'Shark Tank' contestants bring canned air as their product, end up with a million dollar deal
From life-saving to bizarre, a diverse array of products grabbed the attention of the investors on “Shark Tank.” But a couple of entrepreneurs came to the show to pitch a business that manufactured and sold canned air. The entrepreneurs were Rob Neuner and Mike Grice, who sought a million dollars for a 5% stake in their company, Boost Oxygen. As the name suggests, their product was compressed and canned oxygen.
All of the sharks were taken aback by what the duo had asked for, but one could see the demand for such a product. It was presented as a fantastic product for athletes and people travelling to high altitudes with a breathing problem. Carrying a giant cylinder of oxygen with a mask is a hassle, but getting it in a portable form makes a lot of difference.
The company had fantastic sales figures to back up its high valuation. The entrepreneurs claimed that the company was on course to make $6.4 million in sales. The figures were impressive, but this was an industry in which the sharks did not have a lot of experience. As a result, all but one backed out.
Kevin O’Leary might not be an expert in selling oxygen, but he has the necessary connections and skills to skyrocket any business. He saw value in the company, and the sales figures certainly played a part in that. However, a million dollars was still a lot of money, and it would take Mr. Wonderful a long time to recoup that kind of money.
The veteran investor, therefore, offered to pay the million dollars as a loan at 9% interest payable over a period of three years. He believed that the company had good enough cash flow to be able to afford that. O’Leary also said that he wanted 7.5% equity as part of the deal. Had the loan aspect not been there, the entrepreneurs might have said yes in a heartbeat. But that was not the case.
Mr. Wonderful believed it was a great offer, but the entrepreneurs did not feel comfortable taking on such a big debt. “I’m still concerned about taking on debt when we don’t need to take on debt, especially 9%,” Neuner said. O’Leary seemed perplexed as he explained how offering that kind of money without any guarantee that he’d make it back would be too much of a risk.
The entrepreneurs then countered with an interest rate of 6% and an equity share of 5%. Mr. Wonderful said that they were all reasonable people on the set and asked to meet in the middle. He set the loan interest rate at 7.5% and an equity of 6.25%. This was a more agreeable offer, and a deal was struck.
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