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Remember the crew in red shirt on the original Star trek landing parties? You know: the anonymous security man who was hijacked by hostile aliens after only 30 seconds of screen time? As soon as this guy beamed to the surface of the planet, viewers knew, “Oh, it’s a damn, for sure.”
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Fans of Shark aquarium cannot be blamed for reacting in the same way as the show’s video profile highlighting the people behind one of the four companies that showcase each episode. Usually the subject is a photogenic and hardworking couple with adorable children and the same kind of tragic and inspiring story normally reserved for Olympic athletes.
Usually, too, sharks tear these entrepreneurs to shreds.
This pattern seemed to be playing out, in the last episode of last Friday of Shark aquarium, during video for Hatch Baby, a “smart” technology changing mat that helps new parents track their baby’s weight.
But then came a reversal, allowing the founders of the company to escape with more than a few bite marks – and a deal.
Ann Crady-Weiss and Dave Weiss were the couple tossing their smart changing mat, which weighs the newborn before and after feeding, to track not only the infant’s weight, but also health and breastfeeding goals. The pad synchronizes with a smartphone app and even allows parents to remotely monitor data.
The Weisses could cite the excellent track record they had while working for Johnson & Johnson; they had also sold a previous successful business, also in the area of child care. What they didn’t have was sales: the Hatch Baby website was only one week old, which didn’t delight the sharks. They also didn’t like the fact that Hatch Baby sold for $ 299, even though it cost $ 89 to make.
But what they really have, really disliked is that the couple sought an investment of $ 250,000 for 2.5 percent of equity – an assessment of $ 10 million on total sales of $ 0.00.
Sharks doubted parents would spend $ 300 on a connected changing mat, and some doubted sales forecasts of $ 6 million in the first year. The couple’s best shot seemed to be the guest shark and former Google executive Chris Sacca, who had a baby on the way. But, like almost all the other sharks, Sacca bowed, saying that the company could work but that he did not want to invest in something that was still in the prototype phase.
However, Crady-Weiss did not give up. “We know what you do for business; we want you guys, “said Ann Weiss. As an alternative, the couple offered a chance to participate in what was left on their initial financing round – a convertible note capped at $ 7.5 million, with equal terms to original investors. After some hesitation, Sacca did the trick.
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David Hegarty launched an application called Fixed which examines parking tickets, searches for possible errors and, when it finds them, files a letter to dispute the ticket. Hegarty launched Fix in one of the country’s major capitals for parking tickets – San Francisco – and expanded it to Oakland, California; Los Angeles; and the Mecca of all tickets, New York. He asked for $ 700,000 for 5 percent of the equity.
The app is free to use, but sets a fee of $ 35 for any ticket it successfully challenges, or a service fee of $ 1.95 to pay for the ticket if no errors are found. About 25% to 35% of all tickets are submitted, generating revenue of $ 5 to $ 6 per ticket. Hegarty predicted that his net annual income would be $ 80,000.
However, the big problem for Fix seemed to be customer acquisition costs. Currently, Hegarty’s crew are tracking traffic officers and placing flyers on the windshields of ticketed cars, at a cost of $ 4 to $ 5 per new customer. On the upside, 70% of customers become regular users and get an average of six tickets a year, said Hegarty, but the sharks didn’t like the fact that the cost wipes out almost any initial profit from a new customer.
Sacca believed that Uber (where he is an investor) and autonomous cars would shrink the ticketing business, while Robert Herjavec was doubtful of Hegarty’s valuation of $ 14 million. Kevin O’Leary was nervous about getting muddled with a source of government revenue, and Lori Greiner wasn’t sure if the business would work.
That left Mark Cuban, who liked the idea of disrupting just about anything. He offered $ 700,000 for a 5% stake, with an additional 2% as advisory fees. Hegarty balked at first, wanting to be assured that – for a total of 2% – the company could get all of Cuba’s attention, but that didn’t seem to be a problem. Said Cuban: “I love the idea of kicking the government.”
Tasha and Antonio Adams, twin siblings, were looking for $ 125,000 for 10% of the village scholarships, a crowdfunding app and a site to help students pay for college. The idea was pre-conceptual, so it hadn’t been launched. The 8.5% service charge is also unsuitable for sharks.
Although this amount is similar to that of other crowdfunding costs, the sharks did not consider the village grants to provide access to new sources of capital beyond the family and friends of a student. “You don’t really bring something they don’t already have,” said Sacca.
While the founders talked about other potential extensions, to match scholarships or allow donors to set up new scholarship offers, the talk ended up looking confused and unclear. “The problem is that you arrived too early,” said Mark Cuban. “You’re not there yet.”
Sacca added, “Ideas are cheap. Execution is everything. “
From the start, you knew that Nicholas and Alessia Galekovic were going to bond with Lori Greiner, “the queen of QVC”.
The Galekovics launched Beard King, a beard trimmer that keeps all those disgusting little hairs out of counters and out of the sink during beard care sessions. The product’s reusable apron ties around the user’s neck and attaches to the bathroom mirror with suction cups, providing a cloth to collect the trim for easy disposal.
The owners targeted O’Leary in particular, with an old photo of the shark with an impressive bushy beard. But what kept “Mr. Wonderful “and most of the other sharks were the fact that Beard King already seemed to succeed alone.
Thanks to video marketing that went viral, garnering 20 million views, Beard King had accumulated $ 140,000 in sales in eight months and sold 80,000 units the previous month. Indeed, the business had grown to the point where the cost was $ 7 for an item sold for $ 29 – a gross margin of 75%. But the initial margins were thinner and the couple needed money to grow, they said.
Herjavec said he believed that at this point the Galekovics could start the business, to self-finance the expansion; Cuban and O’Leary saw a product but not a company. And while Sacca was sporting his own beard, he didn’t think he could help the couple.
Then, while the last shark Greiner was preparing his own “no”, Alessia Galekovic interrupted him, asking him: “What would that be for you?”
“Because I see it as if, if risky, I should take 51% of the business,” said Grenier. “I was going out.”
The Galekovics conferred, countering with an offer of 45 percent and the real trick – a crown and a Beard King dress. “We built it from scratch,” argued Alessia.
It was too irresistible for Greiner: “Finished,” she said.
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