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EPISODE 0017 - APR 3, 2018 Small Business

Life After Shark Tank

with Melissa Butler, Joe Moore, and Chris Ruder
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The ABC show Shark Tank is irresistible reality programming: Entrepreneurs pitch their businesses to a panel of famous investors and have the potential to make a life-changing deal. But as with any reality show, there’s much more to the Shark Tank experience than what gets shown on TV. We talk to three business owners about what it was really like to go on the program—and what happened afterward, when they had to get back to the very real work of building their companies.

Transcript

Melissa: (00:00:00) A lot of people had told me, you should apply for a show called Shark Tank. I had never even heard of it and so one Christmas, my nephew and I, we binge watched it and I was hooked after the first episode. I felt like it was just such a great concept and you learned so much as a business owner, just by watching other people’s experiences. So, my creative director, he and I recorded a video, and we were just showing our personalities. Like a hula hooped a lot at home, so we were like, talking about the business while hula hooping. And, we got a call from the producer immediately.

(00:00:35) Shark Tank theme music fades into Broken By Design by Clip Art

Wailin: (00:00:38) It sounds like an entrepreneur’s fairy tale, pitching your business to a panel of famous investors on national television. But, for some business owners, it doesn’t work out the way they expect. Welcome to REWORK, a podcast by Basecamp about the better way to work and run your business. I’m Wailin Wong.

Shaun: (00:00:54) And I’m Shaun Hildner. Shark Tank is that show on ABC which is now going into its 10th season, where entrepreneurs pitch their business ideas to a panel of five famous investors, like Mark Cuban, the owner of the Dallas Mavericks, or real estate mogul Barbara Corcoran. And, if the sharks like the idea, they may decide to invest in it right then and there.

Wailin: (00:01:15) Some of our coworkers at Basecamp are fans of the show. I don’t watch regularly, but if I happen to catch it on TV, I cannot stop watching. The production is pretty slick and it’s fun to see people pitching business ideas to investors who ask tough questions and argue amongst themselves.

Shaun: (00:01:31) But Shark Tank is reality TV, so you know there’s more to the story than what they can show you in 42 minutes. On today’s show, three businesses share their stories of what it was like to be on a Shark Tank and what happened after the cameras stopped rolling.

Melissa: (00:01:54) I am Melissa Butler. I am the founder and CEO of The Lip Bar. I found that most cosmetics were filled with unnecessary chemicals and that the beauty industry overall was telling this very linear story of what beauty was. So, I started making lipstick in my kitchen.

Joe: (00:02:10) Yeah, my name is Joe Moore, I’m the CEO of First Defense Nasal Screens. My biggest thing was, I had an allergy attack while I was driving on the expressway and I really don’t have allergies, per se, but I had a very severe attack, sneezing attack, and almost got hit by a semi, and when I pulled over all I could do was see the dust particles floating in the air, in the sunlight, and I knew I never wanted that to happen again.

Chris: (00:02:32) Hello, my name is Chris Ruder and I am CEO of Spikeball. A lot of people ask me how did I invent Spikeball, and I didn’t. I actually brought it back to life. I played it as a kid, back in 1989, 1990, so I was like 14, 15 years old and people would always stop us and ask us about that game. And they’d ask us where they could get it and we could never answer that question. That happened enough times where the lightbulb sort of went off, and I was like, I think this is the marketplace talking to us.

Wailin: (00:02:58) Vegan and cruelty-free lipstick, nasal filters that stick on top of your nostrils and a game that’s like 4-Square meets volleyball. These are all very different companies that had very different experiences on Shark Tank. But they went on the show looking for the same kinds of things that basically all Shark Tank contestants want. Money, expertise, connections, or exposure.

Melissa: (00:03:21) Seven million people watch the show. I knew that that was seven million potential new customers, or new eyes on the business so that was my entire goal.

Chris: (00:03:30) We had a guest shark, we had Nick Woodman on, he’s the founder, CEO of GoPro, and I was just thinking, all right. If I could get Nick Woodman and Mark Cuban, that is just absolute dream team. If I could, somehow, access to their time, that will help me build the brand. The money was kind of a nice-to-have, but from the day I started Spikeball, I was like, I don’t want to go out and raise money. I don’t want that to be the route of how we get to where we’re going. I want to bootstrap it, focus on profitability and if you raise money, then you get bosses and I’ve had plenty of those and I didn’t want another one.

