Shark Tank Bets Big On The Lizard People
To celebrate the 'We've funded $100 million in businesses!' milestone, the show trots out a group of young entrepreneurs to school Friday-night viewers on our economic future.
Much was made of millennials tonight, with the underlying message that a generation effectively locked out of corporate America's offices -- sorry about that; sincerely, the Boomers who aren't retiring and the Gen Xers who are still dealing with the wage lag from our own recession-blunted release into the wild -- is handling endemic underemployment by launching their own businesses. So exactly how millennial are these businesses, anyway? Let's rank them from "We've seen it before" to "This might actually be a generational differentiator."
- The Elephant Pants
Oh judas priest, it's grown men wearing elephant onesies. I feel like the Sharks should refuse Nathan Coleman and James Brooks money on principle. They should double-refuse anyone in an elephant onesie who values their company at $5 million (they're asking $500,000 for a 10% share) when that company does nothing more than make the kinds of pants that Deadheads wore in the winter in my college town. The competitive differentiator between these and whatever flimsy tie-dyed harem pants are hanging in the back of your local head shop? These dudes give 10% of net profits to pro-elephant organizations. Mark immediately says, "That's really not all that much, guys."
The Elephant Pants have done $7 million in sales, a figure that is probably directly attributable to the legalization of marijuana in a few U.S. states and Phish's frequent national tours, and it helps that the pants cost $6 to make and retail for $24. I would guess that anyone in the target audience who heard these figures may just chalk up the mark-up to something they imagined they heard at the exact moment the edibles kicked in.
Both Robert and Mark bail immediately, so repelled are they by the pants. Kevin points out that he actually chillaxes in pants like this in his down time -- Canadian political press, how lucky you are to have this candid photo op to look forward to! -- and he will give the $500K in exchange for a 20% stake in the company. These two amiable pants vendors do not even blink at how blithely Kevin just halved their company's valuation. I leave it to the reader to determine why that might be.
Daymond makes a similar offer and Lori's like, "Anyone want me to partner with them?" which prompts Kevin to make an offer -- $500K line of credit with a 12% interest rate and a 10% equity stake, and in exchange, these guys get "the power of two Sharks." The dudes don't dig the line-of-credit angle and ask if Daymond, Lori, and Kevin will consider partnering for a straight-equity deal of 15%.
Inexplicably, there's a bidding war over these ridiculous pants -- Daymond offers $500,000 for 17.5% and he'll fund their production. That offer prompts Kevin and Lori to drop out. And now is when these two elephant-loving dudes make a counteroffer to the only offer they have, asking that Daymond accept a 15% stake for his $500K and accept another 2.5% stake in advisory shares. Daymond goes for it and celebrates his deal by doing an MC Hammer dance with the pantaloon vendors. Insofar as "crazy things rich people do to entertain themselves," it is not the worst possible hobby.
FYI, if you'd like to help elephants, you can skip buying the pants your great-aunt wore when she was living in a yurt at the Morningstar Commune, and just give money directly to the Elephant Sanctuary in Hohenwald, Tennessee. They do good work.
- Sand Cloud
"As millennials, having a business with a social impact is everything to us," say founders of Sand Cloud, Steven Ford, Brandon Leibel, and Bruno Aschidamini. Although their pitch features adorable sea lions adorably squirming back to the sea, it's unclear exactly how much social impact the company's having on the non-pinniped world at large, and yet these guys value their beach towel company at $2.5 million. (They're seeking $200,000 for an 8% take.)
The pitch starts off strangely -- the Sharks' faces photoshopped on to other bodies remind me of that genuinely weird Parade magazine cover where Robert's midlife crisis was on full display, along with his pecs, but it's a heck of an opening to the pitch. I'm not sure I fully recovered before the segment was over.
The Sharks all express concern over how thin the towels are, showing that they're unaware of the Turkish fouta towel craze that's taken over Etsy, Instagram, and shelter blogs. The founders explain that the young people are into thin towels because they can use them as towels, sarongs, home decor, a hat, a brooch, a dinosaur…
The towels are made for $10 and sell for $47. It's an impressive margin, and has convinced me to never buy from these guys because wow, are consumers being ripped off. Then the founders argue that the price on these tissue-thin towels is more than justified because what they're selling is a cause to get behind, and as someone who has rage-bought a few totes in the last month, I can confirm that lo, we suckers are out there.
Sand Cloud's sales look great -- $30,000 the first year, $430,000 the second year, and this year to date, they've racked up $1.6 million, on track for $3 mil. Daymond's all, "If you're on track for these kind of sales, why do you want $200,000?" The answer? To build a better website. If any web design and development pros are watching, I imagine this is when they began laughing bitterly.
