Last night on ABC's Shark Tank, we met Danon Beres from Huntington Beach, California, who makes the Washed Up Hollywood fashion accessories line. His buckles wowed the businessmen, but ironically, his budget could have used a little belt-tightening. Kevin O'Leary and Daymond John wasted no time in calling Beres "a lying pig" for his request for a half-million dollars.
WalletPop's Jason Cochran talks to Beres for AfterShark today to find out where he went wrong -- and where he found the hot ladies who accompanied him into the pitch. Watch his video interview here, and then scroll down to read on for a recap of his messy encounter with the Sharks on last night's episode.
Danon's dad, Al Beres, is a successful luxury belt designer, and now the son is following in his footsteps, making calculatedly mass belts with hip metal buckles such as skulls with wings. But he needs investment to grow to the next stage. There are two ways to make a special splash in the Shark Tank: bring tasty snack products or escort some hot girls as bait. Beres had the girls (we find out on AfterShark that one of them was his sister), but he should have had more confidence in his sales ability, because out of the gate he was solid, despite the fact he asked a steep half-million dollars for a 25% stake. "Our belts are hot. They're designed for the elite, for the celebrity in mind, but they're affordably-priced for everyone." He's in 300 stores, including Nordstrom, and he's sold 10,000 belts in the last year, which made Daymond John (who owns the fashion brand FUBU) pucker his mouth in thought. Beres sweetened his image: "We don't have a very strong competition for what we do. No one's at our price point."
Herjavec said he liked the product and the solid revenue stream, which should have been the first clue he wanted in. The next clue was that he went after the dollar amount, labeling the valuation as too high, since Washed Up Hollywood currently had about $150,000 in assets and $400,000 in sales, and the figure Beres wanted was equal to a company value of $2 million. The amount Beres was asking, O'Leary said, would leave him "nothing to wet my beak with." There was no upside for an investor. "The guy is the real deal," Herjavec conceded. O'Leary: "The guy is the real deal, and he's a pig." O'Leary and Herjavec said the company was worth only about $650,000, and they kept hammering -- the company was overvalued, and if a bus should run Beres over, they'd be screwed. But Beres stood coolly, which made it seem like the Sharks were failing to find a chink in his armor. John's protests also sounded lame, saying you couldn't see his buckles well when people wearing them walk by, or because shirts often hang over them. So far, the Sharks attempts to undermine this budding clothing line had proved ineffectual.
Finally, Beres appealed directly to fashion mogul John, defending his high valuation by reminding him that in that category, brands can go from zero to megabucks virtually overnight. John retorted that he was valuing the company "on today," thus setting up the rift that causes many an entrepreneur to, well, buckle, and settle for a lowball price. O'Leary whined that the current demand left him no upside. Beres stood firm, or perhaps he just stood confused: "We need $500,000 to be at the level we want to be at," adding a major denim company was about to make a deal with him that would increase his business five-fold. The bulletin fell on deaf ears. "Big mistake with the valuation," Herjavec said. "I'm out." Harrington and O'Leary left negotiations, too. Corcoran summed it up with a motherly moral: "If you had come in here with that right number, you would have with you right now the right investors. It's really a shame. So I'm so sad to say I'm out." John, the perfect partner for the deal, was the last one remaining. "You worked so hard to get here, and you worked so hard to destroy your opportunity just by that number. Because of the number, I have to be out." Everyone was out. "I think they missed it," Beres told us.
* D. J. Stephan and Sean Conway showed up to hawk their 21st century iteration of Cliff's Notes: Notehall.com, on which students can sell and swap class notes and study guides. Yeah, their business involves students paying other people to do the thinking and the work for them. The ethical and future social implications of that concept, though, never came up. The only subject of interest in that room was coin. They wanted $90,000 for just 10% of their company. The business started at University of Arizona (a giant "party school," I should point out), where, the pair said, 40% of the student body used the service without much advertising at all. They've since made $30,000 in revenue in eight months. Robert Herjavec cut to the chase: Based on their $90,000 request, they think their business is worth $900,000, and once that ugly figure was in the air, both Kevin Harrington and Daymond John bowed out. Conway said he'd bet half his company on his projection that he'd make $24 million in revenue in four years. Compared to the $30,000 they'd made so far, that sounded pretty good, if unbelievable, but O'Leary wasn't really biting. He'd give that $90,000, he said, but to own 51%, and he tried to remind them that he's made some pretty big deals in the past. Barbara Corcoran jumped in, and as her way, offered to share control with the entrepreneurs. "The single best business deal I've ever made was when I used to trade my English diagrams in English class for math homework," she said. "It works. That was illegal. This is legal." O'Leary pressed on, but the boys still didn't want him to take control. They counter-offered for 15% control, with the guarantee that in two years, if the business didn't make $24 million, O'Leary could take control of their portion of the company. O'Leary showed his hunger: "I look at you as guys who are just like me, with hair," he said, and said he'd do it for 35%.
Corcoran went to work, torpedoing her fellow Shark. "This guy will eat you for breakfast at every opportunity," she said. "At every little niche and turn, he'll be grabbing for more stock. Believe me, he's an animal." And with that, proclaiming the site "a home run," she changed her offer to just 25% control. Herjavec, feeling left behind, reminded the guys of his prowess in the Web arena, and upped the dollar offer to $115,000 -- $25,000 more than Stephan and Conway asked for -- in exchange for 35% control. O'Leary, left behind in the dollar amount, resorted to name calling (pronouncing Herjavec a "bozo") and said he'd do the same deal, leaving the guys to choose between three Sharks. "All you did is you tainted my deal, and now I have to match your offer, and you will pay dearly in the future," O'Leary griped to Herjavec, who called him an uncreative copycat.
