money…DEAL.

SHARK TANK LESSONS LEARNED – March 29, 2013

After a couple weeks of re-runs, this past Friday was a new episode…an episode which brought some very good lessons to the viewers

            First up was the DROP STOP, a product which SHARK KEVIN called a “foam weenie.”  The use of the product was between the seat and the console in an automobile.  It featured an opening large enough to allow a seatbelt to pass there through.  Cost of manufacturing was $2@.  Retail price was $10 for a package of two.  The product had already appeared on QVC.  The wantrapreneurs reported owning a utility patent on the product.   SHARK MARK rolled his eyes as it appears that he has a low opinion of patents on simple products.  The first LESSON came from SHARK KEVIN who perceived a product without a business.  This means that a business structure would have to be built to sell the product.  Building a business is not something that interests SHARK KEVIN; rather SHARK KEVIN would like to invest, get his investment back and then assure a continued stream of income.  Accordingly, SHARK KEVIN offered the sum of money that the wantrapreneurs wanted, but did not want to own any portion of the business.  Rather, SHARK KEVIN wanted a first royalty until the investment was paid off and a second lower royalty in perpetuity.  Not a bad deal.  However, SHARK LORI saw that she could grow the demand for the DROP STOP in to retail stores; but she wanted a chunk of the business.  Apparently, the wantrapreneurs were willing to give up a portion of their ownership for SHARK LORI’s time and expertise.  Bottom line LESSON here is that wealthy investors are rarely looking for more work to do – unless they have an organization that grows by arranging for the manufacturing and then marketing a product.  SHARK LORI appears to have such an organization.  SHARK KEVIN does not.  Thus before appearing before someone with a request for money, KNOW YOUR POTENTIAL INVESTOR and what they like to put their money into.  Investors such as those on the SHARK TANK are looking for businesses.  However, there are some investors that are just looking for a product idea with potential.  Generally, such investors have just sold a business and are looking for a new project to work on.  Unfortunately, it is quite difficult to find an investor with both the money and the time to devote to creating and building a business.

            The second presentation by TRADITIONAL FISHERIES presented an environmental problem unknown to most people.  Turns out that somebody dumped Pacific Ocean lion fish into the Atlantic Ocean and the lion fish have thrived as they have few natural enemies.  WHO KNEW?  Anyhow, the wantrapreneurs wanted to solve this environmental problem by catching lion fish and bringing them to market as a food fish.  Small problem which didn’t seem to bother the SHARKS was that lion fish must be speared by underwater fishermen.  SHARK KEVIN recalled that at one time the lobster was considered to be the cockroach of the sea.  It then took 40 years to make the lobster popular as food.  None of the SHARKs saw anything close to a quick turn around on their money so all dropped out.  The LESSON here is that the SHARKs who swim in the SHARK TANK are in the business of making money and making money quickly.  If any of the SHARKs want to solve environmental problems, they might be willing to use their own money, but not investment money.  Investors such as the five SHARKs that appear on the SHARK TANK want to jump start the growth of a business, make some quick money and then get out.  The money made will then be put into another business to jump start its business.  Getting out for the SHARKs may mean either selling a portion of the business back to the wantrapreneurs or helping the wantrapreneurs sell out to a larger company.  As previously indicated, the SHARKs on the SHARK TANK have plenty to do on their own and don’t need more work.  If the SHARKs work on anything it is freeing up their own time to make another deal.

            The award for the most impressive presentation of the evening goes to the 18 year girl from Pittsburgh and her SIMPLE SUGARS skin product.  Why so impressive, you may be asking.  The answer is that she was clearly an expert on her product, she knew all the numbers about cost and sales, and she knew the market as well as her competitors, their product and their numbers.  LESSON is that if you are going to sell an invention, it is imperative that you become an expert on your own invention and the market in which it will be sold.  Some inventors just want to invent and come up with ideas.  That’s fine, but if money is to be made from a new idea, then lots of research is imperative.  In addition to all of the foregoing, she was professional, enthusiastic, articulate and respectful…A WINNING COMBINATION!  Of the array of SHARKs, SHARK MARK and SHARK LORI are willing to put money into a person more than a product.  The other SHARKs are simply looking for a return on an investment.  While SHARK MARK was not willing to negotiate and appeared to have little that he could do to help with the business, it was clear that he was impressed by the wantrapreneur and her presentation.  Accordingly she got a deal.

