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: Rolf Shwartz and George Podd
THE COMPANY: Light Film
SYNOPSIS: A decal for cars that displays team logo's and lights up at night
SEEKING: $100K for a 5% stake
PRODUCT/SERVICE: A wireless peel and stick battery/solar powered decal that lights up in your car window that will display your favorite team or logo.
WHAT'S THE SKINNY?: They have a patent application currently filed. They want to go after niche sectors like college kids who support their sports team. They have no sales, but have invested $750K that went into R&D (research and development). It costs around $5 to $10 to produce and they can retail it for $19.99. They don't have any licensing deals but they have the green light with Harley Davidson.
STATS: Kevin Harrington likes the product but thinks his money would go into a black hole because they would need another $1 Million to take it to the next level. Kevin O'Leary is out because cash isn't the only answer to this one, it needs a strategic partner with distribution. Robert likes the product also but drops out for the same reasons. Barbara is out next. Daymond is interested, but he is only interested in the wireless phase of the product (generation 2) and he wants a whopping 75% of the company! But, his offer is $100K for a 75% stake with unlimited financing on orders, with his brands licensed immediately with no money down and guaranteed manufacturing! They would never have to look for another investor again. Rolf and George would like to recoup their investment, so they counter with $750K for 51%. Kevin Harrington suggests that Daymond have 51% of the equity and give them an accelerated share of the profit until the investment is recouped. Robert hops back online wanting to know the amount of cash it would cost to buy 75% of the company. Rolf and George lean back towards 51% and Robert wants to know how much cash would it cost to get 51% equity. Rolf and George would like to keep it at $750K but then Robert asks them to step out in the hall for a second........... He then turns to Daymond and say's he sinces that they will sell 75% of their business for $100K. They want to offer them $100K for 75% equity and give them 75 cents out of every dollar until Rolf and George gets their money back. Daymond and Robert offer $100K for a 70% stake. Rolf and George wants a little more cash up front and wants to partner with them, so they ask for $200K upfront just to breath a little but the greedy sharks stand firm on their offer like the Statue of Liberty on Ellis Island! They won't budge not one square inch. Sensing that, Rolf and George agree to the terms and walk out with the investment.
CAME IN SEEKING: $100K for a 5% stake
WALKED WITH: $100K for a 70% stake
GRADE: (Guppy): C
GRADE: (Sharks): A+
COMMENTARY: They walked out with the investment they came for, but at what cost? I think once Daymond realized he was their last chance he decided to push it to the limit and gain 75% of the company, and so did Robert. this was a tough negotiation for the guppies. From offering 5% of their company to giving up 70%. Ouch! I know it hurts, but look on the bright side, they now have unlimited resources at their disposal while buying into established brands with no down payment.
WHAT DO YOU THINK? COULD THEY 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...........