Daymond John Tips Mark Cuban Out of the 'Tank'
Grow Your Business, Not Your Inbox
On any episode of Shark Tank, the biggest shark is Mark Cuban, who frequently comes on like a Great White who’s more than willing to put the bite on the other dogfish swimming in the tank.
Typically, Cuban sits quietly at far stage right, inquires about sales numbers and then waits for the four other sharks to splash around and hash out what looks to be a promising deal with an entrepreneur. Then, at the last minute, Cuban makes his splash -- gliding in to top their offers and grab the deal.
But not on Week 15 of Shark Tank Friday night: Right off the bat, Daymond John made sure Cuban never even got close to baring his teeth.
John's move came with the first pitch, for Shefit, a new type of sports bra introduced by Sara and Bob Moylan of Jenison, Michigan. Sara, a mother of four, full-time sales consultant and fitness enthusiast, said she'd designed the bra to be completely customizable for each customer. It also seemed a good risk: Both Sara and her husband have good track records in sales jobs. The couple sought $250,000 for 20 percent equity.
While Sara Moylan is a barely contained explosion of energy who knows her business backward and forward, the sharks weren't all that enthusiastic about another entry into the crowded athletic-apparel category. Shefit had good numbers, with $220,000 in sales in the past 18 months, including $50,000 in the last 45 days, evenly divided between an online ecommerce store and 19 different retail outlets. Margins also were good -- Shefit costs $14.50 to make and sells for $58.99.
Yet the sharks still saw it as just another sports bra, and one that might have its utility patent challenged. Robert Herjavec tuned out when Sara Moylan described Shefit as creating an entirely new category of athletic apparel, while Lori Greiner felt that similarities in the bra's adjustable fit feature to back braces might leave the patent hard to enforce.
Still, Sara’s energy seemed to win over John, whose clothing lines include handling international licensing for Biggest Loser star Jillian Michaels.
With two sharks out, John made an offer of $250,000 for a third, not 20 percent, of the company. Then he made sure to freeze out Cuban, who has grabbed deals away from John before, by demanding that the Moylans either take or reject his offer on the spot. Even though they hadn’t heard from Cuban and Kevin O’Leary, the two said yes.
Quipped John: “I love decisive partners.”
Co.alition is a high-tech smart backpack that can charge smartphones, tables, laptops and other devices. It also can serve as a personal cloud drive and is completely self-contained -- users just need to plug in one cord. Pitching the backpack were Jeff Popp and Casey Lorenzen, two Denver entrepreneurs who already have a successful backpack company. They’ve created a separate company for their Co.alition model, and sought $200,000 for 20 percent equity.
The two said they'd sold 500 packs online in seven months for revenue of $100,000. The bags sell for $180 to $600 retail, with margins of 50 percent to 70 percent. But as stylish and complete as the smart bags seemed, the sharks weren’t impressed.
They saw nothing patent-able or unique, which meant that any other manufacturer could knock off a version of Co.alition. What's more, consumers now are free to put a wireless hard drive and charging batter into any bag they want.
What really bothered the sharks was that Popp and Lorenzen were spinning off the smartbag company from their current backpack firm, which posted $450,000 in sales last year. “Why take attention from the other company?” Cuban asked. “Get it up to $2 million or $5 million. If you guys were good, it would just be one company, and 'Here’s a new product and we’re going to go to new heights.'”
O’Leary offered the two entrepreneurs a chance to reboot their pitch, and they countered by asking for $300,000 for a 30 percent stake in both companies. That was more palatable and almost won over John, but in the end, the lack of any real proprietary advantage caused all five sharks to swim away.
A clever, self-contained portable personal air conditioner for use outside, Icy Breeze got a chilly reception from the sharks as soon as they heard its $349 retail price for the model shown (others start at $199).
Dave Yonce, a successful entrepreneur, pitched Icy Breeze, alongside Jason Shackleford and Andrew Jenkins. Icy Breeze is a cooler that holds ice and blows out cold air through a flexible nozzle, thanks to a brass fan powered by a wirelessly rechargeable nickel hydride battery. The manufacturing cost is $191. Icy Breeze has sold 1,700 units online and is in 48 Sam’s Club outlets.
The sharks had their doubts. The first was the device's cost and limited sales. Second was the question of why Yonce was even there, seeing as how he'd recently sold his IT company, Solarwinds, for $4.5 billion, in 2015. Yonce’s answer was that he needed a strategic partnership, something John seemed to doubt.
Given Yonce's capital and success, the entrepreneur should have been able to build or find the team he needed, without the help of a shark, the hosts indicated. “You don’t need us,” John said. “If you walk out of here, you’ll be totally fine.”
Cuban expressed his belief that Yonce, having made a big score, wouldn’t have the drive of a start-up entrepreneur. “You’re looking for a shortcut,” Cuban said. “Just go build it.”
Featured in the dreaded video profile was Shaan Patel, who was seeking a $250,000 investment to expand 2400 Expert, his college entrance exam-preparation service. Patel’s back story was compelling: The son of immigrants, he'd not only beefed his SAT score up to a perfect 2,400 -- something only 3,000 people have achieved -- he’s also both a medical student and an MBA student.
Meanwhile, Patel had built up sales of $1.2 million over four years, doubling his revenue every year. His six-week course costs $999 for in-person courses, offered in 20 cities. The live online version costs $599. Patel said he wanted the capital in order to expand to other cities.
The sharks, however, were dubious about the business' scalability; O’Leary, who previously had invested in SAT prep companies, emphasized that acquiring customers is the key to the business, something Patel does now by word of mouth. The other sharks were dubious about Patel’s commitment, dividing his time between a business and medical school and his MBA studies at Yale.
“Your biggest problem,” O’Leary said, “is you’re not 110 percent committed.”
Cuban, however, was impressed with Patel more than the business, and structured his offer as an “acquihire” -- where an investor buys a business more for the talent behind the products. Cuban offered an agreement through which he’d get a cut of other businesses Patel might create.
In this context, Cuban offered $250,000 for 20 percent. Patel curiously countered by lowering his company's value, asking for $300,000 for 15 percent, and then 20 percent. That drew more criticism from the sharks. In the end, Patel backed down and took Cuban’s original offer.