            The last segment proved that sometime there is a smoldering ember with the ashes of a business.  The product was called COOL WRAPS.  A user places a gift in a decorated plastic bag, heats the bag with a hair dryer and the bag will conform to the shape of the gift.  The business was originally owned by the wantrapreneur and several partners about ten years ago.  Money was needed to continue the growth of the business.  The owners went to banks to get a loan.  Apparently, the banks wanted the owners to pledge their homes to secure the loan.  This is not necessarily unusual.  Apparently, some of the partners were not willing to pledge their homes as security for a loan to grow the COOL WRAPS business.  Thus, the business did not grow and the wantrapreneur eventually bought out his partners.  Most of the SHARKs saw a dead business.  When a business is dead the SHARKs typically swim away.  However, for reasons not articulated SHARK MARK made an offer that was accepted.  Either SHARK MARK had a need that was not articulated or saw the large margins that the product brought in.  The LESSON may have been that a business that appears to be dead may not be completely dead if there appears to be something very attractive, but has an unrecognized feature of the business.  Here SHARK MARK saw a simple product with a large demand and a high margin. 

SHARK TANK LESSONS LEARNED - March 18, 2013

UPDATE:  Sales of the Tower Paddle Board, a company receiving an investment from SHARK MARK, reported an eight-fold increase in sales after their SHARK TANK appearance.

For those who read the Sunday paper that includes the rotogravure (always wanted to use that word) PARADE, Walter Scott’s Personality Parade column reports that the TALBOT TEAS introduced during Season 3 was acquired by Jamba Juice, sales of the PORK BARREL BBQ SAUCES have jumped to $3.5million and way ahead in first place is the READER REST MAGNETIC GLASSES HOLDERS backed by SHARK LORI at $5.5million.  There is a LESSON in the READER REST MAGNETIC GLASSES HOLDER business.  For those who didn’t see the episode, the wantrapreneur who did the SHARK TANK presentation reported that after he invented the product he learned that there was a patent by another on his product.  Instead of stopping, the wantrapreneur called the owner of the patent and bought it.  The LESSON here is that just because you may run into a patent on your invention that is no reason to stop work.  Patents are either sold or licensed every day to enable their use by others than the owner of the patent.

The episode from March 18, 2013 was a repeat.  If you remember the appearance of Robin Leach, the former host of a program about the rich and famous or the appearance of red-haired dancing professionals Anna Trebunskaya and Jonathan Roberts from Dancing with the Stars, this was that episode.

From Vermont came the first swimmers in the tank, a couple whose product was called LIZ LOVELY COOKIES – Baking a Difference.  The cookies were very healthy, vegan and gluten free…that is no milk, no butter, and no eggs.  For those of you who think that these cookies might be made of sand, so did SHARK KEVIN.  Sales last year were reported to be $1million.  Retail price was about $2/cookie.  Mention was made of the IDDBA trade show.  LESSON – if you have a baked good or a product that could be sold by retail grocers, the IDDBA trade show is the one to attend.  The only highlight of this segment was the compliments that male part of the duo received for his selling ability.  Specifically, he was enthusiastic, respectful, and knew the product understood the future of the business and had his numbers down cold – did you catch this LESSON?  All of the SHARKS dropped out.

