You need to watch Shark Tank.
I know I’ve said it before, but you seriously should give it a shot if you haven’t seen an episode.
Aside from the entertainment value of my favorite shark Kevin “Mr. Wonderful” O’ Leary, I learn something new or am reminded of key business lessons practically every time I watch.
This weekend, I ended up catching up on the last two episodes. On each episode, an entrant into the Shark Tank stood out for their self-perception, but for completely opposite reasons.
EZPZ Lemon Squeezey
On one hand, you had a contestant with a business/product called EZPZ valued well above anything any of the sharks considered a reasonable valuation. If that wasn’t bad enough, her response to the reality check was was to tell them she wanted to come in asking for five times the amount she did.
In case you’re wondering, she asked for $1 million for a 5% equity stake in her company, implying her company is worth $20 million. Now she did have $1 million in sales, but to expect anyone to pay that type of multiple is comical.
The best part is that when presented with a contingency offer granting her the valuation she wanted, contingent on her making $10 million next year as she claimed they would, she balked.
And then she walked.
Never seen anything like that happen previously, and this entrepreneur may never have this type of funding opportunity – at exactly the valuation she asked – ever again.
The Beard King Reigns Supreme
The next episode came with a couple pitching a product called the Beard King Bib that kind of reminded me of the Snuggle – something that felt like a joke gift. The sharks had the exact same reaction. Similar to the previous episode, something unprecedented happened. Their ask was $100,000 for 20%.
Down to one judge, Lori Greiner, who clearly was about to bow out, the entrepreneurs preempted Lori’s move by asking her what would be a big enough offer to jump in. The answer? $100,000 for 51%.
They counter at $100,000 for 45%, which Lori accepts.
Talk about snatching victory from the jaws of defeat…
The best part of watching this couple was the owners knew their limits. Even when on the verge of exit, they knew that 45% was the highest they could go.
Moral of The Story
Don’t make claims you’re not ready to put some of your own money behind to demonstrate the confidence you investors to have in you. You can talk yourself out of an opportunity as easily than you can talk yourself into one.
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