In the 9th episode of the first season of Shark Tank four business ideas were presented. Out of the four businesses presented only two were able to walk away with an investment from the Sharks.
The businesses featured in this episode are:
- Chill Soda
- Gayla Bentley
The investors or the "Sharks" featured in this episode are:
- Robert Herjavec
- Kevin O'Leary
- Barbara Corcoran
- Daymond John
- Kevin Harrington
Dan Mackey has created an organic soda drink which he calls Chill Soda. He is looking for a $50,000 investment in exchange for a 10% stake in his business.
In the state of California sodas like Coca-Cola and Pepsi are not to be sold in public schools. The purpose of the soda ban is to promote a healthier diet. However, the sodas have been replaced with fruit juices which are made from high fructose corn syrup which have just about the same nutritional value as a soda.
Mackey decided to formulate an organic and healthy soda that tastes the same as a regular soda but contains a significantly lower calories. The things that make Mackey's soda different from the other sodas on the market is his soda is low glycemic, low in calories, has no simple sugars, and contains antioxidants. In addition to that, his soda contains no artificial sweeteners and no chemicals.
Chill Soda gets its sweetness from its main ingredient, agave nectar, which is frequently used as a sugar substitute. Agave nectar is about 1.6 times sweeter than sugar yet has much lower glycemic index and glycemic load than table sugar.
The investors, after tasting the product, all pretty much agree that it is very good. Herjavec, who seem impressed by the taste of the soda, inquires about the exact calorie count of each can. Mackey reveals that there is 85 calories in each can of Chill compared an average of 140 calories in the major soda brands.
Kevin O'Leary wants to know about his distribution, which is very important when it comes to the soft drink and beverage market. Initially, Mackey is a little clueless when they ask him about distribution. The investors kind of school him on the importance of having distribution and shelf space in a retailer. Mackey reveals that he actually has a distributor for his product that has reach throughout the nation.
Herjavec asks whether his product is available in any retail locations yet. Mackey says that his product is not available in any retailers as of yet. Daymond John wants to know if Mackey has any sales for his product. Mackey says that he has sold 250 cans which, of course, kind of disappoints the investors.
John inquires a little more about his sales and asks for a specific dollar amount. Mackey says that he has made $175,000 in sales. All of the investors, realizing that the math does not add up, wonder how did he make $175,000 from 250 cans sold. Mackey, who in the words of John gave himself "mouth-to-mouth", clarifies that he made $175,000 on the sale of 250,000 cans.
The investors want to know, since he has not sold any to stores, who did he sell the cans to. Mackey reveals that he sold the cans to his distributor. He also mentions that the distributor is also helping him with production runs. Mackey also reveals that he is working with a beverage management company who have a good relationship with the distributor.
When the investors inquire about the beverage management company Mackey makes a huge mistake. He says that the reason why he working with a beverage management company because he does not know much about the beverage industry. The investors, especially John, wonder why someone would be in an industry that they do not know anything about.
John decides to bow out simple because Mackey revealed that he does not understand his industry. Kevin Haggerty decides not to invest because he feels like Mackey will need much more than $50,000 to make Chill Soda successful. Herjavec feels like Mackey is too naive and is not in control of his own destiny. For this reason Herjavec decides to bow out. Kevin O'Leary decides not to invest in the business because he thinks that the industry is too competitive.
Barbara, on the contrary to the other investors, likes Mackey and the product. She feels like his best trait is the fact that he is not slick. She believes that he is honest and he his a straight-shooter. The other investors are all trying to discourage her from investing in the business. In spite of all of their ranting, she offers Mackey $50,000 in exchange for 20% of his business. Mackey and Barbara, to the dismay of of the investors, agree on the deal.
Dan Mackey of Chill Soda On AfterShark
Dr. Jeffrey Broderick and his daughter Kristina have line of super foods and probiotic supplements specifically for dogs and cats called Cornucopia. They are seeking an investment of $300,000 in exchange for 15% of their business.
