Episode three of the new season of "Shark Tank" showed us all the usual situations: Entrepreneurs pitching their businesses, with some getting offers and some walking away empty-handed. But there was one twist: A wife and husband who received multiple offers, but still walked away.
And they were congratulated for it, too.
The episode also featured guest shark Troy Carter, a music manager who runs Atom Factory, a talent management and film and television production company.
First up was Foot Cardigan, an outfit that sends random fashion socks once a month, on either a month-to-month basis or as a three-month to one-year subscription. Founders Matt McClard and Bryan Deluca are seeking $250,000 for 10 percent of the company, and to demonstrate the socks, the two doff their trousers. This gives the sharks the rare opportunity to offer money to men in boxer shorts.
The socks are $9, plus $2 to $3 in shipping and handling, and cost $1.32 per pair to make. Foot Cardigan has sold $1.36 million in three years, and projects $1.5 million in sales this year, with just $6,000 invested by the founders.
Lori Grenier thinks the colorful socks are very on trend, but that it's a crowded market, so she's out. Daymond John offers $250,000 but wants 22.5 percent, contingent on Foot Cardigan working with Bombas, an athletic sock company where he's an investor. Kevin O'Leary offers $250,000 for 15 percent, but wants a repayment schedule with quarterly distributions to all owners, since he doesn't see a big IPO opportunity with Foot Cardigan. Carter offers $250,000 for 15 percent, and wants to create a story for the company, to ward off competitors.
As usual, Mark Cuban is lurking and makes a last-minute offer: $250,000 for 20 percent. He'll take over the online and back-office services, but invites Carter to split it with him. Carter agrees, and the deal is done.
Next comes Wayne Johnson, with a ValPark Mobil, an app and service that arranges valet parking remotely, allowing users to find a valet without leaving the car, request the car while still inside a store or restaurant, and to pay with a credit card. Johnson has invested $100,000 of his own money, and is seeking $300,000 for 20 percent.
Johnson reports sales of $270,000 in his first year, but has changed his cost structure, adding a 15 percent convenience fee to the valet charge and getting $49 from each valet location per month. He's partnered with a large valet service in and around Washington, D.C., and is in more than 115 locations.
Overall, the sharks don't see an opportunity and they all pass. A copy cat service is too easy to create, and they feel Johnson would need to partner with the largest valet service in each market. Even then, they don't see it making enough money as an investment. "I don't see the vision for world domination of the valet parking system," O'Leary says, while Carter feels Johnson is being too optimistic. "You're not paranoid enough for me," he says. "I want a paranoid founder who's afraid that someone's coming to eat their lunch."
Up next is Two Guys Bowtie, seeking $150,000 for 10 percent equity. Founders Tim Paslay and Adam Teague make bowties out of exotic hardwoods for special occasions and club wear, as well as lapel pins, pocket squares and even a wood-brimmed hat. They sold $407,000 last year, with slightly less than $1 million in revenue for two-and-a-half years. A tie costs $45 to $97, and they can crank out custom models and ship in one day, at a cost of $7.50.
O'Leary has a number of businesses that can supply wedding-related items, and he wants to incorporate Two Guys into what he calls, "Mr. Wonderful's platform of love," either as party favors, groomsmen's wear, or both. John offers $150,000 for 20 percent, contingent on making a licensing deal. After some back-and-forth, both sharks throw in a sales royalty, and John ultimately wins, with 17.5 percent equity and a 10 percent royalty until the principal is repaid, for $150,000.
The last pitch comes from Nerdwax, with Don and Lydia Hejney bringing along their two little kids to help with the pitch. The product is an organic, cosmetic-grade substance that keeps eyeglasses from slipping. Originally sold online, the product costs 35 cents per tube and sells for $10, with $136,000 in sales since April 2014. Nerdwax also has added 30 wholesalers.
The sharks like the product, but don't like that one tube lasts six to eight months, and most want to see reorder time cut down to 90 days. Grenier and John don't see it generating big enough profits, and are out.
O'Leary offers $80,000 in debt financing, and wants to be repaid $240,000 from a 10 percent royalty, plus 3 percent equity, saying, "You're a product, not a company." Carter, an investor in eyeglass sensation Warby Parker, offers $80,000 but wants a royalty until he's repaid $120,000 and 10 percent equity.
John and Cuban hate both of these deals, and tell the couple that the company is too young and small to take on investors now. "I beg you not to take any money now," John says. "Go step-by-step," Cuban adds. "You can control your own destiny."
Resenting the meddling, O'Leary complains about Cuban, saying, "He'll give advice but he won't write a check!"
But the offers are moot--while the Hejneys need working capital to grow the company, Nerdwax doesn't have any debt in the company, and they don't want to add any. They decline the offers and walk away, with John yelling, "Congratulations!"