Last night on Shark Tank, Nate Berkopec, a 19-year-old New York University student originally from Minnesota, dared to take his six-month-old environmentally conscious clothing line, The Factionist, into the Tank.
"It's really easy to do your market research if you are the market," he proclaimed of his clothing's message and ethical manufacturing methods, and duly confident, he requested $30,000 for a 20% stake of his business. "It's not just an apparel brand," he enthused. "It's a movement."
But right after that, he ran his ship into the shoals that have scuppered many a vessel before his.
Check out my interview with Berkopec, and also make sure to check in with the big winners from last night's show, Erin Whalen and Tim Stansbury of Grease Monkey Wipes, who also granted us a behind-the-scenes follow-up video interview as part of our AfterShark series.
What objections could the Sharks have to such a bright, enterprising, principled young man like Berkopec? For one, his concept, which had socially conscious slogans silk-screened on tee-shirts, wasn't proprietary, which meant anyone could steal his idea. ("Any guy and his dog can stamp a tee-shirt," said Kevin O'Leary.) Second, he erred in valuing his company on its potential for $150,000 rather than its reality of just $3,000 in sales. Finally, his chosen business was in casual wear, one of the most crowded fields there is, which has "razor-thin" margins.
Faced with that trio of cold realities, the Sharks declined to give him the capital he wanted, and they bowed out one, two, three. Kevin O'Leary seemed like he wanted to eat him for lunch, but he must have choked on the chunks of previous failed entrepreneurs, because he ended up being merely condescending.
"I'm afraid that my shirt would say that 'I invested and lost 100% of my money in Nathan,'" said Daymond John, who quip-for-quip has delivered the most zingers of the season.
After a few chuckles at Berkopec's expense, they were unanimous in saying this particular product wasn't going to be the one to propel him to greatness. "This guy may be in the wrong vehicle today, but if he keeps that passion and he keeps that energy, he'll find a path," said Robert Herjavec.
Sometimes, a bushy-tailed personality is what it takes to tip the Sharks over. But first, you have to start with solid numbers and a promising business plan.
If anything, Berkopec came away with more than his dignity. He also got a fantastic network TV clip of high character praise to attach to his future résumé.
He's already parlayed his flop into a cool part-time gig. For months, Berkopec has been hiding in plain sight as Corcoran's social media assistant in New York City. Click here to see him last October, two months after the show's taping, sending a video tweet with La Corcoran. She doesn't just have a talent for making money. She's also like an X-Man when it comes to nurturing fresh talent.
Who else dared to take a dip in the Tank?
Anthony and Tina Calvert, a deputy sheriff and his wife, needed a $250,000 investment or "it could mean that it will be the end our business." That business was the Podillow, a face-down tanning and massage pillow that contains compartments for your valuables.
Anthony didn't start off boldly. In fact, he began with an apology of sorts, saying that "You can only imagine the razzing I've taken" from the guys back on the department for developing a pillow instead of "black tactical holster or the latest, greatest thing in a prisoner control device." But maybe he was just trying to establish himself as an unlikely underdog (it didn't work for last week's cop inventor of The Twister).
The Calverts had sold about 6,000 units in two years for $29.95 each (for a doughnut pillow that cost about $7 to make), largely through Lillian Vernon and Solutions catalogs. Then Anthony said the magic words: "I have purchase orders from them that I can't fill."
And even though the "Shark Tank" editors put in that chilling razor-sharpening sound effect that denotes dangerous errors, regular viewers of the show know there's nothing the Sharks like more than a proven product with standing orders.
Smelling blood, the Sharks set in. The Calverts wanted $250,000 for a third of their company, and O'Leary brought the proceedings back to a favorite Shark lowballing tactic: He wanted to know why he was being asked to invest in what the company could be worth, rather than in the small figure it was worth now. "You're not letting me wet my beak on the upside," O'Leary complained. "How do we fix that?"
"I don't know," Anthony said. "I'll be the first to admit I'm not a real numbers guy." (Yep, Anthony. O'Leary knew that when you started the whole thing off by going on about the S.W.A.T. team.)
Herjavec: "If you went to a venture capitalist company, in this economy they would pay you a multiple of what your company earns. So if your company earned $20,000, maybe you're worth $100,000 today."
O'Leary: "So. You'd have to sell me 250% of your company."
Anthony: "That's tough math."
The rules of Shark Tank state that you have to go in with a proposed offer, and you can't take less. You can negotiate the future percentage the Sharks take, and the Sharks can up the dollar amount in an effort to outbid each other, but you can't take lower than what you came in to get.
Daymond John: "I can make you filthy rich with this product." Anthony perked up. John: "But you made a tactical error, and it's all going to come back to valuation ... I'm very upset at you for missing the mark, because you missed it for me, too. I'm out."
