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: Kiersten Hathcock
THE COMPANY: Mod Mom Furniture
SYNOPSIS: Modern designer toyboxes built eco friendly and fun for kids
SEEKING: $90K for 25% Equity stake
PRODUCT/SERVICE: Hand built toy boxes and designer furniture.
WHAT'S THE SKINNY?: She made $34,000 last year, she builds 3 a week, turned away retailers due to lack of capital to build product, it cost about $115 to build (including wage to self), they sell for about $475 including shipping, it takes about 10 hours to make them, she has an Amish manufacturer in Ohio that can make 50 to 100 even 1,000 in a week, she wants the $90K to invest and grow into extending her brand.
STATS: This lovely guppy swims into the tank with confidence as if prepared for a showdown. She is the definition of what fuels the economy and creates jobs. Although her investment is very reasonable, Barbara thinks Kiersten is underestimating the amount of cash she'l need and drops out. Daymond happens to be petrified of the furniture business and drops out next. Kevin Harrington is also out. Kevin O'Leary likes Kiersten's story and decides to make her an offer. He say's the big challenge on it is liquidity and he wants to make sure he'll get his money back so he offers $90K for 33% + a 7 1/2% Royalty on every unit sold until he recoups his investment. Robert decides to give her $90K for 33% + Royalty after 500K boasting that he understands small businesses, and knows that a small business can't pay a royalty when starting out, that a small business needs to re-invest the cash, and pay a royalty only after reaching a certain amount in sales. Kevin O'Leary boasts that his 7 1/2% royalty is the discipline she needs to survive. After thinking it over a second, Kiersten decides that Robert's offer is the better offer and walks away with the investment.
CAME IN SEEKING: $90K for 25% equity stake
WALKED WITH: $90K for a 33% stake + royalty after 500K
GRADE: (Guppy): A+
GRADE: (Sharks): A
COMMENTARY: She came in prepared for a showdown, confidence in her eyes and walk, tools at hand. She managed to obtain the investment she wanted while keeping 67% of her company. Not bad. Not bad at all. Good job Kiersten!
WHAT DO YOU THINK? COULD SHE HAVE GOTTEN THE SAME CAPITAL (OR HIGHER) WITH A LOWER STAKE? WHERE THE SHARKS FAIR IN THEIR NEGOTIATIONS? DID BOTH PARTIES COME OUT ON TOP? POST YOUR COMMENTS AND TEST YOUR NOODLE AT THINKING LIKE A BILLIONAIRE...........