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‘Shark Tank’ Recap: Chum In the Water (Season 5, Episode 9)

Mark Cuban, Shark Tank Season 5Sony Pictures Television/ABC

It was time for another lesson in entrepreneurship on Shark Tank: five hungry sharks and four different pitches to be either torn to shreds and devoured or invested in.

The first in the tank was a “product to ensure you always know who is at the front door.” The pitchman, Jamie Siminoff, stood behind the closed front doors and knocked. Lori Greiner, being the gracious one, asked who it was: some of the other sharks looked like they were wondering what the heck he was doing. He announced himself as “Jamie, ready to pitch” and Greiner told him to come in.

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Siminoff, who wanted a $700,000 for 10% was selling the Doorbot – a video doorbell for smartphones. “Think of it as caller ID for your front door.” He demonstrated with a cardboard cutout of Kevin O’Leary and mocked the structure of his deals. The other Sharks were laughing, but while O’Leary was smiling, his eyes looked non-plussed. It’s never a good idea to make a billionaire non-plussed, Jamie.

They asked questions about distribution: he had it online currently, but in November, Staples would sell it.. He said it costs $199 and he pays $81.83 per unit to make it. This is a question that the Sharks love to ask. He had done a million in aggregate sales so far and that there were no current competitors that fit the mold of being a smartphone-only doorbell. They were concerned about burglars but Siminoff said that if it was ripped off the door, they would replace it free of charge.

Greiner, while being encouraging that there could be things to expand, was out first for not being convinced it would be distinguished enough to separate itself from other markets.

The next domino fell very quickly. Mark Cuban was out. He liked the quality of the product, but didn’t see himself adding enough value to company. It was at this point that Siminoff seemed to start getting a hangdog expression, like “None of you are going to invest here, are you?”

As if sensing something, Daymond John was out next. He saw the possibility of ADT using it as part of their product, but he struggled with where it would exactly fit in the marketplace. He did offer a thin-smile of condolence with his refusal.

Robert Herjavec was really adamant that he didn’t like the security aspect of it, since others alarms were hardwired. He said that this might be hackable. This of course led to a quick “I’m out.”

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This all came down to O’Leary, who also calls himself ‘Mr. Wonderful.” This is the same guy who Siminoff had mocked to start off the pitch. He apparently wasn’t moved by the pitchman holding up the O’Leary cardboard cutout again. But he also was about possibly making money and offered him the $700,000 and 5% equity plus his favorite addition of royalties: 10% until the money was recouped and then 7% in perpetuity. Siminoff didn’t like the royalty in perpetuity bit and threw back an offer of $700,000 plus a 10% interest rate and 3% equity, which O’Leary summarily dismissed. After Siminoff turned down his offer, O’Leary hit him with his phrase “You’re dead to me.” The other Sharks seemed supportive of the entrepreneur’s decision.

Update: Usually they update about a particular successful pitch from early in the season, but this time Barbara Corcoran took some of her most successful entrepreneurs on weekend retreat and made it basically into an ad for a Shark Tank book. It was funny seeing her in casual gear though; usually she’s very businesslike on the show.

Second in the tank was Julie Busha for Slawsa, which was a “new take on condiments” that was a cross between slaw and salsa. Her catch-phrase was “It’s slaw-some”, which made me mad that I didn’t think of it. She asked for $150,000 for 15% . She had $212,000 in sales in 4,200 stores, with Kroger being a big retailer. They liked that she hustled and got these stores herself. The price of her product was 20% more than other condiments since it was a more labor-intensive job. In the middle of her pitch, she got teared-up over being debt-free, because that is what made her able to buy the existing company. Her and her husband had been so diligent in saving that she had more than enough money to not take a salary.

Cuban felt he couldn’t contribute, despite her point that she wanted to sell this in his sports arenas. He didn’t see that as enough to invest and was out.

The items were too sweet for Herjavec and he felt he couldn’t invest in something he didn’t like. He was out.

Daymond was not jazzed about the product either and he also bowed out.

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Greiner didn’t want to be in the slawsa business though she liked the product. As is generally her custom, she let her down easy when she said she was out.

So once again, it was down to O’Leary, who didn’t like the valuation. Since it was a one-woman business, he felt there was too much risk. He said he could do a deal and then she’d walk out and possibly get hit by a bus. He was out.