The Calverts asked for too much money based on a dream of their company. The Sharks would have gladly invested if the amount had been equivalent to a small loan.
Moral: Don't ask for too much -- get an intermediate amount and use it to step up to the big time.
Afterward, Anthony was unrepentant: "I think that the Sharks are very closed-minded. They only want to deal with hard numbers."
Well, duh. Let's add one more moral, then: If you're a cop, get someone else to look at your math.
Or come in with the latest, greatest thing in a prisoner control device and use it to force them them to sign the contract.
Next up, we got an update from Cactus Jack, who scored a deal last fall. His Body Jac device, which makes push-ups easier for larger people, and his investment money from Barbara Corcoran and Kevin Harrington was contingent on his being about to lose 30 pounds and look more like a model for his weight-loss system. We saw him successfully weigh in, but viewers of WalletPop's AfterShark series already knew that he passed with flying fringe, because we brought you the results in October.
Harrington must have thought that Cactus Jack, with his Santa beard and gray ponytail, still wasn't quite sexy enough to move millions of Body Jacs, because it was revealed fitness personality Kiana Tom would appear in the upcoming infomercials for the item. Once Jack, wearing a fringed black-and-white jacket and cowboy hat, had signed his paperwork, Tom flounced into the boardroom wearing a black-and-white sweat suit and thick coat of lip gloss. Worlds collided.
Tears in the Shark Tank! Brother-and-sister team Matthew and Kimberly Foley came to pitch their New Jersey store, Wee Can Shop, as the next big mall chain. Using their concept, little kids are given little shopping carts, which they plow along knee-high shopping aisles, piling stuff that's then wrapped into gift bags at checkout. The object apparently, is to teach kids to be consumerists as soon as they can walk.
Or maybe not: "We're teaching kids to think of other people at gift-giving time," said Kimberly, who in the opening segment, never let her brother get a word in edgewise.
When they strode into the Tank -- she in a vibrant red sundress and he in gray and black -- Matthew was allowed to issue the deal request for $200,000 for a 30% stake. "And now my sister would like to tell you our story." Back to Kimberly, who pretended to read from a giant storybook for the next part of the pitch.
Astonishingly, it was money-mad O'Leary who was first to spot the elephant in the room: "Has anybody approached you saying, 'Listen, we don't like the way you're teaching children to become consumers at an early age''?'"
Kimberly said nope, people love it, and they love coming back to spend even more money.
How much money? Matthew spoke up: $13,000 last year. Which may explain why he keeps quiet most of the time.
As Herjavec started gently telling the Foleys that $13,000 isn't enough to pay their own bills let alone sell the idea as a franchise, it was Kimberly's turn to spill. The Mother Goose persona crumbled, and tears welled.
By the time the Sharks found out the Foleys had put $120,000 of their money into the endeavor (Matthew's contribution again), the implication of its futility began to take its toll on Kimberly.
"Why are you crying, Kimberly?" O'Leary wanted to know.
"I'm not sure, because I am passionate about it," she managed to say. "I haven't found a job that I've liked to do since the day this opened."
Uncomfortable shifting. Matthew, for his part, looked like he'd seen this before, because he didn't even turn to comfort her. He seemed to know it would pass in a minute.
O'Leary: "Look, I get the passion piece. But you know what I'd be crying about? The fact you're not making a profit .. I love kids, but they're the hardest things to sell to. Because they don't have their own credit cards!"
Everyone backed out, most of them addressing Kimberly and ignoring Matthew. Harrington did it in the nicest way: "I'd bring my son there to shop, and he'd probably love it, but as an investment, it wouldn't be for me, so I'm out."
O'Leary: "Shame on you for encouraging her.... Kimberly, I'm your only friend up here... All this encouragement for you to go on is folly. It's a huge mistake. Somebody's got to tell you that."
When she left, O'Leary went on a tear. "The family's money being burnt, and nobody's telling her the truth." He proclaimed the whole business situation "evil."
I had to agree with him. Based on the numbers, the Foleys appeared to be on the edge of financial disaster, but no one, including quiet brother Matthew, seemed to want to stand in the way of the locomotive of Kimberly's fevered emotions.
Attention Fox: Maybe O'Leary should take Simon Cowell's role on American Idol. He's got a darker outlook and shinier pate than your Mr. Burns on The Simpsons, and like Cowell, he's not afraid to tell the truth where it needs to be told.
And attention, TLC: We may have your replacement for Jon and Kate right here in the Foleys. The relationship is just as unbalanced, it's based on wrangling tons of adorable little kids, and it's already sexless.
Get our rundown of what happened with the final business from last night's show, Grease Monkey Wipes, including a video update with the team behind it, by clicking here.
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