'Shark Tank' judge Barbara Corcoran calls cake business 'too small' — then invests $50,000 in it
Entrepreneurs come to "Shark Tank" with ventures that have massive valuations, seeking significant investments from some of the biggest names in the business. But not every business pitched to the sharks has gigantic sales figures to boast of. Some companies are small, and the owner is able to make a decent living out of them. Usually, such businesses are considered to be too small to be investable, but once in a while, they do get a deal on the show. That is what happened to a cake business that Barbara Corcoran called too small to invest in, but still offered a $50,000 deal to.
The entrepreneur was a woman named Kim Nelson, who sought $50,000 for a 25% stake in her company, Daisy Cakes. As the name suggests, the company makes and delivers cakes to customers. The cakes are made according to a family recipe, which Nelson said belonged to her great-aunt. She operated in the southern part of the country and recorded revenue of $27,000 in three months at the time of the taping.
Nelson revealed that she and her mother would often drive to several holiday shows, and that’s where they’d get their customers. Every single shark that took a bite of the cakes loved them. Some of them even called it the best cake they’ve ever had. But the problem was that the company was much too small for anyone to invest in at that point in time.
However, the sharks were not out at that stage. They wanted to understand what Nelson’s strategy was to make the company big, as she said that it was her goal. She had been doing well being a regional company, but she wanted her family’s recipe to reach more people. She said that she’d love to get on a shopping network, and that’s when Kevin O’Leary asked a crucial question.
Mr. Wonderful is someone who could easily get Daisy Cakes on a shopping network, but in that case, the company could end up getting $100,000 orders. Meeting that level of demand for such a small company would be a big challenge, and O’Leary asked the entrepreneur how she would tackle it. Unfortunately, she did not have a clear answer. However, she believed she could make 5,000 cakes in 30 days.
As a result, Mr. Wonderful said no to offering a deal. Three out of the remaining four sharks also said no as the company was just not investable yet. However, Barbara Corcoran had a different idea. “I like you very much. I think it’s too small a business, quite honestly, to invest in. However, I noticed when you passed your delicious cake around, every guy here ate more than 50%,” she said.
The shark then offered a deal, but she had two conditions. One was that it would purely be a royalty deal worth $50,000 for a dollar per cake until that money is paid back, and two, that the entrepreneur’s mother would have to be an integral part of the operations, as she’s the one who’d have to drive around the country for shows and sell them. This was a great deal, and Nelson readily accepted.
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