AfterShark: Mr. Poncho, a home-grown business, hits the big time (sort of)
As WalletPop readers know, we have been fans of the show since the first episode, and we've been consistently impressed with its intelligence and real-world lessons even as we've documented its dramas. The season finale, the eleventh episode of the show, was just more proof that the show deserves to live to swim another day.
Two of the most memorable entrepreneurs from the broadcast dropped by WalletPop's studios to fill Jason Cochran in on the experience. Sandy Hyun and Roman Peters know nearly nothing about how to gear up a new business and work with manufacturers to create their iPod covers, but they were smart enough to seek assistance in the Shark Tank. How did it go? They dropped by WalletPop to talk about their experience so far.
After the jump, find out what went down on the show:
* We knew Sandy Hyun and Roman Peters from New York City were wacky because the first time we saw them, Roman was playing a ukelele. We knew they were iconoclasts because they literally sang the name of their product, Mr. Poncho, a line of mp3 players that hold your device and coil your headphones so they won't tangle. Once the song portion of the pitch were behind us, and our attention was diverted from the potentially disturbing drawing of their product mascot (which looked like an iPod wrapped in a Mexican blanket, with a face and a pencil moustache, and wearing a cowboy hat), they got down to business, saying they sought $50,000 for 25% equity. She designs jewelry and he does graphic design, and together have grossed $46,000 on this little item simply by making them from home. Right away, the Sharks wanted to know what was patented -- the Ponchettes had one pending on the outer case, but the little pop-out plastic cup that holds the headphone cord, an essential element of the cover, was not of their invention, and that didn't go over well. Then Daymond John wanted to know how much it would cost to manufacture on a large scale. Hyun: "Probably under a dollar." Such murky accounting did not sit well with John, either. Ultimately, the Sharks were gentle, and they found the pair charming, but they weren't nibbling. Robert Herjavec said his kids wouldn't want to buy one, because they cared about the skin or case of their devices, not the carrying cases. "It's a small business," Herjavec said, going out. Barbara Corcoran liked the little cup that holds the cords, but since it wasn't their patent (meaning the business could be stolen out from under them), she went out, and so did Kevin O'Leary. John didn't like the fact they didn't know the future, calling the business "premature," and he went out next. They all gave the couple pats on the head for a nice "home business," but all hopes were dashed. Were they singing the blues on their way out of the Tank? No way. Afterward, Roman told us what we were hoping to hear: "I feel like this whole process made me look at our business in a different way and I think that's infinitely beneficial to the future."
* Jeff Wolsky wanted $75,000 to turn The Bobble Place, a company that makes custom bobble-head dolls of whomever you want, into a nationwide chain. Instantly, he had all five Sharks nodding in unison. That wasn't because his offer was any good, though, but because he brought in five bobble-head doll version of our millionaire heroes. (Kevin O'Leary's doll had about as much hair as the real guy.) Wolsky's online version of the business, which was not on the table, has been turning photographs into bobble-head versions for about five years, and doing that, he vaguely said he pulls down something in the "seven figures" a year. Yet he 1) was only offering the Sharks a piece of his storefront expansion dream and 2) still needed money for it. The investors smelled something funny right away, though it started with jealousy that they couldn't be a part of the existing business. O'Leary immediately began denigrating The Bobble Place concept as a "vapor business" that wasn't as promising as the online one that was already working. "So I get to have the higher risk location," he complained, while Wolsky would keep the "succulent" business. O'Leary tried to paint Wolsky as greedy, but Wolsky, parrying like a champion fencer, said he was offering an "opportunity" to get in on something that has been proven to work online. Viewers may have started smelling something funny right about then, because even though Wolsky's reasoning seemed sound to us, the Sharks wouldn't rest until they would snag some of the online money -- in fact, it was the Sharks who came across greedy at first, and they resorted to guilt baiting. Robert Herjavec whined, "You're asking me to take all of the risk and giving me none of the benefit. How can you do that?" Daymond John: "You're on a very, very slippery slope at this moment with us," he said, telling him to rethink the offer and cut them into his online business, too.
Barbara Corcoran wanted to know how much it would cost a rent a kiosk in a mall (about $1,500) and what the profit was per year for his online business. The last answer, $500k to $600k annually, had O'Leary hooting like it was a college football game. He couldn't understand why Wolsky would want to expand if he was doing that well: "I forbid you for even thinking about going into a mall!" Then, weirdly, he offered the numbers Wolsky wanted ($75k for 18%) but only for the existing business (not on the table) and with the proviso that he would never be allowed to expand into malls. Wolsky chuckled a little (was that pity in his chortle?) before instantly rebuffing the offer. "You're here to put my money in harm's way," said O'Leary. Wolsky, the minnow, kept biting back: "What value do I have to take $75,000 on a existing business that doesn't need $75,000?" But then he caved a little, saying he might be willing to throw in 5% of the existing business. The give-and-take was getting exhausting.