As indicated above, a personal friend of the wantrapreneur…celebrity commentator Robin Leach was used to lend some star appeal to the second presentation.  More than any other segment, this one was about owning the rights to a good brand “ROCK BAND”.  The product, a polished stone on a leather band in a nice presentation box was almost a throw away.   Key was the trademark ROCK BAND.  Already the trademark had been licensed to an Italian company.  Branding expert SHARK DAYMOND immediately saw the opportunity to use the trademark on other products.  Licensing expert SHARK KEVIN saw the licensing potential of the ROCK BAND trademark.  The segment closed with an offer from SHARK KEVIN and SHARK BARBARA on the table…countered by an offer from SHARK DAYMOND and SHARK MARK.  In a surprising ending, the wantrapreneur rejected what appeared to be the better offer from SHARKs KEVIN and BARBARA for the money requested in exchange for 100% of the company and a perpetual 7% royalty.    FYI, there are many folks who do nothing but live on the royalties from great brands that they have created and protected.  But instead of living a life of just cashing royalty checks and maybe starting a new venture, this wantrapreneur retained a portion of his business for investment with a payback royalty to SHARKs DAYMOND and MARK.  LESSON here…be honest with yourself, how much cash now, or what type of a flow of cash into the future would convince you to entirely give up involvement with your invention or your business?  What continues to surprise me is that for many inventors or owners of small businesses, there is no number that would cause them to divorce themselves completely from their invention or their business.  Is that you?

If there was a LESSON from the sad third segment, it was know how to protect your idea from the beginning.  The product was FUZZI BUNZ DIAPERS…a well-thought out re-usable diaper product.  Sales and profit numbers looked good.  But something seemed amiss.  It turned out that the wantrapreneur had gone to China to have her product manufactured.  Unlike the United States, it is not uncommon when a product is successful, that a manufacturer in China will copy the product and start its own sales.  This is exactly what happened.  Sales of the copies vastly exceeded the sales of the wantrapreneur.  What was needed, she said, was money to pursue all of the counterfeiters.  The problem was that there appeared to be no strong life preservers to save this sinking business.  Another LESSON here popped up.  The wantrapreneur indicated that while she had obtained a patent, it was weak.  If you the reader don’t know this LESSON by now…there are strong patents and there are weak patents.  For products that are easily copied, a strong patent (if obtainable) is essential.  A weak patent rarely does any good for its owner.  Not mentioned, but implied by the facts, before having a product made in China, do your homework.  Look for someone in the U.S. who understands getting a product made in China who can help find reputable manufacturers, and how to put in place agreements that will prevent the theft of an invention.  LESSON here is that if you are considering getting a product manufactured in China, get professional assistance.

The last segment featured the surprise appearance of Anna Trebunskaya and her now ex-husband former dance partner Jonathan Roberts from the ABC-TV show “Dancing with the Stars”.  The product called POSTURE NOW as a simple one…a broad strap across the back connected to two arm bands.  The dancers were there to indicate that dancing was about posture and poise.  Jonathan indicated that he was actually wearing the POSTURE NOW product.  Then the LESSONS started flying.   Confidence if not properly managed becomes arrogance.  Arrogance shows a lack of respect for the SHARKs and they don’t like that.  In this segment, confidence crossed over the line into arrogance several times and irritated some of the SHARKs.  LESSON number two…never call one’s business a “hobby”.  The SHARKs are not interested in hobbies.  Rather the SHARKs do not want to turn hobbies into business.  Instead, they want to put money into a business to make that business grow so that a return can be realized on their money.  If you plan to ever appear on the SHARK TANK, erase the word “hobby” from your vocabulary.  On to LESSON three; the wantrapreneurs had pocketed about $132 thousand from their business instead of putting it back into business growth.  To expect SHARKs who are looking for a total commitment from the wantrapreneur, pocketing money on the way to the SHARK TANK is not a good fact.  The set of bad facts caused all of the SHARKs to swim away except SHARK MARK.  After getting the wantrapreneur to stop talking, he made an interesting offer.  For a cash infusion, SHARK MARK got 30% of the company and a promise of a $5/unit royalty until the cash infusion was paid back.  While the wantrapreneurs got a deal, think about it.  This deal was very one-sided in favor of SHARK MARK, but that’s the SHARK TANK.

