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).