Dr. Jeffrey Broderick, who has been working as a veterinarian for over 40 years, claims that he has developed products that prevent disease and extend the lives of dogs and cats by 50%. Cornucopia is a blend of antioxidants, herbs, and vitamins that are from parts of the world where the people and animals have longer lifespans.
The investors, who normally lead off with questions about sales, question the claims of Broderick's product. When Dr. Broderick reveals that his products extends the lives of dogs and cats by 50%, O'Leary wants to know why the product isn't for humans. Broderick tells the investors that his product is actually human grade and that he actually uses one of the supplements in smoothie that he prepares each morning. Upon hearing this O'Leary decides to try one of the products himself. The Brodericks, who have brought their dog, Casey, onto the show, demonstrate to the investors that dogs actually like the product despite its formulation.
Daymond wants to know if the product has a patent. Dr. Broderick reveals that he did not have the product patented because he would have to disclose the ingredients and formulation. He mentions that some people have tried to duplicate his formula in the past.
O'Leary asks can he support his claims with clinical data. Broderick, who does not have any clinical data, says that he is basing his claims on his observations throughout his veterinary practice. Herjavec, who is very skeptical about the product, compares Broderick to a snake oil salesman who his trying to take advantage of people.
Herjavec, who seems to be very frustrated with Broderick's claims, wonders why the products are not being used extend human lives. Broderick contends that his focus is on the lives of animals. Ultimately, Herjavec decides to bow out.
Haggerty contends that no retailer would allow him to put any of his claims on the packaging because he has no clinical data to support. He also mentions that the FTC would make him prove his claims before he could market his product on a national scale. Haggerty emphatically declares that he is out.
O'Leary, Barbara, and Daymond all decide not to make an investment because he has no proof or data. O'Leary and Barbara add that they think his claims are credible, however, he needs hard evidence and data to back it up.
Customer Reviewing The Health Benefits Of Cornucopia
Amazon Price: $16.00 $8.76 Buy Now
(price as of Sep 17, 2013)
Ray Latypov and Jim Dimascio have developed virtual reality locomotion technology called Virtusphere. They are looking for an investment of $1.5 million in exchange for a 10% equity stake in the company.
Their technology, which utilizes a specially designed sphere along with a headset for the user, allows people to simulate real world experiences within virtual reality. The user is placed into the 10 foot sphere with a wireless headset, which covers the their eyes, and then a virtual environment is transmitted to the headset. The user has the ability to move freely inside of the sphere which is mounted on a special platform. The technology can be utilized for military combat simulations and video games.
After Latypov and Dimascio demonstrated how the technology worked, O'Leary wants to try it for himself. O'Leary seems to be really enjoying the experience. After O'Leary finishes trying out the Virtusphere he says that it takes a while to get used to.
The investors want to know if the technology can be used in people's homes. Latypov and Dimascio reveal that in the future possibly but the current price is $35,000. Herjavec wants to know if it can be added to a video game. Dimascio contends that the Virtusphere can be applied to video games along with other markets like fitness.
Herjavec asks if they have sold any to the military. They reveal that they have sold some to the military for $50,000 a piece. They also tell the investors that it costs them $15,000 to make. In response to Haggerty's question about profitability, Dimascio tells the investors that they have to sell 30 Virtuspheres a year in order to be profitable.
O'Leary, who attacks their valuation of $15 million, wants to know which market provides them with the best opportunity to sell 30 units a year. Dimascio feels like the United States military is the best market. He thinks that the technology can be placed in recruitment centers across the country. In addition to that, he think that the technology can be used to entice potential recruits.
Herjavec asks what they would use the money for. Dimascio says that they would use the money to visit military recruitment across the countries to prove the concept. Herjavec, who seems to really like the concept, just cannot get over the fact that the technology too far from some sort of consumer application.
Haggerty feels like if the Virtusphere was ever sold to consumers that there would be a lot of liability issues. For this reason he decides not to make an investment. Barbara decides to bow out because she cannot relate to the product. Daymond decides to not invest because there is way too much that he does not know about their industry. Additionally, he thinks that they need a strategic partner to get the product off the ground.
