Swimming with the Sharks Get’s One Direct Marketing Business Caught in the Royalty Net
Welcome back, Daymond John – why are you always the itinerant shark? I am a simple mammal trying to find a fish to eat, but even that is getting tough to do with all these container ships blocking my favorite fishing spots. I sure hope you land-dwellers have a plan to clear this up soon –no doubt mammals as highly evolved as you have put the best and brightest in charge and things will clear up in short order… nothing… Beuler…Beuler… (call back coming, read on).
Let’s take a quick look at the products offered up on this week’s menu:
Shark Food – Direct Marketing Businesses
- Wedfuly – wedding livestream
- Wad-Free – household, laundry
- Beulr – productivity application
- Spergo – apparel
Pitch #1 – Wedfuly
Company Category: Wedding – live stream service
Bait: $200,000 for 5% equity ($4,000,000.00 valuation)
Bites:
- $200,000 for 20% equity ($1,000,000.00 valuation) –from Kevin O’Leary
- $200,000 for 10% equity ($2,000,000.00 valuation) from Robert Herjavec (accepted)
Shark Rating: 2 bites – Wedfuly lost 50% in value but may not be mortally wounded.
Dolphin’s Den – Call me stunned. If someone told me that 2 years into a seemingly never-ending pandemic, with multitudes of illogical and overbearing restrictions, “recommendations,” and mandates that there would be multiple sharks making offers for a business that holds virtual weddings, I would have done one of the greatest spit takes ever recorded.
I am with Daymond – O-U-T. However, there appear to be some people in this world who never want to get back to normal. The Wedfuly principal had a great pitch and deserved the shark’s attention. Still, mammal to mammal, I hope this business fails in its current iteration and finds an application for its services that supplements as opposed to substitutes human contact.
Pitch #2 – Wad-Free
Company Category: Household-laundry
Bait: $200,000.00 for 5% equity ($4,000,000.00 valuation)
Bites:
- $200,000 for 5% equity ($4,000,000.00 valuation) plus a $1.50/unit on the first 666,666 units sold from Kevin
- $200,000 for 20% equity ($1,000,000 valuation) from Laurie
Shark Rating: 3 bites – Sure, the valuation was untouched; however, $1,000,000 of critical growth capital will be liberated from the company’s treasury and handed over to Kevin. If that selling price goes down, that royalty could even be lethal to the point that it may have to be traded off for a much bigger slice of equity to Kevin.
Dolphin’s Den – Call me old-fashion, but I love problem-solution pitches. Apparently, you humans have a problem with “tornado,” “hostage,” and “burrito” bed sheet wads, but now you may have the perfect direct marketing solution! Wad-Free is one of those simple solutions that makes us all ask, “Now, why didn’t I think of that?”
On the positive side, Wad-Free has excellent margins (38% gross profit). Casting off into the future, the cost of goods should come down appreciably, but the selling price will also likely be cut in half to under $10… this is where that royalty attachment to the first 666,666 units sold makes a big difference, and don’t think Kevin doesn’t know that.
However, the comment from Laurie re. “Equity doesn’t mean that much when you are making millions.” may have misled the owner. From a purely existential standpoint, agreed. However, if the patent is strong and the sales are consistently growing, this product will likely get purchased by a bigger entity, and at that point, equity means everything. Hopefully, Mr. Wonderful lives up to his name because he will be a millionaire due to his royalty well before our owner.
The Wad-Free deal is an excellent example of where Media Funding might have been the better fit.
Pitch #3 – Beulr (call back is here)
Company Category: Productivity Application
Bait: $150,000.00 for 20% equity ($750,000.00 valuation)
Bites: no bites – full Underpants Gnome model (See Don’t Feed the Sharks Episode 4 for an explanation)
Shark Rating: 0 bites
Dolphin’s Den – “This is an MVP” said the founder of Beulr to Robert’s question. Well, if this is an MVP, that must be good, right? Insert Mark Cuban for the translation – “MVP stands for Minimally Viable Product” to the full agreement of the Beulr founder – truer words have never been spoken. Did I say that I am not a fan of app pitches…
Pitch #4 – Spergo
Company Category: Apparel
Bait: $300,000.00 for 10% equity ($3,000,000.00 valuation)
Bites:
- $300,000.00 for 20% equity ($1,500,000.00 valuation) from Daymond (accepted)
- $300,000.00 for 25% equity ($1,200.000.00 valuation) from Mark
Shark Rating: 1 bite – Spergo lost 50% valuation in the transaction with Daymond, so it should be at least 2 Sharks. However, Daymond is a billion-dollar brand in the same exact category. It is a perfect match, and the founders still have 80% of the business.
Dolphin’s Den – Love everything about Spergo – only in America does this happen! A 15-year old kid creates a hugely successful direct marketing company. Seeing our country is going hard on the mandate road –I mandate that every teen and pre-teen watch this presentation to the Sharks as inspiration to what freedom and a free market makes available to anyone with a dream and the drive to see that dream through.
Good Deals, Eh Deals, and Lots of Great Inspiration
We again see the Sharks take as big a bite out of these businesses that they think they can get away with — we’ve said it before, sharks are gonna shark. Here’s the thing, lots of folks succeed without giving up valuable equity in their direct marketing business; heck, we’ve funded hundreds of them ourselves.
Media funding is a unique way to help you grow your sales. It’s too risky for most lenders, but we’ve personally been where you are, and we know how to do this without giving up your equity
Here’s what we’re looking for:
- A product with promising sales
- A direct marketing business in need of cash to expand reach.
Call our funding experts or complete our Contact Us form for more information.
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