The premiere of Shark Tank featured lots of great businesses; a rental toy company, a new design for pogo sticks, a very unique alarm clock and the largest offer on prime time television.
Toygaroo seeks $100,000 for toy rental company
First in the shark tank was Nikki Pope who was asking for $100,000 for 10% of her business, Toygaroo. Toygaroo is essentially the Netflix for toys, families pay a monthly membership between $35 and $89 to get a large box of toys sent to them each month. When a kid loses interest in the toy or outgrows it you send it back and choose from one of the 300 different types of toys. When the toys return to the warehouse they are sanitized and then shrink-wrapped, waiting to be sent out again the next family.
Nikki ran a test market of her business with five hundred people, sending them a box of toys worth $200, but her cost was only $50-$85 per box and she charged $45 a month. This means within two months she should break even. At the end of the test market she had a waiting list of over 1000 people.
There was a little bit of confusion over the ownership structure of the company. Nikki and four other business partners all own 10% each of the business, while her husband owns the remaining 50%. For some reason as she brought in new partners only her shares were being diluted.
Kevin was the first shark to act, offering $100,000 for 35% of business. A little history on Kevin O’Leary: in 1999 he sold his educational software company the Learning Company, (which produced popular games including the Reader Rabbit series) to Mattel for $3.7 billion. Robert and Mark offered $200,000 for 40% of the business. They offered more than the key was asking for because they believe that she needed the money to expand quickly. Kevin brought his experience working at Mattel and contacts in the toy industry to the deal, while Robert and Mark offered their experience online. Nikki had to decide what was more important, good connections with toy companies, or a proven track record with online businesses.
In a twist Kevin and Mark joined forces offering 200,000 for 40% of business, cutting out Robert of the deal.
Nikki came in knowing the Sharks. She knew that Kevin O’Leary had experienced in the toy industry and she really wanted a deal with him. That preparation surely helped her close the deal and get a strong strategic partner.
Shark Tank buzzes for Wake n’ Bacon, but no $40,000 investment
A few years back one invention went viral and was featured in major magazines and all over the Internet. That invention was the Wake n’ Bacon, an alarm clock that wakes you up to the smell of cooking bacon, right beside your bed. Matty Sallin brought his invention Wake n’ Bacon to the shark tank, hoping to hit $40,000 for 20% of his business. Matty was hoping use the money to redesign his product for the mass market. The problem was Matty was not prepared for the sharks and did not even have any projections of how many products he would sell, and only a rough idea of how much the cost of production would be. All the sharks were out and he walked away without a deal.
Vurtego extreme trick pogo stick owner tries to land a big Shark Tank deal
Brian Spencer came bouncing into the shark tank with his business Vurtego. Brian reinvented the pogo stick by replacing the traditional spring with a compressed air cylinder. This allows his pogo sticks to bounce higher and do extreme stunts. Some of the sharks felt that there was a danger of somebody getting hurt, but Brian said that Vurtego is safer than skateboards because there’s less speed in comparison.
So far he has sold 7000 units at $330 apiece, whose costs are only $100 a unit. The sharks said he should be selling his products at much higher price, and selling to the mass market was the wrong direction for his business. Right now Vurtego has the cool factor going for it. It’s unique, and hard-to-find and if you could pick one up at Wal-Mart it would lose all that. All of the sharks were out and Brian walked away with some good advice but no deal.
A Ferrari is something that a lot of people dream of owning and hypothetically a Ferrari could sell a reasonably priced car, but then less people would dream of owning a Ferrari because the value is no longer there. Sometimes you make more selling less products and by selling a dream, and charging a little bit more for that dream.
First Defense Nasal Screens owner seeks $500,000, walks away with $750,000
Last in the shark tank was Joe Moore with his business First Defense Nasal Screens. Joe was looking for $500,000 for 10% of his business. First Defense Nasal Screens is a new take on surgical masks, instead of covering your whole face they stick to your nose creating a seal around your nostrils. This should eliminate 99% of airborne particles. First offense is patented and has a large order for $8 million over the next six years from a distributor in the Middle East. Joe needs $500,000 to buy the supplies to fill the order. In the past Joe considered licensing the product to a major drug manufacturer, but he found out that they would rather buy his product and shelf it (not sell it) because they make more money by selling the drugs to cure the patient then to prevent the disease.
And so began the most intense negotiation in shark tank history, with the largest offer ever. Kevin and Mark offered $500,000 for 20% of the company and 15% royalties until they recruit their initial investment. Daymond offered $800,000 for 30% of the business and also included a 10% royalty. Kevin tried to offer $1 million for the whole company but that was quickly turn down. Joe said that he would be willing to sell his company but would like a royalty of around 10%, and continue to be involved in the company. Daymond upped his offer to $1 million for 30% of the company and 10% royalties. Robert offered $2 million for the whole business and to give 10% royalties back to Joe, as well as a job managing the company. He turned down the offer, but Robert countered with an offer for $4 million for the whole company. It was the largest sum of money ever offered in the shark tank. Joe countered with $5 million and a 15% royalty. Robert rejected the deal and was out.
After the sharks talked without Joe there, they reevaluated their offer and combined forces. Daymond, Mark, and Kevin offered $750,000 for 30% of the business and 10% royalties (forever) and after a little discussion and Dallas Mavericks season tickets thrown in, Joe accepted the deal.