I was watching Shark Tank the other night when entrepreneur and inventor Eric Corti walked in pitching a balloon pump designed to take the air out of an open bottle of wine. He was looking for cash in return for a stake in his business.
I’m no oenophile, but I know that wine lovers and wannabe snobs will pay a lot of money to preserve their vintages. A friend of mine even installed a temperature-controlled wine chiller in her kitchen, telling me that “everyone has one.” (My mom quipped, “Yes, it’s called a refrigerator.” But I digress.)
The sharks liked the guy’s product, with one of them calling it “a better mousetrap.” Kevin O’Leary offered more money than Corti had initially requested in return for a 50-percent stake in the business—on the condition that he was coming in solely to help negotiate the sale of the wine balloon to the competition. Lori Greiner offered $500,000 for 100 percent of the company. Mark Cuban joined her—upping the buyout offer to $600,000 but only if Corti said yes immediately.
The sharks’ interest gave me three valuable pieces of information:
- The product was salable.
- The potential value of the product was significantly higher than where Corti had valued it.
- No one valued the inventor—just his invention.
Point #3 is significant—because most investors bank on the entrepreneur and count on that passion, drive, and smarts to result in a great product and a successful business. Here they had a product they believed was bankable and didn’t need (or want) the entrepreneur.
It’s decision time. What would you do?
First, I give Corti credit. He tried to negotiate a small (3-percent) royalty for his wine balloon. It backfired, but it was still the right move. And it got instant pushback (which actually reinforced data points 1 and 2). Cuban dropped out (and the offer dropped). At the end of the day, Corti accepted $400,000 in a revised Greiner-Cuban buyout.
I walked away thinking that Corti had allowed himself to be robbed—especially after the price dropped by one third. Sure, $400K is a lot of money. But there are other investors out there. Probably other buyers too. And attracting that much interest from the Shark Tank crew had to worth something. Plus there’s nothing to say that Greiner wouldn’t have brought the product to QVC anyway. Or that you couldn’t perhaps leverage her obvious interest in the product to pry open the door at rival HSN.
What would you have done?
Photo by floodllama (Flickr).
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{ 7 comments… read them below or add one }
Hi Daria,
I agree. In the rounds of negotiation, hurrying up is one the worst mistake. There is one book that I read about negotiation , where it was clearly spelled out that companies put pressure on small vendors to continuously cut costs without giving something in return. Promise of contract or immediate sales push vendor into a corner into accepting it. I think negotiations are more like those at the end of the war where armies negotiate for days on territories.
Entrepreneur is as important as the product itself because his entrepreneurial spirit cannot be copied even though his product may be mass produced. The entrepreneur in the incident could have waited a little long.
Ashvini recently posted..Becoming an indispensable employee
Hi Ashvini,
Agreed. hat’s why you probably would never find me pitching to the highest bidder.
I think the distinction here is that this guy seems to be, at heart, an inventor and not an entrepreneur. The sharks recognized this in wanting the product but not him. So while you and I are trying to figure out how to parlay that interest into sales, he’s taking the cash and (presumably) moving on to create his next great product. Different skills sets and, at the end of the day, each valuable in its own way.
Hi Daria,
Quite right. I think some people create just because they have the creativity. This seems like artists/record label deal though. Maybe its good to hire a manager like most creative artists do?
Ashvini recently posted..Becoming an indispensable employee
Really tough decision because as you mentioned $400K is a lot of money to most of us. Love your point #3 because it’s so valid. Just the other day someone I work with said to me, ‘Apple had 2 founders? Why is Steve Jobs saying he is a co-founder?’ Oy vey! I wouldnt have known the answer either and would we even know Steve Jobs as the founder if Apple wasnt so iconic?
He should have had more faith in his product and noticed the attention he was getting. But we can all say what we would have done if we were him, but given the chance to be in the same position, we all may do the very same thing.
Hi Christina,
I don’t whether it’s about faith in the product (which everyone seemed to have) or faith in the person–and his ability to “sell.” He may have looked at the buzz and decided he did not have the skills to translate that into a booming business. Or maybe he didn’t want one. $400K may not be a lot of cash for a great idea, but it’s still a lot of money.
I’m just glad I didn’t have to make this decision.
I love Shark Tank, it’s a great reasource for entrepreneurs! I’ve had a few business ideas myself but am never sure if they’re good enough to “make” it. I recently read a book titled “HOT or NOT: How to Know if Your Business Idea Will Fly or Fail”, and it helped me pin point the areas of weakness in my idea so I could work on them before trying to find investors. If any of you other aspiring entrepreneurs out there would like some help, I’d definitely recommend checking this book out!
Hi Amanda,
Well, I do think there’s a business continuum from good business idea to idea shark wants to invest in. So a lot more business ideas can be successful–just not in the build it, make a huge, quick profit model.
FYI: I have pulled the book link from your comment as I do not have any advertising on this site. People can go and look it up for themselves if they are interested.