Daymond John Bites Back: 'Tell These Bobos to Take a Walk'
Last Friday's Shark Tank was a military-themed episode, and the training, discipline and focus that two Army Rangers, a retired Air Force major and a Marine, plus two Army spouses demonstrated in their businesses seemed to be exactly the gung-ho, all-in commitment the sharks look for in deal-worthy entrepreneurs.
Nonetheless, the timing and scalability of each business still counted, leaving half of the entrepreneurs walking away empty-handed. The evening even featured a commando-style raid, where Daymond John tried to blow up a deal.
In a twist on the show's military theme, the first pitch came from Lisa Bradley and Cameron Cruse, two military wives who sought $100,000 for 20 percent of their handbag and accessory company, R. Riveter.
The two women manufacture high-end handbags and messenger bags, using upcycled surplus military gear. And while the sharks were impressed with the quality, they were even more impressed with the process.
Bradley and Cruse explained that they'd created their company as a way to help military spouses find work. With frequent moves and deployments, these husbands and wives often have trouble getting a job or building a career. So R. Riveter trains them to create individual pieces of bags and sell as piecework to the company, which then assembles them near Fort Bragg, North Carolina.
A sample bag that sells for $220 costs $55 to manufacture. Bradley and Cruse told the sharks they had $300,000 in sales for the last 12 months and projected $400,000 for this year. That 25 percent increase, they told the sharks, could come from an investment to support online marketing efforts. So far, they said, they'd invested just $9,000 in the entire venture.
The sharks loved this business, especially for its aspect of socialpreneurism. “You’re more than a business,” Robert Herjavec told them. Added Mark Cuban: “What’s really cool to me is that you are a social network through action.”
Herjavec and Robert O’Leary both accepted Bradley and Cruse’s deal, while Cuban offered additional financing for inventory and equipment. But Daymond John offered something different: advice that the entrepreneurs walk away and self-finance to grow the business first.
“At this stage, an investment is not in your best interests,” John told them. “I really believe you should tell all three of these bobos to take a walk and keep the rest of your company, because you’ll figure it out.”
Instead, Bradley and Cruse decided to let Cuban help them figure it out.
Marine Corps. veteran Willie Blount and his second cousin, Tarik Rodgers, pitched their smart-glove technology company, BearTek. It offers a touch-sensitive glove and control module that allows users to control a phone, camera or any other device by touching the tips of their fingers. Although the company had sales of $200,000 in 15 months, the sharks were dismayed by the price, of $200 to $275 per pair.
Blount and Rogers countered that the gloves were proof of the viability of their technology, which could be used to control military equpiment, such as drones, night-vision displays and more. That left one more problem for the sharks: what they considered an over-rich valuation for the company of $10 million. That valuation was based on the cousins seeking an investment of $500,000 for just 5 percent of the company.
Beyond the valuation, the sharks didn’t like how the entrepreneuers lacked any major contracts and hadn’t created any product extensions beyond the gloves. The sharks felt that the two men were seeking a far-too-rich deal far too soon.
“You really have something here,” Lori Greiner told them, “but you’re just at the point of figuring it out.”
Retired Air Force Major and missile combat crew commander Angela Cody-Rouget sought $150,000 for 20 percent of her home organizing business, Major Mom. She said that she had built the business up to 16 employees in Colorado and Arizona and that the business had had sales of $407,000 last year, with projected sales of $550,000 this year.
Cody-Rouget told the sharks that if the profits hadn’t been reinvested, the business would have netted her and a partner $320,000 last year.
Unlike most clutter consultants, Major Mom's organizers do all the hands-on organizing themselves, decluttering, room redesigns and rearrangements for clients, and hauling off any surplus household items to be donated. Cody-Rouget said she hoped to expand by franchising to other veterans, who she said could start with only $15,000 in financing.
The sharks were doubtful about that plan to expand to 150 franchises, and thought that goal would be a bigger challenge than she expected. When Greiner suggested that Cody-Rouget simply continue expanding the business on her own, the entrepreneur answered, “It’s just not fun,” causing Cuban to wince.
“That’s the scariest answer you can give me,” Cuban said. “There’s always something more exciting than grinding it out.”
In the end, the sharks’ doubts about scalability and sense that the business could grow organically resulted in no offers.
Combat Flip Flops
Another business with a social mission, Combat Flip Flops, goes by the motto, “Business not bullets.” Former Army Rangers Donalde Lee and Matthew Griffin distribute what they consider cool products from dangerous places: flip-flops from Bogota, Columba; sarongs from a woman-run business in Afghanistan; and jewelry crafted from old land mines, in Laos.
Their most popular product is high-quality flip-flops, which cost about $25 to produce and ship and sell for $70. The company sold $134,000 worth last year and is on track to sell $300,000 this year; already, it's realizing a 5 percent net profit. The partners sought $150,000 for 10 percent equity.
Both O’Leary and Herjavec saw logistical problems in scaling the business, however, and a lack of focus, with too many products. When O’Leary -- who regularly dismisses entrepreneurs he dislikes with the phrase, “You’re dead to me” -- said he was out, Griffin walked over and handed him a long piece of bright orange plastic. O’Leary asked what it was; and Griffin deadpanned, “It’s how we mark the dead.”
Despite that exchange, Greiner liked the business, saying that it should first focus on one product line and then branch out; she invited the other sharks to go in on a deal. Cuban and John agreed to join her, and Griffin demonstrated some impressive impromptu negotiating skills, expanding the deal to $300,000 for 30 percent equity, split equally among the three sharks.