The following are actually REAL negotiations between entrepreneurs and investors (Guppies & Sharks). The sharks invest their own money at their discretion. The guppies get devoured into a belly of finance, or spit back into the ocean of hard knocks to fend for themselves. The entrepreneurs must convince the sharks to invest the FULL AMOUNT, or walk away with NOTHING.
THE GUPPY: Shawn Davis
THE COMPANY: CBS Foods
SYNOPSIS: CBS Foods flagship product is The Original Shrimp Burger offered in 4 flavors of original, teriyaki, cajun and jalepeno.
SEEKING: $200K for a 25% Stake
PRODUCT/SERVICE: CBS Foods flagship Original Shrimp Burgers.
WHAT'S THE SKINNY? HOW DOES IT MAKE MONEY?: It costs 87 cents a burger and it retails for $1.63. CBS also has a Lobster Slider which has shipped 300 cases. He has commitments from 2 supermarkets for 600 cases of burgers and 300 cases of sliders. To date he's sold over 26,000 burgers. The dollar amount for the orders is $87,200. He has $30K in sales this year. He would make roughly 53% on $100,000 in orders.
STATS: Some sharks enjoy lobster, crab, and shrimp especially if it's stuffed with enough cash and rolled in dough. Today's special is Shrimp Burgers, a meal which Mark Cuban enjoys, but he's not experienced in the restaurant business and see's no way he can add value so he backs out. Barbara Corcoran just doesn't even like shrimp at all so she's out. Kevin O'Leary is concerned the profit margins aren't high enough, the protein supply is vulnerable to price fluctuations, and that it is a risky product so he's out. Robert loves the shrimp, but doesn't think the company is worth it, so he's out also. Daymond is Shawn's last chance and he actually loves the tasty shrimp burger but can't seem to get over the evaluation of the company being worth $800K. Shawn is willing to re-negotiate his equity giving up to 30% from 25%. No bite. He then brings his offering up to a 40% stake for $200K. Daymond just can't get past the evaluation of the company being worth as much as Shawn says and decides to back out. Most of the sharks love the tasty burger, but the appetite for the dollar is much bigger. The shrimp and the guppy is spit back into the ocean of commerce to sink or swim. Shawn may have a wonderful product, but just can't seem to hook the sharks on the investment. Shawn finally walks away with no investment.
CAME IN SEEKING: $200K for a 25% stake
WALKED WITH: Free Publicity
GRADE: (Guppy): D+
GRADE: (Sharks): Not Applicable
COMMENTARY: He may have over evaluated what the company was worth, but if his product was anywhere near as tasty as it was evaluated by the mouths of the sharks, then he is sure to find an investor out there somewhere. Maybe he can get creative and structure the agreement with a royalty that escalates (or lowers) according to units shipped up to a certain amount. I bet Captain D's & Long John Silvers can use a tasty shrimp burger. With the free publicity of Shark Tank on ABC, some restaurants or grocery store chains out there are sure to be placing orders for one of the ocean's most tasty treats. If I owned a cafe' I surely would. The demand of shrimp lovers won't let him down. Hang in there Big Shake!
WHAT DO YOU THINK? COULD HE HAVE GOTTEN THE SAME CAPITAL (OR HIGHER) WITH A LOWER STAKE? WHERE THE SHARKS FAIR IN THEIR NEGOTIATIONS? DID HE OVER-EVALUATE HIS COMPANY? POST YOUR COMMENTS AND TEST YOUR NOODLE AT THINKING LIKE A BILLIONAIRE...........