Last night on another roller-coaster episode of Shark Tank, we met Michele Kapustka and Melisa Moroko, sisters behind SendABall, a Web-based company that sends inflated balls through the mail -- address it, stamp it, and send it, no box required -- instead of greeting cards. Between them, they have seven kids, and the families collaborate out of a garage.
In their taped introduction, they confessed they were doing so well, they couldn't keep up anymore. "We are slammed with orders. We need the Sharks and we need them now," said one of them. (Which one? We needed more time to distinguish them.) A problem like that -- too much guaranteed income -- is the sweet smell of chum to such finely tuned noses as our Sharks'.
They wanted $86,000 for 20% of their biz, and right away, they explained what they would do with the cash: They wanted to buy their own manufacture equipment so they wouldn't have to pay to outsource anymore. One of the sisters (the one whose name starts with M) said they would put their new equipment in "our little place in Chicago."
Perhaps it was wise to neglect to mention that that "little place" was a garage, or perhaps not, since Kevin O'Leary himself started his billion-buck empire in his own house. At any rate, it took Daymond John, and not O'Leary, to finally ask, point-blank, where get the truth about where they were actually being shipped out.
Robert Herjavec wanted to know why she was asking for an odd figure like $86,000. "An oddball number!" quipped O'Leary. The sister on the left said that their family was a frugal one, and they only wanted to ask for exactly the amount they knew they needed.
"Nooo," protested O'Leary. "You ask for more!"
He needn't have worried. The sisters are good at making money, because the next thing she revealed was that they charge $20 for what costs them only $5 to do. So far so good: They've got good margins, proven sales, and they're fiscally responsible. Seemed like a slam dunk, so to speak, for the ball business.
But then it came out that the sisters aren't taking a salary, and sometimes they use their kids as employees and pay them only $6 to $8 an hour. "It's slave labor!" O'Leary joked. John said that to ask her boys to work for her meant "she's got balls." When Herjavec wondered how much profit they'd actually make if they had to pay a staff, they were assured they'd make profit if they just sent 100 balls a day, and right now they were sending up to 75.
Finally, O'Leary cottoned on to the fact that the sister on the left, whom we now identified as Michele, was the one doing most of the talking. "I would never pay your sister any money," he said, probably flirting a little. "Get her for free."
But ultimately, he didn't want "to be in the ball business," so he went out. Barbara Corcoran wondered why they didn't just want to go to a bank for a loan, but the one sister said they had wanted, in essence, to tap into the Sharks' address books. Kevin Harrington, although in appreciation of the entrepreneurial success story, said anyone could steal the idea, so he went out. John, too, said "You don't need me as a partner. I don't think it would be advantageous to you."
"I had a ball, but I'm out," said Herjavec.
Corcoran seemed to find the sisters' honesty and good spirits infectious, and she almost bit. Finally: "You know what? I'm out," she said. "You're fine without me."
High praise for the ladies all around, but no deals. At least they made a few friends. "You come over, you can stay in my camper," Michele told Herjavec.
Asking millionaire Shark Robert Herjavec to sleep in a camper? That would take more balls than the sisters have.
Following some pretty salty wrap-up puns to do with balls, Michele delivered one final boner for the family TV viewing audience: "We're going to bounce back soon. We're in the ball business!"
Then, a first: We heard from a past entrepreneur who spurned the Sharks' offer. This one was on Robert Allison for LifeBelt, who appeared on the show so long ago (well, last August, for the pilot) that in the flashback clips, the Sharks were still perched awkwardly behind a desk piled with money and not reclining in their leather chairs. Back then, Allison rejected Herjevec's $1 million courtship to own his idea, which prevents a car from starting unless the seat belt is engaged, and instead elected to stay single.
Allison, on his own, has been shopping the idea to automotive retailers -- not the big car manufacturers, which was the original plan -- and he was shown putting together a "multimillion-dollar deal" with Gillman Automotive, a big dealer in Houston, to furnish LifeBelt as an option for car purchases there. "These deals are only the beginning," Allison said, adding that he'd have sales in excess of $10 million by March. All without a single Shark taking a bite out of his business.