SHARK TANK – LESSONS LEARNED, March 8, 2012

UPDATE – Some may remember the PAINTED PRETZELS which SHARK MARK invested in to put in places such as his Landmark Theaters.  No longer is the wantrapreneur making the pretzels herself.  She reported that sales have taken off and she has more time to spend with her husband and family.  Good for Her!

            BABY LOVES DISCO opened the show.   Opening the presentation was a floor full of little kids with big smiles dancing their little hearts out.  Good start, as the dancing kids brought big smiles to the faces of the SHARKs.  The idea was family dance parties held at venues like night clubs during the day.  Music, disco and kid activities were supplied.  The LESSON to be learned from this segment is that the wantrapreneurs did not understand their income flow.  While the numbers looked good from a macro perspective; questioning by the SHARKS revealed that income came from sponsorship, tickets and the sale of merchandise.  However, when the SHARKS tried to nail down the amounts of money provided by sponsorship, tickets and merchandise, the presentation fell apart.  SHARK LORI did not see a business model.  SHARK ROBERT did not see a business plan.  Both dropped out as did the other SHARKS.  Simply said, the BABY LOVES DISCO was not prepared.  Not apparent to me, but spotted immediately by my wife is that red dress worn by the lady wantrapreneur which did not properly fit her. 

            Following the closing of the doors after the exit from the SHARK TANK, the male entrepreneur said something strange…”Sometimes it feels good to get your butt kicked on national TV”…Strange!

            Next to stir up the waters in the SHARK TANK was Cowboy Ryan whose presentation was full of Waa Hoo’s and Yee Ha’s.  It turns out that Cowboy Ryan was a rodeo cowboy who had been hurt.  For therapy, he started exercising.  This exercise problem lead to his product group called LOSE 12 INCHES WITH ANY 12 WORKOUTS.  The core of the product group appeared to be a trade secret software program which used body measurements to calculate a workout plan based on heart rate.  Also included was a heart rate monitor which told the exerciser how long the heart rate had been at the desired level.  Enter the motivational DVDs. YEE HA!  What else?  Enter RODEO ABS.   WAA HOO!   After ripping off his shirt to show his sculpted abs, Cowboy Ryan then introduced his patented RODEO ABS abdominal muscle exercise machines.  SHARK LORI gave the machine a try and commented that she could feel the effect of the exercise.  While SHARK LORI seemed to like the product package, SHARK LORI taught the first LESSON.  With a name like LOSE 12 INCHES WITH ANY 12 WORKOUTS, the claim for obtainable results is right out there for potential attack.  While Cowboy Ryan swore up and down about the results from the use of his product – YEE HAA! and WAA HOO! – SHARK LORI saw the product name as a big potential liability.  SHARK MARK provided an excellent LESSON with his comment that when the volume of presentation goes up, his skepticism meter goes up.  And since the volume of this presentation was high, SHARK MARK’s skepticism meter went into the red zone and he dropped out.  Circling quietly around the other SHARKS was SHARK DAYMOND.  When all other SHARKS had dropped out SHARK DAYMOND made an offer matching Cowboy Ryan’s request.  Turns out that SHARK DAYMOND saw Cowboy Ryan as a brand that could be turned into money.  In effect, SHARK DAYMOND did not see a lot in the product package, but being a brand expert, he saw value in Cowboy Ryan as a way to present products to consumers.

            Cartoon-y is not a word; but if it were it would apply to the third set of wantrapreneurs.  The two wantrapreneurs appeared in Viking hats and punctuated their presentation by breaking for damaging cell phones.  Kind of hokey for a serious business.   At the end of this segment, SHARK MARK called this business what it was – an arbitrage play.  By this SHARK MARK meant collecting large amounts of money and dispensing small amounts of money.  The product package was called CELL HELMET.  The product package included a cell phone cover and an insurance policy assuring the repair or replacement of a damaged cell phone.  The idea was that a buyer of a cell phone would buy a cell phone cover for about $50, and obtain an insurance policy for repair or replacement of damaged cell phones.  If repair or replacement of a cell phone was needed there was not enough income to take care of the outgo.  SHARK DAYMOND saw the possibility for unethical people to see the business as a cheap way to get low cost cell phone repair or replacement.  SHARK LORI saw the business as being a cell phone hospital when most people want a cell phone emergency room.  As always, SHARK KEVIN saw the many competitors in this business and the lack of any barriers to the entry of others into this market as a big negative.  The wantrapreneurs saw the many competitors as validating the viability of their business.  LESSON here is that the SHARKS will look for a market advantage and without some market advantage, they will swim away.  That’s what happened here.

