- Hi, I'm Emily Canal,
I'm Inc.'s resident Shark Tank expert,
and this is Tips from the Tank.
(upbeat music)
- Today we're talking about Blueland,
which is a company that's trying to reduce
single use plastic by making refillable household cleaners.
Founders Syed and Sarah came into the tank
asking for $270,000
in exchange for two percent of their business
which they created in New York City.
When we normally think about household cleaners,
it looks something like this.
You run out of a product,
and you go and replace it at the store,
but founders Syed and Sarah wanna change
that behavior in consumers.
- Our tablets come with a beautiful
reusable forever bottle,
so you never have to throw away
another plastic cleaning bottle ever again.
Together we can eliminate approximately
five billion plastic cleaning bottles each year.
- That really got the attentions of on of the guest sharks
on this episode of Shark Tank, Daniel Lebetsky
who is the founder of KIND Snacks.
- We are all aware of the problem with plastics,
we're trying to do everything we can
to not destroy our planet before it's too late.
What's your unique selling proposition or differentiation?
- Syed and Sarah couldn't really answer Daniel's
questions about what differentiates them
which cause some concern for him.
While Daniel was asking these questions,
the Sharks were also firing their questions
about fundraising, money, evaluations of the two founders,
so, we didn't really get a clear answer
as to what they think differentiates them form other brands;
however, we did learn that the two founders
have raised three million dollars
at a 13.5 valuation and that was from Venture Capital
and other successful euntrepenuers.
Those kind of numbers always get the Sharks excited,
and the then the founders started talking about sales,
that they had sold about $200,000 worth of product
just in the first month that they were online,
and that was direct to consumer.
The fact that the entrepreneurs were hoping
to give away just two percent of their company,
is a big indicator as to how the negotiations were gonna go.
Very, very badly.
- I don't think you really came here for a deal.
You came for the commercial.
I'm out.
(upbeat music)
- There was some side negotiations happening
while the sharks were offering their deals,
but Kevin was really the first to get a concrete deal out.
Sarah and Syed countered Kevin O'Leary's offer,
by asking for three percent equity,
which got Mark Cuban laughing hysterically.
At this point the sharks are getting pretty pissed off.
If you're not willing to budge on that equity,
it's a little disrespectful
and doesn't incentivize your investor to work for you.
Then, Sarah makes this genius call.
She clearly understands Kevin O'Leary,
and knows what he likes to do
when he makes deals on Shark Tank.
She turns to Syed, they whisper for a minute,
and she comes back at Kevin.
- So Kevin?
- Yes.
- We know you like a good royalty.
- Oh!
- [Sarah] What if we kept you at three percent for 270,
but then we give you a royalty of 50 cents per kit,
until you make your money back?
(dramatic music)
- Done.
(laughs)
- Woo!
- [Emily] The three tips for this pitch are:
know what makes you different,
don't mess up an opportunity,
and strategize for your shark.
Number one, know what makes you different.
These founders had a really compelling product,
they had a really compelling story,
but there was one thing lacking in their pitch,
and that is how they would stand out against other brands,
trying to do something similar.
There are lots of companies trying to produce
more eco-friendly products,
and products that will cut down on single-use plastics.
So what was this company doing, that makes them special?
Why should the sharks invest in them?
And that was a question they really couldn't answer
on Shark Tank.
While they were still able to get a deal,
that is something that every founder should think about
before they pitch investors,
is what makes them different?
Hopefully your idea is original enough
that you don't have to,
but you should always have that in your back pocket.
Number two, don't screw up an opportunity.
The two founders came in,
saying they were seeking $270, 000
for two percent equity.
And right off the bat, the sharks were gasping.
That is a very, very risky proposition for anyone.
And yes, the sharks know
that there's going to be negotiations
during the deal-making process,
but that is still a very, very low amount of equity
to be willing to give up.
Coming in, saying that you're willing to give up
two percent equity sends a message right from the start,
and that's what tipped off Mark Cuban.
That's why he got angry and said,
I think you're just here for the commercial,
for the publicity.
So, off the bat,
if you're gonna go on a show like Shark Tank,
if you're gonna pitch investors,
you need to make sure
that your equity is a reasonable amount
to get them to work hard for you,
and doesn't insult them.
Number three, strategize for your shark.
Sarah made a brilliant move here,
that ended up saving their pitch.
It really looked like the sharks were angry with them.
They weren't willing to give up a lot of equity.
Doors were closing very quickly,
and then Sarah, seeing the opportunity
to negotiate more with Kevin O'Leary,
pulled out a royalty deal,
which is something that Kevin O'Leary does
very often on the show.
If you're gonna go on Shark Tank,
or if you're gonna pitch an investor,
strategize a little bit ahead of time.
Know which founders gravitate towards which deals.
That way, if you feel you're moment's slipping away,
like Sarah and Syed did,
you can pull something out that might save your deal.
I'm Emily Canal, this is Tips From the Tank,
and never underestimate the power of a royalty deal.