But what happened with his plan to sell to the big Detroit players? We never learned, but it's probable that if he'd let Herjavec buy the license as he proposed, he'd have had a better shot approaching them and not pounding the pavement on the local level.
Qubits construction toys
Next! In walked Mark Burginger, the architect creator of Qubits, a flexible, interlocking construction toy kids can use to build stuff, kind of like Lego and kind of like an Erector Set that won't slice up kids' fingers.
Burginger did something few entrepreneurs' egos allow them to do. He came in offering Sharks a controlling interest in his creation: 51%, in exchange for $90,000.
Why did he want to back away from control of his invention? Part of the answer seemed to lie in the opening package, which showed him wistfully relaxing by a stream in his hometown of Bend, Oregon, lamenting that it's hard for an architect to get a job these days. So, we learned, that his heart really isn't in toy-making. It's in building things.
Herjavec, like me, grew instantly suspicious about why Burginger would want to unload control of his business right out of the gate. "One, I'm smart," he replied. "Two, I want to put together the best Board of Directors anyone could ever imagine for this company."
"You can create natural structures that relate directly to science," Burginger offered. (Trivia for the future home game version of Shark Tank: A qubit is a unit used in quantum physics.)
Leave it to O'Leary to zero in on the bottom line: Since November of 2007, he learned, only $8,000 of them have been sold.
Uh-oh. Was that a knife-sharpening sound we just heard?
O'Leary: "Tell me that you've gone to see one of the large toy companies with this already."
Herjavec: "How much of your own money have you put into this?" (Uh-oh. That's always a prelude to heartstring-plucking by the show's editors.)
"I have invested $60,000," said Burginger, docile as you please. "Quite frankly, I had to borrow much of it."
It was only when Herjavec told him he'd wasted that money that Burginger became emphatic. "It's not a waste. Nothing I have done here is a waste."
But O'Leary was annoyed that this guy had never tried picking up the phone to call "one of the four" big toy manufacturers to try to reel them in. He went out. Herjavec joined him on the sidelines. So did Herjavec and Corcoran, who couldn't see him competing against the big boys. Although they didn't say so, part of the problem might have been that he didn't seem like he had the will to do so. After all, he hadn't even called the big toy companies.
Finally, with everyone else out, Daymond John spoke. He loved the fact Burginger had already offered 51%. After all, wresting control of companies is one of John's favorite tactics in the Tank.
John had no competition now. He said he'd meet the offer provided Burginger agreed they would take the toy concept and its branding to a toy company. And just when Burginger looked down and out, the architect had a handshake deal.
More than a handshake, actually. He got a hug from his new partner, and as he departed, he celebrated the fact that John would be able to get him a much better deal than he could have done on his own. As it turned out, he had wanted to sell or license Qubits to a larger entity all along.
This sensible man was ultimately the architect of a sensible deal, and by giving John control, he won't have much to do other than sign off on deals and, if all goes well, cash checks for 49% of the take. If no toy company wants Qubits, though, John would be off the hook.
"I got you guys!" crowed John after Burginger had gone.
"He was waiting in the weeds!" O'Leary proclaimed of John' stealth attack.
John shrugged. "If he gets the deal, I get the deal. If I don't, I don't."
"He got a free option, is what he got" Corcoran said.
Herjavec: "That was a good deal. I wish I'd have thought of that."
Llama Brew and more
Next, the Shark Tank saw one of its most flamboyant characters ever. Nicole Jones of Chicago flounced in like a catwalk model on speed and tried to rustle up some cash for her Pillars of Slippers shoe party concept. Read about how that turned out, and see our exclusive video interview with her, by clicking here.
We met Phillip Lough and Aida Camwich-Lough, who make their living putting on petting zoos. They also own llamas. "We ended up falling in love with our llamas," Phillip said.