Wailin: (00:04:02) The sharks are watching carefully to make sure the business owners know their numbers. And they can be ruthless… it’s not called Shark Tank for nothing.

Joe: (00:04:10) I watched some of the episodes and I knew that they want to know your valuations and how many have sold, and stuff. We hadn’t even gone to market yet, but I had one big client out in the Middle East that came, and they wanted them for the Red Cross or the Red Crescent over there.

[Shark Tank clip]

Robert: (00:04:25) So, you have an order for eight million dollars.”

Joe: (00:04:28) Yes sir.

Robert: (00:04:30) Right now.

Joe: (00:04:30) Yes sir, matter of fact, I have the contract right here.

Kevin: (00:04:34) You know, you don’t sound like the bozo I thought you were.

Robert: (00:04:36) That’s a prepared man, right there, good for you.

[Clip ends]

Joe: (00:04:38) So, I knew I had something. I didn’t know how they were going to react to it, but knowing that I had contract behind there, I felt a lot better. The funny thing is, if I would have been there two years sooner, when I first applied and I wouldn’t have had that contract, they would have—I would have left with them thinking I was bozo. Once they saw that there was money involved and that there was actual room to make some money, then it was a different story to them.

Wailin: (00:05:05) Melissa from The Lip Bar had a very different experience when she came out with her creative director sporting bright purple and green lips, the unique colors her business is known for. But unlike what happened with Joe, the sharks, Kevin O’Leary, in particular, started off dismissive and just got more callous.

[Shark Tank clip]

Kevin: (00:05:23) This is a new innovation. I can see a massive market share in the clown market.

Lori: (00:05:29) Kevin!

[Clip ends]

Melissa: (00:05:30) So many emotions were going through my head at that time because I was thinking about like, who I am as a person, as a woman, as a woman of color. I came from a Wall Street background, so I knew my numbers so well, but they never gave me the opportunity to really talk about the business. So, immediately, they were kind of from the family of, your business doesn’t matter, you don’t matter.

Wailin: (00:05:57) As the segment went on, Melissa showed the sharks her idea for a Lip Bar-mobile, but things didn’t get any better.

Melissa: (00:06:04) So, when we went onto the show, we presented the idea of our Lip Bar truck and the Lip Bar truck was basically our way of getting in front of the customers. So, we sell lipstick. It’s a super intimate product. People want to know what it looks like on their face.

[Shark Tank clip]

Robert: (00:06:20) Oh, that is such a bad idea.

Kevin: (00:06:24) So, Rosco, aren’t you worried if you walked into a bar with that type of lip, somebody’d try to resuscitate you. If anybody thought you could sell purple or green lipstick, they’d do it. They already have the shelf space, they’d just add another color. And they would crush you like the colorful cockroaches you are. You only have so many minutes on earth, don’t waste them trying to sell lipstick. I’m out.

[Clip ends]

Wailin: (00:06:47) If you’re keeping track, the sharks essentially called Melissa a clown and a cockroach. It’s really hard to watch. But Melissa kept her composure.

Melissa: (00:06:56) Part of me was just like, you know, this is insulting me. But then I had to remember in that moment, and this is what allowed me to stay cool. This is a TV show. They’re running a business. Their goal is to get ratings and at the end of the day, this is not my target audience. So, I was very angry in that moment, but then I was able to level out because I started remembering my why, my purpose and that ultimately, I wasn’t talking to the correct people. And so, the biggest thing, after Shark Tank is that I decided that I would never talk to the wrong audience again. I will only talk to people who understood my core values, understood why it was essential. And that’s—it’s so essential when you’re thinking about things like fundraising, because you want to have the right partner. You want to have someone who’s not just going to give you money. You want someone who’s going to have a value add. You want someone who’s going to believe in you and your vision and your business. So, I experienced these emotions going from anger to more level-headed, to ultimately, like, wait, I don’t need them. And so, I decided in that moment that they weren’t going to have authority over my dreams or over my business or even over how I feel about myself.