            The last segment presented the very important question and LESSON…what is more important, to release the smallest interest in a business or to get a deal with a SHARK.   The producers would like the viewers to believe that releasing the smallest share of a business is the goal, but this should not always be the case.  Enter the final wantrapreneur.   The business was called CORDA ROY…a product that looked and acted like a bean bag chair, but opened up so that the stuffing for the bean bag chair unfolded into a mattress.  For those who listen for the word “PATENT”, not only did this wantrapreneur indicate that he had a patent, but that his patent had been enforced twice successfully.  For those unfamiliar with patents, successful enforcement of a patent can be compared to battle stripes on a soldier’s uniform.  This means that when a patent has been enforced successfully, it has been tested and found to be an effective weapon against a competitor.  GOOD LESSON!  Money was needed to expand the marketing of the invention.  The wantrapreneur had one retail store in the Mall of America.  He reported that his product was an impulse purchase and that people were not searching him out looking for a bean bag chair containing a mattress.   One by one the SHARKS started dropping out because they weren’t seeing the value in the business as the wantrapreneur saw.  But SHARK ROBERT seemed to like the product.  However, he felt that he needed marketing help to expand this business.  Accordingly, SHARK ROBERT made an offer contingent on SHARK LORI joining him in an investment in CORDA ROY.  SHARK LORI rejected the offer from SHARK ROBERT, but seemed to like the product and saw its potential for big sales on QVC.   Instead of wanting a share in the business, SHARK LORI wanted control over the business.  SHARK KEVIN put this into perspective and commented that the wantrapreneur would be working for SHARK LORI and not the other way around.  The wantrapreneur put this into perspective with his questions back to SHARK LORI asking if her offer meant that SHARK LORI’s team would then become responsible for marketing and selling the product.  Since the answer was yes, DEAL!!!  The other SHARKS were shocked, but the wantrapreneur commented that he came on the show to make a deal and make a deal he did.

SHARK TANK – LESSONS LEARNED, March 1, 2013

UPDATE:  Some may remember SURF SET FITNESS.  The product was a surf board mounted on springs.  SHARK ROBERT actually got on the device for a brief demonstration; however, he did not invest in the business.  But, SHARK MARK did.  The mid-show update break reported that sales have jumped from $190,000 to $500,000 and are on track to $5,000,000.

            First through the door came a trio of young men with a product called NUTS ‘N’ MORE.  For some reason, there are those in the universe who have a burning desire to improve on peanut butter.  Several of these folks have appeared on the SHARK TANK.  The NUTS ‘N’ MORE Product was a fortified peanut butter which includes more protein, more Omega oils and more fiber.  The retail cost was high…$10.99 for the peanut based products, and $12.99 for the almond based products.  The production cost of $2.90 per jar for the peanut based products, and $4.00 per jar for the almond based product; this looked good as they were just about half of the wholesale price of $5.75 for the peanut based products and $7.25 for the almond based products.  The top end retail price was a bit shocking, but profit margins on wholesale seemed to keep the SHARKS swimming around the tank particularly with the reported growing demand for the products, and the reported interest in the product by a national distributor.

            The big turn-off was the large valuation the wantrapreneurs had given to their new company.  The SHARKS mentioned this high valuation again and again.  When it looked as if the segment would end without a deal, SHARK MARK found a creative way to stay in the game.   LESSON here is that if the numbers aren’t right, creativity in deal making can often be used to create a workable business relationship.  Here SHARK MARK quickly realized that what was needed was money up front to build inventory.  Thus, SHARK MARK was willing to provide the money needed now, but provide the remainder of what was requested based on future orders.  All of this for a bit more than a third of the company?  CLEVER!  SHARK ROBERT offered a similar deal.  At the end of the segment, the wantrapreneurs left with a deal funded by both SHARKS MARK and ROBERT.