Mark asks for 25% stake for $400K, which knocks the valuation down to $1.6 mil. The guys are all, " …Ehhhhhh. No." They quickly insult Daymond with a silly offer; he rolls his eyes and peaces out. Both Robert and Kevin offer $200K for a 15% stake, which puts the valuation at about $1.34 million, and the trio decides to go with Robert. He cheerfully admits he doesn't get the towel, but he does get high margins and he's fine with sniping Kevin.
But come on -- these towels are basically what you're going to buy as a bridal shower present for the kind of woman who's wearing Elephant Pants.
- Ora Organic
Ronald Chang and Will Smelko are seeking $375,000 in exchange for 5% of the company, putting the valuation at $7.5 million. You might think this is a lot for a nutritional supplement company, but never underestimate people's willingness to boost their vitamin B intake, or to pay out for organic plants turned into "chef-designed" liquids and powders. Pineapple spray as an appetizer? Don't mind if I do. It's the next logical step after sous vide, foam, and other cooking-as-science-experiment cuisine.
(It will not surprise anyone to learn the company's founders met at Berkeley.)
Ora has $415,000 in sales in 10 months, which is nice, but Robert's all, "Eh, the space is competitive and you don't have anything that really stands out from the rest of the market. Hard pass." Daymond is like, "Why would I bother with a tiny stake in a $7.5 million company? That number is ridiculous and I'm out." I enjoy when Daymond is crapping on an offer and not the other way around.
Lori's hung up on the packaging because "less is more" is not exactly her aesthetic. She cites marketing concerns as her reason for bailing. Mark is out because he was hoping they'd actually have a partnership with, say, a Blue Apron or some delivery service. He's not here for your "We'll be in Whole Foods...someday" promises.
Kevin does his schtick, then offers $375K for 20% of the company, thus turning a $7.5 million valuation into a $1.87 million one in the time it takes you to read this sentence. "I'm not even interested in negotiating," Kevin adds. "So you can do this, or you can pass."
So of course Will counters with a $5 million valuation -- so $375,000 for a 7.5% stake. In theory, Mr. Wonderful should bark, "I said I'm not interested in negotiating," but in practice, Mr. Wonderful cannot resist the chance to drag out drama and suck up more attention, so he counters with a 17.7% stake for a $2.2 million valuation. Will sticks to his $5 million valuation, offering a 10% stake in the company, and he's all, "I'd hate to see you all kicking yourselves for not jumping on when we take off big," and they take off without a deal. I admire someone who can resist a hard press on camera, but it's kind of fun when the Sharks all chortle over someone overvaluing their company.
The problem? People can't pilot drones worth a darn. Abby Speicher's solution? A school to train drone "pilots." This is a drone pilot-training school, run by actual aviation professionals. They've got 27 locations across the country, and in 18 months DARTdrones has been in business, they've made $520K, but they're not profitable yet because they're pumping money into a new curriculum. "We've noticed the people in our classes are commercial users. Their police or fire departments have sent them. So we've made a big shift...to focus on commercial users."
This is a great idea, and it's an oddity for Shark Tank -- a leading-edge company and not a lagging one. Drones plus VR headsets are basically the future of 24/7 surveillance, facility inspection work, and remote watches for things like livestock or potential fire outbreaks. A facility that's locked down a training curriculum with a defined set of skills for graduates is in a great position to team up with -- or become -- a facility that trains remote workers to surveil and report on things via VR-plus-drone setups.
Mark asks if community colleges have twigged to drone-training as a possible field of study, and Speicher tells them that she's been asked to license her curricula to these places. Again -- she's founded something that's on the leading edge of the market right now and I am on tenterhooks to see which Shark recognizes this and will grab her company. The offer she's making -- $300,000 for 10%, so a $3 million valuation -- is remarkably good, especially given how her business model is predicated on training police and fire departments, of which there are many in the U.S.
Mr. Wonderful goes to make an offer and Mark's all, "Eh, screw him, I'll give you what you're asking for. But either pick me or walk away and see what sort of nonsense Kevin will put you through."
Speicher is all, "DONE." She walks out, calm as only an MBS who racked up a frillion awards from Babson College can be. Although the other Sharks razz Mark for not putting Speicher through the ringer, he grins, presumably thinking about how he just got in on the ground floor of a company that's building name recognition among commercial drone users, and how corporate training is a license to print money.
It was interesting how the one business that was defining a brand-new market was the one with the least amount of engagement or interest from the Sharks. It's a stark illustration of how having a young pitchman doesn't make an idea -- or its backers -- particularly forward-looking or innovative.