Meanwhile, Stephan and Conway just sort of stood by, appearing as if they were barely keeping up with the male in-fighting on the panel. It was Corcoran who had the last word, telling the entrepreneurs that they didn't need high rollers like Herjavec and O'Leary. They just needed "the right players" to win. Cool as that, she stuck with her lower offer of $90,000, and said that if they weren't happy with her as a partner in six months, they could buy her out, plus 20% interest. "What! Are you out of your mind!" O'Leary blurted, the dollar signs draining from his eyes. "That's just illogical, Barbara!" said Herjavec, and before Conway and Stephan could leap, they went in together and brought the offer down to match hers. The extra $25,000 had vanished, and Herjavec said the guys had to choose between money on loan (meaning Barbara) or cash with experience (Herjavec and O'Leary). The Notehall guys surely noticed that the offer for their company had suddenly and unceremoniously deflated before their eyes, which shook their faith in O'Leary and Herjavec. And in a miracle ending to the deal, Barbara triumphed, even though her offer had been lower all along. "You're dead to me," O'Leary told the guys. As the they strutted from the Tank, Conway muttered, "Kevin! What is his problem?"
Back in the leather chairs, Corcoran gloated. "It feels so good to beat this guy!" she crowed, laughter in her voice. O'Leary stewed until he couldn't bear it anymore, and he hustled down the hall to interrupt the celebrating Notehall guys, who were busy remarking about how genuine Corcoran, their new partner, had been. "What happened in there was insane," O'Leary said, "You just made a deal in there with a real estate agent. Does that make sense to you? She doesn't understand what she did." Something about the guys' unrepentant faces made him cool down, though, and he ended by congratulating them and saving face. "That never happens to me," he said. (Except, of course, it just did.) Corcoran, it bears noting, was confident enough to remain behind in the Shark Tank and let O'Leary soothe his own ego without her.
* We caught up with the women behind the Coverplay playpen cover, which Barbara snapped up a few weeks ago on the show. They appeared with their product at a trade show and told us they've received more orders than they could imagine, and they were about to close a deal that would put the covers in every Marriott property. "You can't just walk into a bank and get a loan for $350,000. So closing the deal with Barbara was the best thing that ever happened to our company." Stew on that, O'Leary.
* Lisa Lloyd from Tucson, Arizona, told us about Treasure Chest Pets, a cute foam plush toy line with secret compartments for storing little objects. She has spent $100,000, maxed out her credit, and driven her home to the edge of foreclosure for her idea. "I have cried myself to sleep more times than I can count," she said, adding that without investment from the Sharks, she can't fill her orders and everything could crumble. She wanted $150,000 for a 20% stake. Selling in 200 stores, she has sold about $100,000 worth of product. When pressed by O'Leary, she said she is selling only through boutique stores and not mass-market box stores because, quite frankly, "I'm under-capitalized." Meaning she can't afford to fill the orders if she got them. The 1,100 pieces she has in inventory are already sold. O'Leary said it's too hard to fight for distribution in the toy business, and he went out first. Kevin Harrington, too, went out, saying the product was too niche-oriented. Corcoran offered only a third of the money, and she wanted half the company -- Lloyd flinched at that news. Daymond John finally piped up, saying he has "unlimited manufacturing capabilities" that could make them both "filthy rich," and that made Lloyd beam. Was good news coming? "That would be awesome," she said quietly, visions of vertical integration dancing in her mind. John said he'd take over manufacture and distribution, leaving Lloyd to handle only sales, as long as he could control 60%, "because you have no worries after that," and he invited Corcoran to join in the deal. "Hold on, Lisa," Herjavec said, who, as he often does, punctured the tension with a pin. "I think this is all crap," he said, and offered her money as a loan -- no percentage ownership -- while letting her keep control. "She's a great lady, and if all she needs is a loan, I'm happy to be there," he said, uncharacteristically. John: "So this is the Loan Shark Tank. Is that what we're doing?" In response, Lloyd was measured. "If all I need is money, that this is the way to go: a line of credit," said Lloyd. "If I only needed money. But if I only needed money, I'd need a lot more than $150,000." Interestingly, even though Herjavec gave her more than what she asked for when she walked into the Tank, John's promises of taking care of "the entire back office" swayed her. As Lloyd left, deal with John and Corcoran established, she was practically skipping with joy. You could see the stress melting from her face. She was obviously relieved not to have to worry about fabrication and delivery anymore. "It all came together today," she said.
* Look who's here now: this week's oddball. This time, it's Edwin Heaven, who dangles THRoX, "the cure for the missing socks." He offered the Sharks 25% equity for $50,000. And what is the cure for missing socks? Selling three socks instead of two. Cue the gong. O'Leary said the established sock makers "could crush you like the vampire cockroach you are in two seconds," which summed up both his position and Heaven's creepy grey mullet, but Heaven must have needed a more explicit reason. "Have you patented this?" O'Leary asked. Heaven: "You cannot patent a package of three socks." O'Leary: "Right. I'm out." The other Sharks gave the idea more dignity than it perhaps deserved, proclaiming it a mere novelty, and Heaven hoofed it back out the door.
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