            Enter now the lady in the red dress from PSI BANDS.  If self-assurance is a key quality to be on the SHARK TANK, this wantrapreneur had a double portion.  The product was an arm band including an adjustable pressure applicator.  The utility of the product was to put pressure on the point on the person’s arm just above the wrist that would relieve nausea symptoms.  Since the product was patented, had been cleared by the FDA, and reportedly produced $1million in sales in the last 12 months, the SHARKS started looking closely into the numbers as things looked too good.  Here is where a NEVER DO THIS TYPE LESSON popped up.  In response to a question about debt, the wantrapreneur reported that the business owed $600,000 in deferred salaries.  ARE YOU KIDDING???  Think about this.  SHARK MARK started from nothing.  SHARK DAYMOND had to borrow money from his parents to get started.  SHARK KEVIN began his business with a small loan.  SHARK BARBARA failed several times before her business took off.  SHARK ROBERT supported his family entirely with credit card debt before he hit it big.  None of these SHARKS ever thought that they were entitled to deferred salaries.  The rest of the segment included some light questioning about the R&D and science behind the product, but the damage was done.  SHARK KEVIN made a small offer which appeared to insult the wantrapreneur and the segment was over.  While self-assurance can be a good thing, it not properly managed, self-assurance can slip into arrogance and that’s what happened here.

            In previous LESSONS LEARNED reports, the point has been made that the SHARKS are reluctant to enter into a business that is quasi-medical in nature.  In this segment the reasons for this reluctance became apparent.  The two wantrapreneurs from NEO INNOVATIONS introduced a non-laser tattoo removal system.  Reportedly it was based on a 50 watt light bulb.  The cost was $139.00.  First year sales were 700 units.  Second year sales were 1200 units.  An application for FDA approval was pending.  SHARK BARBARA opened the door about risk with her question about safety.  As the segment continued, each SHARK reported that their wealth made them targets of lawsuits.  At the end of the segment, SHARK MARK said something like…Stay poor and you won’t get sued. 

            A check on the internet revealed that a patent application for the device and process for removing tattoos had been submitted in 2010.  Apparently some funding had been obtained from a group of angel investors called VYROGEN.  A marketing director had been retained in 2011 and a new design for the product was launched this year.  Added to the product in 2013 was a pill that was advertised to be an accelerator to tattoo removal.

            Likeability, drive and courage characterized the last wantrapreneur into the tank.  She was a small town girl from Arkansas with an idea and the courage to stand behind her business called the JESKA SHOE Company.  The product was a high heel shoe with interchangeable heels.  The $200 anticipated retail price for the base shoe was high.  No sales.  No real experience with manufacturing costs.  The idea was not a new one as the wantrapreneur reported that her idea had been described in a patent issued in 1899.  For those new to the world of patents, the LESSON here is that one cannot get a new patent on an idea that has been described in an old patent.  SHARK KEVIN quickly described the shoe market as being made up of giant companies who would see that a shoe with interchangeable heels would reduce sales.  Things were not looking good, but this wantrapreneur showed her drive – all the while being very respectful to the SHARKS.  Then, like Bill O’Reilly might say, came the personal story segment.  Personal investment in the business came from the money her grandfather had put into a college fund.  When that money ran out, she sought investors.  After being turned down by investor after investor, she went to the folks who wouldn’t say no – her parents.  Tearfully, she reported that her parents took out a second mortgage on their house to help her out.  The responses that this story evoked were interesting.  SHARK ROBERT related his beginnings; but he indicated that he personally was not able to ask his parents for money.  Other SHARKS reported that they liked her but that she needed to find another product to pursue.   After being quiet throughout the segment SHARK DAYMOND reported that he too had been turned down by investor after investor and that his start-up money came from his parents.  After four of the SHARKS dropped out, SHARK DAYMOND indicated that he was going to make the wantrapreneur an offer, but it was a bad offer.  The offer was for $70,000 in return for 70% of her business.  SHARK KEVIN commented that instead of having her own business she would become an employee of SHARK DAYMOND.  SHARK MARK’s facial expression showed his disapproval.  But, to the wantrapreneur’s credit, she rose above all of this negativity and commented that a small part of something is better than a large part of nothing.   DEAL with SHARK DAYMOND.  Very few segments of the SHARK TANK have made this writer want to stand up and cheer for the wantrapreneur; but, this segment was one that brought me to my feet.