A llama-based business? Really? Do Sharks even eat llamas? More to the point, would they pay $125,000 for a mere 10% equity for Llama Brew, an odorless liquid fertilizer made from their poop?
John, as always, wasn't taking any crap. "What makes somebody go pick up poop and and wanna make a juice out of it?"
It's the kind of question you just can't answer, although Aida tried, selling the eco-friendly fertilizing properties as a way to contend with the endlessly mounting piles of excrement. They even showed a picture of a llama, introducing her as "one of our employees, Eden," who works 24-hours a day making their product.
"'From the butt to the bottle' should be your motto," volunteered O'Leary.
Unfortunately, the huge valuation wasn't justified by the mere $4,000 made so far. That, in accounting terms, is a big steaming pile.
They do, though, have a provisional patent on the process. "Not the poop. You can't patent poop," said Phillip, gravely shaking his head.
The Sharks refrained from dumping on the Loughs too much, focusing instead on numbers. It would cost too much to educate the public on why llama poo was the best method, Herjavec reasoned, and O'Leary resented the low profit figure. "I'll take you out for dinner and spend more," he spat.
Death by overvaluation. All five Sharks wiped their hands of the llama poo business.
New umbrella = Nubrella
Finally, we got to Alan Kaufman, who wanted $200,000 for 25% of Nubrella, a new kind of umbrella. It's "impossible to invert," it protects from wind, and it can be used entirely without hands. He was pretty tanned for a guy who makes his living from rainstorms.
If it sounds weird, it looks like it, too, fitting over the head and shoulders like a giant helmet. When he put it on, everyone laughed and doubled over in their seats: He looked like one of those hazmat-suited guys who took E.T.. Daymond John, who once volunteered to have be the target of a knife thrower, was the first to step up for a product demo.
Kaufman had sold 3,000 based on a few news articles -- no marketing at all -- and while it used to cost $49, he just found a new manufacturer and brought the price down to $29. (So he said; his website currently lists them for $49.) They cost $14 to make, he owned the patent, and he had hundreds of orders he couldn't fill because he was out of money.
"I've been getting funded still internally mostly by family," Kaufman admitted.
Corcoran: "Oh, they must love you."
Kaufman: "They don't really want to talk to me anymore."
But would the Sharks? If the Sharks could get over the bizarre look of the product, it could be "a home run."
Corcoran and Herjavec seemed to think it was too odd to invest in. Harrington, the guy you'd think would take it to infomercials, would only give $200,000 for 65%, not the 25% requested. O'Leary, chastened that he couldn't match Harrington's distribution channel, went out, and when Kaufman said he'd max out at 35%, there was a chilly silence. Harrington said it was a bad number, but he showed his hand when he didn't back up his words by going out.
That's when John, who always knows exactly when to get in, offered to join with Harrington, selling his retail experience alongside Harrington's TV experience. But they wanted 60%.
"I think it's a little rich," said Kaufman. "Would you accept 50% for that price?"
Both Harrington and John quavered in their seats, knotting their hands together. You could almost hear them salivating.
After a well-placed commercial break, we heard John tell Harrington they had to have control because their money would be at risk in the production area. So they revised their bid to 51% for the same money.
Kaufman was worried that they may need more cash later. John casually said that if those unfilled orders were for real, he would finance everything. "Forever." This made Kaufman's jaw fall open. Much like a llama's.
Would you have gone for it? He did.
After he left, the Sharks reveled in the victory. "You guys slaughtered him! ... He told you the truth and you used it against him." O'Leary said. John: "We left him as much meat on the bone as he could have."
Out in the hall, unaware that he was being spoken of as a sacrificial lamb, Kaufman sang the praises of his new partners and saviors.
Suddenly, his over-the-head umbrella reminded us a lot of the jaws of a Shark clamping over its oblivious prey.
From balls to poop, this episode had everything.
When it comes to Shark Tank, WalletPop has everything, too. We've got a library of video interviews with the entrepreneurs and Sharks from the show, and they're brimming with valuable business lessons. Find it by clicking here: www.dailyfinance.com/after-shark-tank.
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