Ex-Amazon engineers lose 6-figure ‘Shark Tank’ deal off 1 blunder: ‘That’s the biggest mistake startups make’
Three years ago, Brett Skaloud and Jeff Feiereisen left their engineering positions at Amazon to launch a showerhead firm that has amassed thousands of clients, social media virality, and a $5 million annual sales projection.
Their attempt to develop their brand too rapidly proved to be “the biggest mistake startups make,” according to billionaire investor Mark Cuban, as they were still unable to close a transaction on Friday’s edition of ABC’s “Shark Tank.”
Boona, a Seattle-based firm that produces the $249 “Tandem” showerhead, was co-founded by Skaloud and Feiereisen. By attaching to the majority of conventional existing showers, it creates a new water stream on the opposite wall, converting them into couples showers.
They stated they hoped to grow Boona beyond the Tandem and into other product lines and revenue sources when they requested $400,000 on the show in exchange for 10% of their firm.
Festeisen declared, “We want to establish a brand.” “This product is the subject of a great deal of [intellectual property], but we are not betting the company on it. I mean, handhelds are the next clear opportunity for us.
At least a few of the investor judges on the show were alarmed by the statement.
Kevin O’Leary stated, “I don’t buy it as a company yet, I see it as a very interesting innovation as a product.” “Some of the best deals in the history of Shark Tank occurred when the entrepreneur concentrated on and optimized just one application.”
“We are currently concentrating on that,” Skaloud answered.
As for me, I’m not sure. It terrifies me that you were talking me about developing a brand strategy, expanding SKUs, and starting a business,” O’Leary remarked.
Cuban supported O’Leary, saying that businesses commit this error when they try to become a brand instead of focusing only on selling their product. However, your execution is what creates a brand.
“For this reason, Tandem is our first priority. In an attempt to entice investors back, Feiereisen stated, “And if we do create new products, it’s to support Tandem.”
‘You came to the advice tank’
Skaloud and Feiereisen estimated at the time of filming that they would make $1.7 million by year’s end and $5 million the next. Boona, the pair said, had 5,000 clients, 40,000 subscribers on its mailing list, and raised $774,000 through a Kickstarter effort.
Lori Greiner, Robert Herjavec, and Barbara Corcoran withdrew their investment very soon.
Two things prevent me from connecting with the product at all. I’m worried that you’ll lower the water pressure in half since I enjoy taking baths and I prefer high [pressure], Corcoran remarked. “Secondly, the thought of taking a shower with my spouse Bill was just unthinkable.”
O’Leary and Cuban were left.
“Guys, I think [the Tandem] is just going to be a cash-generating machine, and trying to grow too fast would be the biggest mistake you could make,” Cuban emphasized once more. “Just accept the cash that [clients] are hurling at you. However, if it’s $400,000 for 10%, you have to make $4 million in after-tax profits simply for me to get my money back. I’m out, so that’s not good for investors.
In addition to a 10% equity interest, O’Leary offered the two $400,000 with a $40 royalty each unit until he received $1.2 million back, or $400,000 to become their third partner with a 33.3% equity position.
“A choice must be made,” he stated. “You’re not smart enough, because you can’t do it. You visited the advice column.
Although they were grateful with the feedback they had gotten, the two departed the concert empty-handed.
“While we would have preferred to have struck a deal, their reasoning makes sense, and I’m eager to carry on developing this company precisely as they advised,” Feiereisen remarked.