It was the night of the non-businesses on Friday's latest edition of Shark Tank and--amazingly--three of the four walked away with deals. Some people will buy anything, it seems, and on episode 26 of season 6, some sharks were willing to invest for just that reason.
We've all heard the adage about selling the sizzle instead of the steak--in other words, sell the experience and heuristic attributes, not the fact that your product is plain-old USDA Choice. But in some cases, there was barely any ground chuck to sell--much less steak--and even less sizzle.
Even more amazing: The shark with the sharpest teeth--Kevin "Mr. Wonderful" O'Leary--the guy who usually shreds a vague business idea or a poorly pitched prospect, lined up behind most of them. "All roads," he told one entrepreneur, "lead back to Mr. Wonderful."
Take SnagaStool, a Boston company with a mobile app that allows bar patrons to reserve a bar stool or a table for events in pubs. Jamie Manning and Adriano Varassin sought $120,000 for 18 percent of the business, which doesn't snag you a stool at peak times in your favorite bar, such as Friday night happy hour or the big Sunday game, but offers incentives from bars to come and drink off-peak. So, reserve a stool at 2 p.m. Monday and you might get a free beer or appetizer (along with that call down to HR when you get back to the office).
Robert Herjavec pinpointed the issue: "Why do I need you off-peak, when I don't need a reservation?" he asked. "And if the bar is super-busy, why would the owner leave it empty for you?"
Lori Greiner took it even further: If patrons go into a pub at peak time and see empty stools with a Reserved for Snag A Stool sign on them, "I can see people really being pissed off."
Not that it's likely to happen, when the company has signed up just three Boston bars. And no wonder, as Herjavec points out: "You're selling access to something that in peak time gets sold out anyway." And during off-peak periods, "You're selling the thing that nobody wants, that's not hard to get."
O'Leary sees the value, if the business were, you know, run on a sane basis. He cites his own experience of arriving two hours before a New England Patriots game at his favorite bar, just to reserve a few coveted stools with his friends. If he could simply waltz in 10 minutes before the game and get the same stools by paying for a reservation, that would be worth big money, he says.
"There's the kernel of a really interesting idea here," he says. "I want to make money getting access to real estate that I covet. You haven't showed it to me. I invite you back when it's fixed, and we just gave you an idea on how to fix it."
Sure, along with the 400 other entrepreneurs watching "Shark Tank" who just decided to do the same non-patentable idea, and probably sketched out their entire business plan on the back of a cocktail napkin, where it probably ought to stay.
In the other waters of the tank:
Kim Kaupe and Brittany Hodak sought $725,000 for 10 percent of their company, which publishes add-ons for CDs and concerts to encourage "super fans" to buy "physical music" rather than download songs. They've sold $30 million in three years to WalMart, signed up artists such as Miranda Lambert, Kiss, Katy Perry and Brad Paisley, and project $4 million in sales this year.
Mark Cuban bows out, but a bidding war erupted, starting with O'Leary offering $725,000 for 35 percent of the company, with Daymond John jumping in to take 30 percent for the same amount, O'Leary cutting his offer, John cutting his, and Herjavec and Greiner countering an offer of 14 percent equity with 17.5 percent.
Sasha Koehn and Erik Schnakenberg want $200,000 for 8 percent of this anti-fashion fashion line of American made basics, based on clothes worn by Schnakenberg's brick-layer dad. The kind of dad, I'm betting, who would have slapped anyone suggesting he needed $135 jeans to wear to work. It's called "Carhartt," real working people wear them, and those jeans are $40.
Nonetheless, the "curated" collections of T-shirts, jeans and oxford shirts sell "in packages of matching neutral outfits, enough to dress a software engineer for a week with no fashion faux pas," according to The New York Times, and in eight months, Buck Mason has sold $300,000. The owners, who've invested $10,000 project netting about $35,000 on sales of $500,000 this year.
John, who comes from a fashion background, calls the valuation of $2.5 million "crazy," and O'Leary, noting that most clothing outfits sell for four times cash flow, says they need a lot more sales and to be a lot further along. Herjavec sees value in the brand however, which has a very low cost of customer acquisition and steady repeat business. He offers them $200,000 for 50 percent, then drops it to 25 percent. A chorus of sharks encouraged Koehn and Schnakenberg to take the deal, but they insist on giving up no more than 17 percent and walk away empty-handed.
Says John to the other sharks: "Welcome to my world, the world of designers. They have no clue."
A great presentation and a great product--a shock-absorbing sports shoe insole thinner than a dime, that already sells $1.2 million a year in Europe. Former pro football player Bryan Scott of Atlanta sought $100,000 for 10 percent. He and three partners own the North American license for the product, want to bring out a line of insoles for ladies' high-heels, and have absolutely no sales to date. The insoles cost $6, which definitely puts the sharks off, and sell for $30. Scott and his partners also have ideas to expand to shock-absorbing grips for tennis rackets, golf clubs and more.
Most sharks pass but Mark Cuban sees value in the product, which seems to be in search of an actual business model, and clearly can't set up an entire North American distribution system for just one model of insole. But Cuban has contingencies: $100,000 for 20 percent only if Daymond John, who recently bought the Etonic athletic show line, comes in on the deal.
Wait! That would be an actual business that might work, selling a better sneaker through an established manufacturer and distributor. Daymond, however, wants both sharks to throw in $100,000 for 40 percent. Otherwise, he says, "I would get my head cut off."
Ultimately, Scott settles for $200,000 for 30 percent, snagging two sharks with an actual idea of how to make money on the product, a very good shock-absorber for making a profit here in the real world.
Brian O'Connor is author of the forthcoming book, Everything I Needed to Know About Business I Learned From Shark Tank (An Unofficial Guide), coming this fall from Riverdale Avenue Books.