O'Leary thinks that the product is very unique, but decides to bow out. Herjavec, who really likes the idea, thinks that there are too many questions. He thinks that they are way too early and decides not to invest.
An Overview of Virtusphere Technology
Gayla Bentley is a clothing designer from Houston, Texas who has created a clothing line for women who wear a size 12 or larger. She is seeking an investment of $250,000 in exchange for 20% in her company.
Since major luxury retailers do not cater to women who wear a size 12 or larger, Bentley sees an opportunity to capitalize on this underserved market. She wants to start a Gayla Bentley retail location in Houston.
O'Leary wants to know why major luxury retailers do not carry plus-sized clothing. He makes a bold statement which suggests that larger sized women are not that interested in fashion. O'Leary feels that the market always serves demand which may be the reason why major retailers do not cater to larger women. Bentley acknowledges O'Leary's concerns, but contends that her clothing line could change that trend.
Bentley reveals that she is currently selling to Nieman Marcus who features her line solely on their website. In addition to that, she primarily wholesales her clothing. She also reveals that she has been averaging $500,000 in sales annually over the last five years.
Daymond wants to know what Barbara, who is the only female Shark, thinks about Bentley's clothing. Barbara thinks that the clothing is beautiful. She also adds that attention to detail is top notch.
Herjevec asks Daymond whether opening a retail location is the best strategy. Daymond, who has built a clothing brand, is sure about the retail strategy. However, he does see the opportunity to create new space since that is exactly what he did with his clothing brand.
Herjavec also wants to know why she cannot market her brand to all women. Daymond thinks that she could sell this to all women, but that there is a lot of competition.
Herjavec, who is obviously is opposed to any type of physical retail location, asks Bentley why does she want to open a retail location and how would he get his money back. She says that her wholesale sales have been down so she decided to open up part of her wholesale showroom for retail. As a result of this, her sales are up 137% and her average sales per customer is $1000.
Haggerty, who likes to focus on selling one product, decides not to make an investment with Bentley because she has an extensive product line. Herjavec is out because he does not believe that a physical retail location is the way to go. O'Leary does not want to take a chance because her retail distribution opportunities are limited.
Barbara, who believes in Bentley and her clothing line is willing to put up 50% of the investment if Daymond is willing to invest the other. Barbara, also feels like the Sharks are not giving Bentley a chance because they cannot relate to larger women. She adds that all of the Sharks have "trophy" wives who are not plus-size.
Initially, Daymond seems like he is about to cut Barbara completely out of the deal, but he likes the fact that he has a partner who knows women's fashion and has skin in the game. Ultimately he decides that he is willing to partner with Barbara but he wants 50% of the company. Bentley, makes a counter-offer of $250,000 for 45% which Daymond immediately rejects.
Bentley is concerned that she will lose creative control in her company. Daymond assures Bentley that she will have creative control and that they will make business decisions together but that he and Barbara need 50%. Eventually, Bentley decides to accept the deal.
Gayla Bentley On AfterShark
Amazon Price: $9.99 $8.99 Buy Now
(price as of Sep 17, 2013)
Wrap Up of Episode 9
In this particular episode there were not any ideas that stood out in my opinion. In addition to that, there were not really not ideas that were horrible.
Virtusphere - Although this idea was not funded by the investors, there is no doubt that this is a great idea. Interactive gaming and virtual reality is coming in the very near future. Timing is pretty much the only reason why this idea was not financed.
Cornucopia - The biggest issue with Cornucopia is that there is no data to support the claims that their product prevents diseases in dogs and cats.
In response to Dr. Jeffrey Broderick's claims about his product Robert Herjavec said:
"There's only two kinds of people who make this kind of claim....There are people who truly believe it and are ignorant because they don't know any better....Then there are people who make them because they are slick con men who are trying to take advantage of people's desires and needs."
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