Part of the America’s Entrepreneurs Special Report
If you’re one of the 8.5 million TV viewers hooked on ABC’s Shark Tank as I am, you may have noticed something interesting about it.
Although many of the entrepreneurs seeking money from the show’s millionaire “sharks” are eager-beaver, twentysomethings hatching techy businesses, some are quite the opposite: They’re older, 50+ home-grown founders with low-tech, practical ideas (sometimes weird and wacky ones) that make the sharks go into a feeding frenzy.
Hopes, Dreams and The Next Big Thing
Shark Tank creator Mark Burnett says his show is about people’s hopes and dreams — the entrepreneurs needing cash infusions for their businesses and the sharks who are eager to profit from The Next Big Thing.
Below are success stories of two 50+ founders who appeared on Shark Tank and their advice for other midlife entrepreneurs hoping to hook investors to fund their businesses off the air. One is Susan Knapp, the founder of the gourmet food company, A Perfect Pear. The other is Brad Hooks, creator — along with his two young daughters — of ScreenMend, a clever product to fix your damaged window screens.
Susan Knapp: A Perfect Pear
In 2009, Susan Knapp, of Napa, Calif., jumped into the Shark Tank looking for $500,000 for a 15 percent stake in her gourmet food company, A Perfect Pear.
Knapp began her working life selling Yellow Pages ads to small businesses and their stories inspired her in 1998 to turn her love of making Cinnamon Pear Jelly into a side business. At the time, she had only given away the jelly to friends and family over the holidays.
With a ready supply of pears from a neighboring farm, Knapp launched Aunt Sue’s from her kitchen with four products, each one winning top awards at County and California State Fairs. As the company gained momentum, Knapp changed the name to A Perfect Pear and introduced 15 new products. In 2003, she quit her job to be a full-time entrepreneur, using her credit cards, savings and home-equity line to get going. By 2007, Knapp’s products were sold in 650 stores, and online and had sales of $700,000, but she had one big problem: $100,000 in orders and not enough money to fill them.
Because of the credit crunch, Knapp couldn’t get the production money she needed from a bank and venture capitalists were reluctant to open their wallets. So she went on Shark Tank as a last resort, hoping to raise $500,000 in exchange for a 15 percent stake in her company.
Four of the sharks jumped in the waters (“Mr. Wonderful” Kevin O’Leary, fashion and branding expert Daymond John, tech innovator Robert Herjavec and infomercial king Kevin Harrington) undercutting one another to get a sizeable bite of Knapp’s pear business. O’Leary offered $500,000 for 70 percent of the company, which Knapp immediately rejected. Then John offered $500,000 for 51 percent; Knapp countered with 49 percent, but John demurred. Next, Harrington and Herjavec teamed up to offer $500,000 for 50 percent. Although Knapp didn’t want to give up that much of her business, she accepted because she felt A Perfect Pear would flourish under their savvy business mentorship.
Knapp’s advice: When you’re seeking money from investors or lenders, know your business numbers. You need to be able to articulately cite your assets, sales, cost of goods, margins, P&L (profit and loss), ROI (return on investment) and long-term projections. Moreover, you must know them so well that you can rapidly recalculate on your feet if you receive an offer different from the one you’d hoped for.
As O’Leary often says on Shark Tank: “Know your numbers or you’ll be broke before you know it.”
Brad Hooks, ScreenMend
Brad Hooks created such a simple, practical product, it’s hard to believe no one had invented it before. In 2013, with his two young daughters beside him, Hooks went on Shark Tank pitching a window-screen repair kit called ScreenMend.
Their invention was inspired by Hooks’ then 9-year-old daughter, Lily. She’d been trying to scrape candle wax off their porch table when she noticed her father becoming frustrated trying to repair holes in their window screen with self-adhesive patches and said: “Why don’t you put candle wax on the screen patch?”
“Why not?” answered her dad. So they soaked a small piece of screen in wax, let it harden, put the wax-coated piece over a hole in the screen and heated the wax with a hair dryer. The patch not only stuck, it lasted through all kinds of weather for almost four years. The Hookses knew they had something and began manufacturing the wax-covered patches, packaging them in their kitchen and selling them to small retailers and hardware stores.
The demand quickly exceeded their manufacturing capacity, though, and they learned that Bed Bath & Beyond would buy their products if they changed the packaging so the chain could hang them from displays.
Hooks figured it was time to try to face the sharks, since most of them had contacts with the largest retail outlets. So, with just 750 sales under their belts, Hooks and daughters Emma and Lily, then 14 and 12, brought their waxed screen patches and a hair dryer onto Shark Tank, asking for $30,000 in return for 25 percent of their business.
Three sharks declined, saying the business was too small and they’d need to put in too much work to scale up. But Dallas Mavericks owner Mark Cuban offered to meet their request. He remembered how someone had supported his tiny stamp collecting business when he was a kid and wanted to do something similar for Hooks and his daughters.
The family was just about to take Cuban’s offer when Lori “Queen of QVC” Greiner jumped in with an offer of $30,000 for 50 percent. She eagerly pronounced that she’d change ScreenMend’s packaging and get the product into TV- and major retail outlets. Although Hooks and his daughters weren’t thrilled to give up 50 percent of the business, they went with Greiner because she was willing to work hands-on and had impressive TV and retail expertise.
A year after Shark Tank, ScreenMend’s sales increased from $4,000 to $1,000,000. ScreenMend is now in Lowes, Ace Hardware, Home Depot and Bed Bath & Beyond. Griener also got the product on QVC, where its entire inventory of 32,000 units sold out within 10 minutes. In early 2015, ScreenMend will move into its own manufacturing facility.
Hooks’ advice: When approaching an investor, know what you’re willing to give up, what the tradeoff might be and who you’re dealing with.
If an investor is asking for a larger stake in your company than you’d like, that doesn’t necessarily mean he or she wants a bigger piece of the pie. It could mean the investor feels the deal is risky and wants to better cover the upfront outlay.
And if you’re seeking expertise, counsel or connections more than just cash, weigh the character and compatibility of the investor who’d be mentoring you. After all, the investor will be doing that with you. Shark Tank’s real estate mogul Barbara Corcoran often says on the show that she’s investing in the entrepreneur even more than the business.
A Piece of Advice of My Own
As someone who works often with senior entrepreneurs, I’d add one tip of my own: Listen closely if an investor turns you down.
The explanation you hear could help you shift gears to make your company more successful. Just as on Shark Tank, if an investor doesn’t think an idea or business will work, odds are the reason is valid.