SHARK TANK LESSONS LEARNED – February 22, 2013

Some additional facts about the SHARK TANK…some of you may have noticed that the two female SHARKs do not appear on every episode.  Specifically, Lori Greiner and Barbara Corcoran, both appear in the seat between SHARK KEVIN and SHARK ROBERT.  For you fans of SHARK LORI, her appearances on the SHARK TANK can be found on her website Newsletter@lorigreiner.com.  She pairs up her appearance on SHARK TANK with a program offering her products.  GOOD MARKETING LORI!

            In the cover article of the March 2013 issue of SUCCESS magazine featuring a look at SHARK BARBARA, the author, Tory Johnson, writes that SHARK BARBARA was not happy about sharing her chair with SHARK LORI as none of the male SHARKS have asked to share their seat.

            A couple other interesting tidbits about the SHARK TANK show appear in the article prepared by Tory Johnson.  While the show doesn’t show it, the wantrapreneurs must wait a minute after they walk into the SHARK TANK and do not talk until instructed by one of the SHARKS.  This one minute is very important to SHARK BARBARA as she believes that she can tell a lot about a person during this one minute pause.  Secondly, each SHARK is wired to the producers to cue the SHARKS on what to say.  Remember readers the SHARK TANK show, like most TV shows, has the mission of providing content that attracts viewers thereby enabling the TV network to attract viewers.   More viewers mean more valuable commercial time that the TV network can sell to advertisers.  It is not the purpose of ABC-TV to neutrally report the truth about business negotiations or present balanced negotiations leading to either a DEAL or NO DEAL.

            First to jump into the SHARK TANK were two ladies who owned a business called Addison’s Wonderland.  The product was high priced decorating accessories for girl’s bedrooms.  (Addison was the daughter of one of the wantrapreneurs.)  An example of high price was bedding set having which retailed at of $1400.  The fathers of daughters in the group, SHARKs MARK and ROBERT, were shocked at the cost.  However, the good first year sales and 55% margin grabbed their attention.  Apparently, the two wantrapreneurs had put their fingers into a high end market that no one else had identified.  SHARK LORI quickly indicated that high end was not her business model.  Rather, her formula for making money was to offer quality products at affordable prices to sell to the masses.  While the decorating products were being sold in high end specialty retail stores, sellers told the wantrapreneurs that sales would go up if the price came down.  Thus, money was needed to bring down manufacturing costs.

SHARK KEVIN quickly identified the fact that there was nothing proprietary about the product so they were easy targets for knock-offs; therefore, there was no opportunity for the business to get real big.  SHARKs MARK and ROBERT realized that what had been presented was a money making business.  SHARKs ROBERT and DAYMOND indicated that the ladies were already in a good business which they just needed to grow.  SHARK MARK dropped a very good lesson at the end.  Specifically he looks for ROT, Return On Time.  Here, SHARK MARK did not see a good ROT thus, like the other SHARKS, he dropped out.

            On to the second pair to swim in the SHARK TANK.  The company was called Muddy Watter Cammo.  The product was camouflage clothing made to look like the surroundings.  Their point was that what we know about camouflage clothing didn’t really hide the wearer.  Instead, the product was made fabrics  produced using a 54 step process beginning with photographs of an area…which fabric was made into clothing.  SHARK KEVIN wanted some evidence that the product worked; for example, are more ducks dying because of the product.  SHARK DAYMOND wanted to know if they were selling clothing or the technology to make the fabric.  The answer was both.  When the questions came to justifying their $3Million dollar valuation on the business, the presentation started to go south and all of the SHARKs dropped out but SHARK KEVIN.  LESSON here is that too large a valuation acts as SHARK repellent.