Wailin: (00:08:14) Joe from First Defense Nasal Screens was in an entirely different situation. The Red Crescent contract was worth eight million dollars and the sharks wanted to make a deal.

Joe: (00:08:23) They were coming from every direction. I’m trying to do calculations in my head. It’s very easy to get lost in all of that and them cutting each other off and one guy’s trying to state his case and everything back and forth. It got a little confusing after a while.

Wailin: (00:08:37) In a matter of minutes, Joe had three offers, including one from Robert Herjavec to buy his entire company outright. Robert offered Joe, four million dollars plus a 10% royalty. Meaning, Joe would get 10% of each nasal filter sold. At the time, it was the biggest deal ever offered on Shark Tank, but Joe had some reservations.

Joe: (00:08:58) In this space, in a medical products space, about 3.8% royalty is the average. 10% royalty was huge. My concern was, I didn’t know at the time what that meant to sell your business and so I was—at the four million, I was just afraid of being cut out too soon. And with my stockholders and everybody else, you know, it just wasn’t what we were looking for. We wanted to stay part of it until we had a true understanding of what it could really be valued at.

Wailin: (00:09:30) Joe turned down the record-breaking buyout offer. He took a different deal from a group of three other sharks. $750,000 for 30% equity and a 10% perpetual royalty, meaning the sharks would keep collecting royalties even after making back their initial investment.

(00:09:47) Chris from Spikeball got a deal, too. Not from dream duo of Mark Cuban and Nick Woodman, the founder of GoPro. But from Daymond John, the founder of hip-hop clothing company FUBU. The deal was $500,000 for 20% equity. Chris left the Shark Tank set feeling really excited.

Chris: (00:10:05) FUBU was a major brand and he just turned it into this amazing thing, so I was really hoping to learn, okay, how do you do that?

Wailin: (00:10:14) But Chris never got to that point with Daymond John. Six or eight weeks after filming, he had his first phone call.

Chris: (00:10:19) What he wanted to do was, I think he said, add some friends at Marvel comics, or something like that. And said, like, yeah, let’s make a Spider-Man branded Spikeball set. And if you watch a lot of the shows where he does deals, a lot of them are licensing. That seems to—that’s becoming his specialty and that was not necessarily what we were looking for. I wanted to build our own brand. I shouldn’t say that past tense. I want to build our own brand. We are building our own brand and putting someone else’s likeness, whether it’s Spider-Man or a Nike logo, or something like that. I don’t think that’s going to be the main way that we build the company. I think he considered Spikeball more of a toy. Mission of our company is to create the next great American sport, so I consider it a legitimate sport and I think we’d actually be taking a step back if we did a Spider-Man licensing thing.

(00:11:05) We had two, maybe three phone calls total like, that was it. And then I think the final call, it was just his people. He wasn’t on it. And they said, you know, we do a decent amount of sponsorship sales for different events, maybe we can sell some sponsorships around the hundreds of Spikeball tournaments that you guys have every year. And it’s like, all right, that sounds great. We swapped emails and the relationship kind of—we never really broke up, we just kind of stopped calling each other.

(00:11:29) I genuinely was hoping the deal would close and we’d—and I’d basically have his brainpower that I could tap into. But I did feel good in that I wasn’t forced. I wasn’t locked into it. Now that I look back at it, essentially what happens on the show is a handshake. So, no matter what deal happens on the show, no entrepreneur has signed anything, that says, you absolutely have to do this. So, disappointed, yes, but I understood. And, you know, I have a feeling if Daymond John were sitting right next to me, he’d say, yeah, I was hoping we’d do a deal as well, but let’s not do a deal for the sake of doing a deal. Let’s do it because we think we can do something special together.

Wailin: (00:12:06) Joe’s deal for First Defense Nasal Screens also fell apart, partially over personality differences and partially because Joe didn’t want to wait around for the deal to close. He had a business to run.

