On an episode of Shark Tank that aired March 20, I pitched my company, The Home T, a startup apparel company based in New York City. Long story short: I dove into the tank and impressed the Sharks by revealing that my little T-shirt brand did $1 million in sales in our first 12 months. I explained I was looking for a strategic partner and investor to help grow our business, and then found myself, over the course of the exchange, declining offers from Robert Herjavec, Lori Greiner, and Daymond John. Not at all how I expected things to go.
When I declined the final offer from Daymond–$250,000 for 20 percent of the Home T–the reaction from the Sharks was mixed. Mark Cuban enthusiastically agreed with my decision, Kevin O’Leary threw my shirt at me in disgust as I walked out, and Daymond explained that I was dead to him.
The reactions from my friends and family after the show aired have also been mixed. In between many supportive comments, one line I hear a lot is, “I can’t believe you walked away from $250,000!”
Yes, $250,000 is a lot of money. So how and why did I turn it down? Three reasons:
- The best offer valued my company at $1.25 million. That’s a valuation that was half of what the company generated in revenue in 2014 (the year the show was shot). As tempting as a partnership with a Shark is, I couldn’t bring myself to devalue what I’d built by such a gigantic amount.
- The Sharks’ job, in most instances, is to inform you as to why there’s no way in the world you are worth what you think. This process breaks down your hopes and makes you second-guess yourself. And right when they’ve got you feeling that way, that’s when they start making lopsided offers. I knew my numbers well, which I believe helped me think strategically and resist less-than-desirable offers. Knowing your numbers and your growth potential goes a long way.
- This third reason is actually the most important to me. Accepting $250,000 from Daymond would have been a safe bet. Partner with a fashion mogul to build an apparel brand? Why not?! But taking an offer at the expense of my company’s value isn’t an “easy road” I’m willing to walk. Entrepreneurs don’t look for the easy ways out. We take risks, and those risks often seem confusing to people not in that world.
If you’re reading this and thinking, this guy really screwed up, I’ll leave you with the wise words of Mark Cuban, a guy we can probably agree is smarter than the average bear: “He would be the moron of the century if he sold a million dollars in sales at a million-dollar valuation.” Thanks, Mark!