            As has been reported several times in this LESSONS LEARNED report SHARK KEVIN is a licensing guy.  During this segment, SHARK KEVIN said as much.  He made a small offer that was rejected by the wantrapreneurs.  While the rules of the show seem to indicate that the wantrapreneur is to ask for a sum in return for a chunk of the company, the LESSON to be learned here is something should be said about licensing to attract SHARK KEVIN’s interest.

            The wantrapreneurs punctuated their presentation by blowing duck calls. IRRITATING!  At the end, the duck calls indicated lack of seriousness about the some very serious valuation numbers that they placed on their business.  NO DEAL.

            Before the last two segments and update was given on the fragrance product called LIQUID MONEY.  The wantrapreneurs turned down an offer from SHARK DAYMOND, but a hotel in Las Vegas picked up the product and sales grew rapidly.

            FYI, if you believe that getting a deal on SHARK TANK is the key to success, the SUCCESS magazine article on SHARK BARBARA indicated that about one third of her investments have not been successful.

            Enter two young ladies who were friends while attending Baylor in Waco, TX.  The business was called Hip Chicks.  The product was a jeans design for women.  It featured a design that hid what some call a “muffin top” and others call “spillage”.  Also hidden was something called “whale tail” whose only other analog is called “plumber’s butt” in men’s clothing?  The money requested by the wantrapreneurs was for a sales force and the backing for more designs.  Retail cost for the jeans was $187.  OUCH!   Wholesale cost was $80.  Manufacturing cost was $68.  Do the math – that’s hardly a set of numbers that adds up to a big profit.

            As expected, SHARK DAYMOND, the clothing guy, became the expert SHARK for the other SHARKs.  He reported that the cost to launch a new jean line was $5 million.  While he didn’t offer a deal, he did offer an interesting suggestion heretofore unheard on the SHARK TANK.  Specifically, he suggested sending out 100 to 200 jeans to those who might like the jeans and endeavor to get a partner.

            The segment ended with some harsh words from SHARK KEVIN who valued the probability for success of this business at zero.  SHARK LORI asked SHARK KEVIN to be nicer; but, SHARK KEVIN replied by indicating that they should thank him for being present.  Wonder if these words came from the producers?

            NO DEAL.

            Three sons of a lumber yard owner were last into the SHARK TANK.  The product, wooden eyeglass frames, bore the trademark PROOF.    Sales, primarily at trade shows, seemed good.  Cost to make was $14.  Wholesale price was $50.  Retail price was $100.  Not Bad!   Projected sales for next year were $850 thousand.  Money was needed to build inventory as Pacific Sunwear had given indication that it might place a large order.

            SHARK LORI saw a conflict with her eyeglass business and dropped out.  While SHARK DAYMOND was impressed by the interest of Pacific Sunwear he dropped out.  For reasons unstated SHARK MARK dropped out leaving SHARKs KEVIN and ROBERT.

            As expected from a licensing guy SHARK KEVIN made an offer that included a continuing flow of royalties; first to pay off the cash advanced and then a lesser royalty in perpetuity.  If you, the reader, don’t get it now; the lesson here is that SHARK KEVIN makes money by building perpetual streams of income – NOT BUSINESSES.  SHARK ROBERT liked the wantrapreneurs and matched SHARK KEVIN’s offer but without the string of royalties.  While the wantrapreneurs tried to squeeze some more money out of the SHARKS, it was not to be.  After the wantrapreneurs left the SHARK TANK without a deal, SHARK KEVIN commented that they let greed cloud their vision.  Unless the wantrapreneurs had another deal offer in their pocket, SHARK KEVIN’s comment may have provided a good LESSON.

            NO DEAL.