Shark Tank Blog Post

I recently wanted a Shark Tank partial episode featuring OrigAudio, a startup company founded by Michael Szymczak and Jason Lucash. Mike and Jason have created several portable speakers options that allow travelers to convert traditional household items into speakers for their iPod or MP3 player. The two entrepreneurs are seeking a $150,000 investment from the sharks in return for a 15% stake in their business. So far they have generated $750,000 of revenue over the past twelve months, of which they netted $149,000 of revenue (a 20% net profit margin). They currently distribute their product in over 500 retail stores and online.

The sharks where initially very impressed by the speakers and by the fact that OrigAudio had already generated $750K of revenue. However, as the questions started rolling, the shark’s tone and interest in the speakers started to change. They pushed Mike and Jason on whether or not their business is really profitable if they have not paid themself a salary yet. They questioned who owns the IP and manufacturing license on the product.  When the shark’s find out that a China company owns the license and Mike and Jason only have a five year deal with the company to sell the product, they start questioning the sustainability and growth prospects of the company and realize that Mike and Jason are not the inventors of the product.  At this point, one of the sharks, Kevin O’Leary, tells Mike and Jason he does not believe in the company is worth $1 million dollars and says he is out and will not invest in OrigAudio.

Next, Barbara Corcoran asked if the guys have to demonstrate how their product works before people will buy it. Mike and Jason indicate that they would like to install in-store displays featuring their product with part of the $150K investment they hope to get form the sharks. Jason indicates they currently generate most of their sales from QVC television sales. The sharks are impressed that the two have been on QVC and more impressed by the fact that OVC invited the two to sell on their network. This seems to break open the negotiations between the sharks. Mark Cuban steps up and tells Mike and Jason he wants them to re-consider their 15% stake in the business, stop dealing with the other sharks, and offer him a larger stake in their company in return for the $150K they are seeking. Mark indicates that if he does not agrees with their revised evaluation of OrigAudio’s value, than they can go back to seeking funding from the other sharks.

At this point, the other sharks (except Kevin O’Larry) jump in and tell Mark they also want to be involved. Daymond John offers $300K for a 100% stake in the business. Barbara offers $150K for a 25% stake in the business and a partnership with a New York TV station. Robert Herjavec offers $150K for a 15% stake in the business, the exact offer Mike and Jason had proposed to the sharks initially, along with an assurance that he will be there for Mike and Jason down the road when they need more cash to continue growing their business.

Mike and Jason take their “time-out” and discuss the options. They decided to accept Robert’s offer of $150K for a 15% stake in the business and the assurance that Mark will be there for them down the road when they need more cash. The prospect of having a long-term partnership with an investor and only have to give up 15% of their business sold them on Robert’s offer.

This is the first shark tank episode I have ever watched and I must admit I found it very interesting and enlightening. The sharks asked key questions that got to the bottom of the entrepreneurs business model. Just like we have learned in class, IP and market prospects were key factors that the sharks required before they would invest in a company. I highly recommend watching Shark Tank and look forward to watching more episodes in the future.