The third pitch in the tank was Magic Moments. This was created by three guys from Detroit, Michigan, Trevor and Blake George and Sanford Nelson.

The product was a new way to for people to share favorite images. They could take a picture on their smartphone and then use an app on the phone to put those photos on any product and supposedly make money off it. The products ranged form mousepads to iPhone cases. They wanted $500,000 for a 15% stake. The problems cropped up immediately. They had no numbers though they couched it with terms like “Pre Revenue Sales.” This made every Shark roll their eyes.
There was the question of the legality of using people’s photos for sale and they countered that they use CafePress as an exclusive vendor, which gave them access to the company’s legal team.

Daymond grilled them about fundraising. They said they had raised $500,000, though it was friends and family only. Those are some really deep-pocketed friends and family, huh?

O’Leary was the first out: he couldn’t get past the valuation of it and he felt he could emulate it for 1/3 of the price. When Mr. Wonderful, who usually is one of the last to bow out is the first one to say no, that’s NOT a good sign.

Cuban thought it better to do web-based photos and not just have it go from the smartphone straight to the product, since a lot of people like to edit the photos in something like Photoshop. He was out.

Daymond didn’t think they have proof of concept, especially in something like photography and the Internet, where there are so many apps out there. He was out.

Greiner was very uncomfortable about selling everyday pictures that other people took, so she was out.

Herjavec was not convinced that a real marketplace existed, so he was out.

There was no deal from a Shark again. Maybe the fourth one would be the one, though I had a bad feeling that wouldn’t be the case since the preview showed Herjavec yelling “I’M OUT!!!!” at someone and that hadn’t occurred yet.

Last in the tank was Surprise Ride, which was the brainchild of Donna and Rosy Khalife, who were sisters and refugees from Lebanon. Their product was geared toward family fun and education. They asked for $110,000 for 10%.

After their pitch, they handed out Surprise Ride packages, which were very well made. They had tailored them to each Shark’s interest; Herjavec’s had something about race car driving, a subject that he is a fanatic about.

The Sharks got down to brass tacks. The product cost $24.99 for a six-month subscription and they had shipped 800 to 220 subscribers over the last 4 months. O’Leary hit them with two questions that he always likes to ask start-ups: Customer Acquisition Costs and the Value in Customer Profit Margin. Rather than the deer-in-the-headlight expression that O’Leary must have anticipated, they answered his questions with no problem, earning a cheer from other Sharks. It helped that one of the sisters had a background on Wall Street.

What helped them was that it was a scalable business and they had raised $100,000 from an angel investor. They were anticipating $500,000 in sales for the year and felt they had a large potential customer base in mothers..

Daymond didn’t like the valuation. He used the example of his own company, FUBU. When he first started, he sold 800 shirts. That meant he had sold 800 shirts. No crazy valuation. He was out.

O’Leary again saw a proof of concept issue. He was out.

Herjavec saw them as underestimating what hustle would be required to get this done. Despite his misgiving, he did make an offer: $110,000 for 25%. Here’s where the two girls really screwed up. They practically didn’t acknowledge the offer or say anything like, “Thank you, Robert.” They just turned their gaze to the other Sharks and asked for other offers, Even I was cowering at home from Herjavec’s death glare.

Greiner was telling them that she saw herself in them and telling them they could make anything happen. An exasperated Cuban was rolling his eyes. “She’s telling you she’s out in 9,000 words.” He was right. Greiner was out, telling them to do it on their own. She said she was out. They were begging and Herjavec interjected that Greiner was out. The girls made Mistake No. 2, telling him basically to butt out.

Cuban then blasted them for their wanting to rely on other companies to drive their products. Entrepreneurs need to drive their own destiny.

Herjavec then really took it to them, changing his mind. The girls massively screwed up by not immediately taking his offer or even acknowledging it. Ironically, Cuban was munching on the popcorn that the girls had put in his package. They even played the immigrant card on Herjavec, but he was unmoved.

O’Leary summed it up: “You are now legends on Shark Tank. You had a deal and couldn’t close it.”

So… there were no deals this week. Judging by the previews with one entrepreneur pumping her fist, I think it gets better next time.

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