Saturday, November 10, 2012

Shark Tank

We started watching the ABC show "Shark Tank" by chance. We have been watching it since, every Friday' night after dinner.

Shark Tank is a reality TV show about selected entrepreneurs of start-up small businesses seeking investment from a panel of investors - or "the Sharks".  In stark contrast to many reality shows which try to lure audiences by sex, violence, rudeness and downright stupidity, this show is a fresh air on the small screen. It draws people by intelligence, business smart and suspense.

Money only 

On last week's show, there was a guy named Michael, who went to college at Princeton, and got a MD from other school,  who invented a new plastic food cover "Plate topper".  His new plastic cover has several advantages over  plastic wrap, and he was seeking $90K investment for a 5% stake of his company.

After his presentation, several investors showed great interests, one investor (Lori) offered $900K for 30% stake of the company, another investor (Daymond)  counter offered $1M for 25% stake of the company!  Michael got really excited, he tried to incite an bidding war among the investors and seeking the highest bid; but when asked about his true valuation of his company from Daymond, he would not give a number initially and eventually he valuated his company at $15M. This and other behaviors eventually led to the two investors rescinded their offers. He got this outcome due to his inexperience and to some extent greed, but at least he knew then what his company was worth from seasoned, serious investors, $3 ~ 4 M.

Desperately wanted to get some investment, he essentially begged investors to reconsider, and in the end Lori's substantially lowered value offer $90K for 8% stake was accepted.

I was surprised that he would take this offer since he knew the trues valuation of his company already. The only conclusion I could make was that  he was greedy, want instant money at almost any cost. The other investors went much further, they said that he was not a person one could do business with.

Two grannies 

If last week's show provided an educational moment from a bad practice about what was wrong, this week's show  about two grandma entrepreneurs"Ice Chips Xyliandy" company  provided another educational moment from an exact opposite practice about what is right.

Briefly, the two grannies have a successful  business on ice chips candy, they wanted to automate their manufacturing process and seeking $250K for 10% stake in their company. During the presentation and negotiation process, they calmly listened to an offer or reject, patiently waited for next tender. In the end they got two offers $250K for 40% stake from Barbara and Mark, and $250K for 25% stake from Daymond.

When asked if they knew which offer they would chose, they glanced at each other and said "we know" - they picked the offer from Barbara and Mark - the lower valuation offer,  because they believed that Barbara and Mark's personalities fitted theirs.

I thought that they made great decision because business is not only about money, it is also a good chunk of one's life, you got to like who you work with. Same applies to ordinary people who work to make a living.

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