"Jeff... greed is good, but we need to be greedy together," said Daymond John. And saying the kiosk business was a risky offshoot of his existing business, he went out. So did Kevin Harrington, who was thinking something like I was thinking: Wolsky could have tested the kiosk idea with $10,000 of the "seven figures" of profits from the online company, so it didn't make sense why he was trying to fish for $75,000 in the Shark Tank to begin with. Corcoran said she felt a little tricked when she found out the original business was not part of the deal, and claiming an early betrayal of trust, she bailed third. Herjavec, apparently annoyed, decided to have Wolsky for lunch, taking him apart for not having specific projections and numbers, and pointing out how cagey Wolsky was being about the true numbers behind the business. That's why O'Leary upped to $100,000 for a 20% stake provided he supply some coaching for the mall idea. "You've got a mall addiction. Gotta get rid of that.... I'll send you off to Betty Ford, the special mall division, and get over that whole idea." Herjavec upped the offer to $125,000 for 20%. Wolsky, dollar bills dancing in his eyes, kept trying to up it. He suggested Herjavec and O'Leary join up and contribute $225,000 in exchange for 20%. It all got very confusing, so O'Leary sent Wolsky out of the room to address Herjavec in private, in front of the network TV cameras. O'Leary: "He doubled the price when you got involved.... Robert! The guy is messing around with us." Collusion was established, and when Wolsky returned, the deal had simmered to $100,000 for 20%. Wolsky thought a minute and said no. So Herjavec went back to his solo offer of $125,000 for 20%, as O'Leary backed out. Wolsky kept at it, counter-offering to $100,000 for just 7%.
Confused? So was everyone else. And that broke the deal. Herjavec curtly dealt the body blow. "Jeff, I've learned in business when something is this complicated the day we get together... the way it begins is the way it ends. So I'm out. Jeff, we're done." As Wolsky left, the Sharks decided this chunk of chum had no intention to taking a deal. He wanted to take their $75,000 and use it the way he wanted. Very possibly, too, he wanted to get some TV publicity. Well, he got one of his wishes.
* This week's follow-up: Heath Hall and Brett Thompson from Pork Barrel BBQ sauce, which Corcoran invested $50,000 in a few weeks ago. The two Republican lobbyists were shown giving out samples of their product at a Costco, and they reported they had their own restaurant and were even selling in 130 grocery stores. They also claimed they had their own "campaign bus," although it turned out to be just a regular motorcoach with a small banner hanging off the side. The restaurant, too, was only "coming" -- we saw them at a ribbon-cutting at a construction site. We did, however, finally see Heath in a pig costume, an imagined spectacle that Barbara had fixated upon during their first encounter in the tank, given his porcine features. All in all, the segment proved that these guys were pretty much still small-timers with a high level of personal sales ability and political know-how. Get back to us when that restaurant opens, boys. We'll take the bus there.
* Time for this week's crackpot inventor! The fourth spot on Shark Tank is usually for the oddballs, and urologist Dr. Floyd Seskin certainly delivered. He's selling a golf club you can pee in. I mean, why head back to the clubhouse when you can just unzip behind a tea towel? (A few months back, Graham Norton mocked this product on his talk show on BBC America.) His $25 Uro Club, with a dummy shaft that doubles as an 18-ounce urine reservoir, needed $25,000 in exchange for 51% of his product. As soon as Seskin started the pitch, John leaned back and put his head in his hand, apparently sickened by what he was in for. Can you imagine all the golf courses in America filled with elderly men weeing into their fake 7-irons, even if it is behind the clip-on privacy towel that comes with it? Then don't go to South Florida, where Seskin has already sold 3,000. (How would you even clean the thing? It's not like it fits into the kitchen sink. Disgusting.) Do I really have to tell you what the Sharks' reaction was? Here's a hint: O'Leary repeatedly called it a "pee-pee pole," and some off-color jokes were made about O'Leary's "portfolio" not fitting "into the investment." Harrington, though, a fellow Florida resident who apparently understands the plight of golf-playing retirees, surprised everyone by offering $25,000 for 70% of the device. Graham Norton's target is now the latest investment of Kevin "Infomercial Whiz" Harrington. "I was wiling to take even less," Seskin confided to us after it was done.
With our popular AfterShark video series, you can catch up with more of the entrepreneurs, including the finale's other big story, the guys who extracted $600,000 from the Sharks for their JumpFoward concept. See all our interviews at our AfterShark home page: www.dailyfinance.com/after-shark-tank.