Joe: (00:12:17) One of the sharks recommended I didn’t do the deal, actually, to me. And I was told. Do not stop running the business. Do not stop growing the business while you’re waiting for the paperwork. And then, paperwork, due diligence took almost nine months, and so, over that time, things changed. More people wanted—had interest in it, and such. And of course, I’m going to keep taking contracts because I want to pay the bills, I want to grow the company. I wanted to take their money, I really did. I wanted them involved. I would have liked to work with them because of their knowledge on the social medias and stuff. I really even know to this day, we probably would have got a lot further a lot faster. They told me on the show, if you need money, we’ll give you money. But I’ve also heard of situations where if they give you money, they’re asking for more percentages again. And I think that eventually there was a way that I was going to end up not being the majority shareholder and that’s what I didn’t want to happen.

(00:13:10) So, I felt good about it, but I guess mixed feelings.

Wailin: (00:13:15) As for Melissa at the Lip Bar who had vowed never to talk to the wrong audience ever again. The first thing she did after taping her Shark Tank appearance was to do exactly what the sharks said not to do.

Melissa: (00:13:25) The idea that they laughed at, they told us that the Lip Bar truck was a horrible idea. I was hell-bent on building it. We basically started channeling and funneling all of our money into fundraising for the Lip Bar truck and really just like, repurposing our profits to really go into this vehicle. So, we went to New York, Philadelphia, Chicago, Atlanta, we went to a lot of really large cities and we parked on really popular, walkable streets. And, we did so well with the Lip Bar truck. It was probably our most innovated marketing tool to this day.

Wailin: (00:14:05) And then, in 2015, Melissa decided it was time to expand into retail stores. She set her sights on the big prize: Target.

Melissa: (00:14:12) I emailed the buyer and I just pitched her. We’ve seen the rise of multi-cultural beauty, so I’m always using that within our pitch. Like, this is how you get this customer. Or, you know, this is how you serve that customer in a greater way. So, I definitely used our price point, the fact that we’re vegan and cruelty-free, and that at the end of the day, I didn’t think they had anything like me in their current brand assortment. So, I said, take a chance on me and you’re going to get some different results. At the end of 2016, we launched on Target.com and then at the top of 2018, we launched in Target stores.

Wailin: (00:14:55) You’ll see a lot of Shark Tank businesses, including Spikeball and First Defense Nasal Screens who use their appearance on the TV show as part of their promotional strategy. It’s on their website and their marketing materials. As seen on Shark Tank. The Lip Bar doesn’t do this. Melissa didn’t even mention it when she emailed the beauty buyer at Target.

Melissa: (00:15:13) People come to me and say, like, wait, I think you were on Shark Tank. I’m like, yeah, that was a little blip on our radar.

Wailin: (00:15:22) With Shark Tank, not every business that tapes an appearance gets their episode aired. This creates tremendous uncertainty because companies have to get ready for a big wave of attention that might not even happen. Here’s Chris.

Chris: (00:15:33) As I was leaving the stage, or talking to the producers afterwards, they’re like, all right. Thanks for coming out, if your episode’s going to air, we’ll call you two weeks before it airs. If we don’t call, it’s not gonna air. So we spent so much money. We had so much cash tied up into our product. Our warehouse was bursting at the seams waiting for this event that may never come. So, I basically just stared at my phone for the next six months just willing it to ring. And, you know, we were the final segment of the season finale. We could not have waited longer. Thankfully it came, and then, you know, we had tremendous sales and one part of it was direct sales at Spikeball.com but the other part which was great was retailers reaching out to us saying, “We want to carry your product.”

Wailin: (00:16:18) Spikeball, The Lip Bar, and First Defense Nasal Screens all saw a great increase in website traffic and sales after their episodes aired. And even years later, a rerun can give them another lift.

Melissa: (00:16:29) Apparently we got really ratings because they’ve re-aired the episode like 16 times now. And every time they air it we notice a boost. We see people on our social media saying, “Hey, just saw you on Shark Tank, so happy you guys kept going. Oh, congratulations on launching in Target. Take that, Shark Tank!” Because they were very cruel to us. It really gave our customers a reason to rally behind us and feel like they were standing with us which was so powerful.

