AfterShark today: Paul Watts disses his 'Shark deal' and enrages Kevin O'Leary
Paul Watts used to work for the city of Sacramento, where he dealt with graffiti everywhere, and now, he wanted to launch his Graffiti Removal Services franchises nationwide, begging for $350,000 for 15% ownership. After demonstrating his non-toxic, biodegradable removal solvent on a stop sign, the Sharks starting asking tough questions.
His self-owned GRS location makes $75,000 a year, and if he got the Shark cash, he'd ask $60,000 from future franchisees, and the Sharks would earn royalties off franchises. O'Leary tested a tried-and-true Shark tactic -- basing his investment on current sales rather than on future potential -- and told Watts that since he hasn't sold any franchises, he ought to own the whole business for his $350,000 investment.
And the dominoes began to fall. Barbara Corcoran, fearing government red tape, backed out first, followed by Kevin Harrington and Daymond John, who both said the idea didn't have enough proprietary elements to work well in a franchise structure. That left Herjavec and O'Leary, who once again tag-teamed their entrepreneur, demanding to go in together for a majority stake. "It's a fantastic deal," Herjavec said -- a sure sign, if past episodes are a guide, that maybe it wasn't.
Sure enough, in the most feisty display of entrepreneurial resistance yet this season, Watts flatly turned it down. "Thank you, but no," he said simply, sending O'Leary into fits and igniting a confrontation. "Whaddaymean 'no'? There is no 'no'!" he barked, prompting Watts to say it twice more, more firmly each time. O'Leary: "When you walk out of here, I won't even think of you again."
Watts: "Oh, yes, you will. Every time you see graffiti, you'll say, 'I should have invested in that company'."
O'Leary, the man who claims to never get emotional about money, appeared stung: "You are dead to me if you turn around," he threatened. Watts, certain of his company's value, stayed cool. "This deal that you're offering me is a Shark deal," he said.
Watts turned around, but strangely, seemed more alive than ever when he had the last word in his exit interview: "Their offer would have made me an employee of my own company," he said. He didn't seem to regret a thing.
Does he today? Find out in our AfterShark interview, later today.
Also today on AfterShark, we're planning a second interview with an inspiring entrepreneur who did hook a Shark: Kwame Kuadey grew up in Ghana, but now he lives in Ellicott City, Maryland with his family. With his cash reserved decimated from a layoff, he developed a new business, and now he needed the funds for it. He asked for $150,000 for 30% of GiftCardRescue.com, which buys unused gift cards and sells them at a markdown.
Despite a projected $120,000 in sales this year, three Sharks bailed, one after the other, claiming the concept was uninspiring. Kevin O'Leary, though, smelling money, jumped in to offer Kuadey his $150,000 for half the business. Kuadey. who didn't want to lose control of his business, showed a fearlessness that few entrepreneurs have shown so far in the Tank and evenly countered with an offer for 40%. O'Leary wouldn't budge, but Kuadey, ever professional, remained unruffled and didn't appear desperate. Robert Herjavek, impressed with Kuadey's pluck and solid preparation, upped the deal to $200,000 if he could join in, as long as he and O'Leary could split GiftCardRescue.com with Kuadey 50-50. Kuadey snapped the deal up -- but for a full third more cash than he'd hoped to get when he walked in the door, making one wonder just who took whom. Herjavec, once Kuadey had gone: "We could have gotten more from him." Kuadey, though, was elated. "This is what the American Dream is about," he told the cameras. "I feel very blessed."
It's all part of our ongoing post-show coverage on the nail-biting venture capitalism docu-series, in which Americans with big ideas try to make money fast by begging five millionaire Sharks for cash. Check out all of our previous interviews with Sharks, unlikely winners, and notorious losers on our AfterShark home page!
What else happened on Shark Tank last night?
- Texan Gina Cotroneo pitched Soul's Calling, her plan for "world happiness domination." She wanted $150,000 for a 25% stake. Cotroneo, the victim of a high-profile violent crime, has made it her life's work to sell a line of products designed to convey positive messages. She showed off a few, including the Inspirella umbrella, emblazoned with happy aphorisms, and Soul Seeker sandals, which print uplifting words in the sand as you walk. "Everything has a positive message on it and positive energy in it," she said. Even though she has put some $100,000 into the enterprise, she has made less than $20,000 a year on it.
- Dan Claffey went to the U.S. Patent Office and got the rights to common words such as "latte," "cappuccino" and "coffee." Then he stuck the words on a line of games and teddy bears. Then, in the most brazen business move yet, he asked the Sharks for $300,000 for 40% equity in Coffee Brand Gifts, a line of products designed force customers to pay him for the names of popular breakfast beverages. Then came the snag, and it was unsurprising: He's taken no orders at all. "This moment in front of you is the perfect moment," said Claffey, who added that he didn't want to make products until he had the capital to get them made. That tidbit sent the Sharks into an uproar. "No! What you just said is un-American! It's un-American!" shouted O'Leary (a Canadian). "Dan, are you afraid of sales?" said Herjavec. Claffey pressed on, voice rising and speckled with flop seat, with figures about how many people drink coffee. In short order, full of hot air and backed with no numbers, he took the walk of shame out of the Tank, empty-handed.
- Amy Feldman and Allison Costa wanted $350,000 for 15% of their CoverPlay, a washable slip cover for playpens they wanted to sell to parents and hotels alike. They had a patent, they had existing sales at Target, and they had distribution at a variety of hotel brands and cruise lines. They just needed promotion. That's infomerical magnate Kevin Harrington's forte, but he bailed instantly because, he said, it's too hard to get the attention of parents with kids below age 2.
"It's not worth what you're asking," said Corcoran, but she still offered the scrappy pair her money for 40% -- still not a controlling stake -- with the stipulation that her investment couldn't be used for anything except developing the product. John said they could use his money and existing infrastructure for manufacturing and distribution, but he wanted 65%. Herjavec went all the way to $500,000, splitting control with O'Leary and John. In private consultation, Feldman and Costa admitted liking Corcoran more, but they wanted to offer a smaller stake, 30% for the additional right to own 10% of their patent. Whoops. The Sharks had assumed the patent was part of the deal. All deals were retracted until they threw the patent in. "Men always want the control," Corcoran said, "I too had a majority partner at one time. And he only wanted one more percent. And seven years later, he married my secretary, left me high and dry, and almost broke my back. So I've been there." Her woman-to-woman appeal did the trick. She got the deal, and the CoverPlay women kept 60% of their company.