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: Jeff Stroope
THE COMPANY: Hy-Conn LLC
SYNOPSIS: The world's fastest way to connect and dis-connect from a hydrant
SEEKING: $500 K for a 40% stake
PRODUCT/SERVICE: An adapter that connects any standard hose to any fire hydrant while saving time
WHAT'S THE SKINNY?: He's made sells calls in the last month, out of 11 fire departments, 4 has given him purchase orders, and the other 6 are working on the paperwork to give him a purchase order. The large adapter sells for $385, the small one sells for $215. Each fire department will average about 35 units costing about $7K. He has talked to distributors of fire supplies, but they weren't ready to buy it, but want him to take on the financial challenge of getting it distributed. He needs $500K to get it into distribution.
BUSINESS MODEL/HOW DOES IT MAKE MONEY?: There are over 33,000 fire departments across the united states. Millions to be made in this market alone.
STATS: Daymond is out first due to the fact that he doesn't like how the distributors want Jeff to take on the financial challenge of making the products, and says he doesn't think they believe in it to that extent. Barbara can't get pass the fact that she can't see the fire department paying $7K to save a few seconds to attach a hose. Robert likes the design and wants to know why can't he use it for oil pipelines, or why can't he use it on garden hoses. Then Jeff casually reaches into his pocket and presto-alli-kazzam! He whips out a garden hose adapter that falls under the same patent. You can sense the waters in the tank are about to get turbulent. This is like getting 2 for the price of 1. Mark Cuban smells money in the tank and likes Jeff's idea so much he decides to offer him $1.25 Million for 100% equity stake, + a 3 year employment contract at $100K/year and a percentage of the profits! Kevin O'Leary the Bullshark decides to bite down, but he only wants the garden hose piece. He offers Jeff $500K for 100% of the garden hose end of it, + a royalty of 3% in perpetuity. Mark doesn't want his partner to sell off an integral part of the company giving away the garden hose piece. Robert wanted to make Jeff an offer similar to Mark Cuban's but he wasn't gonna go as high as Cuban so he's out. Kevin O'Leary wants to leave his offer as is. Kevin offers Jeff $500K for everything except the fire hose for 5%. Mark Cuban then offers Jeff $1.25 Million for 100%, a 3 year employment agreement at $100K/year, + 7 1/2% royalty on everything sold! The Great White Shark is flexing his greedy grin preparing to sink his extensive financial teeth into another feast of millions. Jeff likes Mark's offer better and decides to accept it. Jeff swims out the tank with the investment he needed. One more win for the economy. Good job Shark Tank.
CAME IN SEEKING: $500K for a 40% stake
WALKED WITH: $1.25 Million, a 3 year employment contract at $100K/year, and a 7 1/2% Royalty on everything sold.
GRADE: (Guppy): A+ ($$$ CASHED OUT!)
GRADE: (Sharks): A
COMMENTARY: When Jeff reached into his pockets and pulled out the side dishes and desserts, this financial luncheon turned into a full coarse dinner as the Bullshark and the Great White began to sniff out dollars in the tank preparing for a showdown with their eyes set on this guppy with the 2 for 1 lunch specials. I think he made a smart move. Great job Jeff!
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 BOTH PARTIES COME OUT ON TOP? POST YOUR COMMENTS AND TEST YOUR NOODLE AT THINKING LIKE A BILLIONAIRE...........