Wailin: (00:16:58) While none of these companies got or kept deals with the sharks, they’ve all found ways of building their businesses in a sustainable way. For example, Joe is on the verge of making a deal with a large company.

Joe: (00:17:08) Right now, it’s been almost three years of negotiations. I’m negotiating with a very large company, I’m under a confidentiality contract, I can’t say who they are. But we’re in the final stages of possibly doing a licensing deal with them and putting it on every shelf around the world. The nice thing, too, here is me and my stockholders, friends and family, we’ll still own the entire company, but they will just end us a check every month. I don’t have to worry about the manufacturing anymore and the website. They would do all of our marketing and everything, and like, I said, they’re huge.

Melissa: (00:17:44) We’re actually still bootstrapping, which I’m actually really proud of. So, six years in, we’ve now launched into this major retailer and we haven’t taken an investment from a large outside company or private equity or a bank or anything like that. Right now we’re in the position where we need to, but yeah, we’ve bootstrapped to this point and it’s really given me the ability to have a greater sense of creative control, but also really understand the vision and where I want the brand to go and how I want it to grow.

(00:18:17) Broken By Design by Clip Art plays.

Chris: (00:18:22) When you go through the doors and you look at the sharks, that’s literally the first time you see them. I assumed that when you go out there, maybe you see them backstage, you chat for five, ten minutes and then they’re like, all right, Chris, take your place, we’re gonna do this. No. When you walk through the doors, that’s literally the first time you see them, and when you leave, that’s the last time you see them. I haven’t seen any of them since I left the stage that day. And it’s a very emotional thing, right? You’ve created this company. It’s your lifeblood. A lot of people say it’s my baby or something like that. It’s very important, and wait, you’re just going to go ahead and sell 20% after having talked to this person for forty minutes in front of a camera. That’s not how the real world works.

Wailin: (00:19:08) REWORK is produced by Shaun Hildner, and me, Wailin Wong. Our theme music is Broken By Design by Clip Art. You can find all of the companies we featured today on the internet. The Lip Bar is at theLipBar.com, they have amazing product descriptions that you should definitely read. All of their product descriptions are amazing. Very funny. You can also find them at theLipBar on Facebook, Twitter, Instagram and Tumblr. Spikeball is at Spikeball.com and @Spikeball on Twitter, Facebook, YouTube, and Instagram. And, First Defense Nasal Screens is at wp.filteryourlife.com.

Shaun: (00:19:50) Special thanks to Taylor Wizner and Sara Spiegel for their help with this episode. A reminder that we’re still collecting your questions for an upcoming mailbag episode about workplace communication. If you need advice asking your boss for a promotion, or telling your employees to stop buying you holiday gifts, leave us a voicemail at (708) 628-7850. Or, you could write us at hello@rework.fm.

Wailin: (00:20:16) And we do accept holiday gifts.

Shaun: (00:20:30) Did I ever tell you my nickname is Shark. But not for like, cool reasons. My friends had a—now a real child at that point a three year old who could not say the word Shaun, but she knew the word Shark. And one time at the comic book store said, “Say goodbye to Shaun.” And she said, “Bye, Shark.” And it stuck. And now I need to like, learn pool or something.

Wailin: (00:20:57) Yeah, I briefly also wanted to become a pool shark but that all went by the wayside because I was terrible at it.

Shaun: (00:21:07) Yeah, that’s my problem with pool, too. I’m just bad at pool. Also darts. Most of those bar games.

Wailin: (00:21:12) Yeah, I’m bad at all bar games.

Shaun: (00:21:14) Mm-hmm.

Wailin: (00:21:14) Mm-hmm.

Shaun: (00:21:15) Shuffleboard.

Wailin: (00:21:16) I think I’m okay at shuffleboard.

Shaun: (00:21:19) I’m an okay bowler.

Wailin: (00:21:21) Oh, I’m a terrible bowler.

Shaun: (00:21:21) Nice. Do you use bumpers?

Wailin: (00:21:22) I don’t think—yeah. I don’t think I’ve ever broken 100.

Shaun: (00:21:26) With bumpers?

Wailin: (00:21:27) Yeah.

Shaun: (00:21:33) I have to shut this down. Shut it down. We’re done here.

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