'Shark Tank' turns down $400,000 deal because the founders made the 'biggest mistake' most startups make

"Shark Tank" is a show where entrepreneurial dreams turn into a reality, but founders face tough competition and tough questions from investors before they can secure funding. In the words of Kevin O'Leary, also known as Mr. Wonderful, "Shark Tank" sometimes becomes an 'advice tank' where entrepreneurs often learn important lessons the hard way even if they don't walk away with cash. This happened to former Amazon engineers, Brett Skaloud and Jeff Feiereisen, who failed to secure funding for their startup, Boona, on the show. While the two presented their innovative product called Tandem, which added an extra shower head for couples to bathe together, the sharks didn't show they any love.

Biggest Mistakes Startups Can Make

Skaloud and Feiereisen made a presentation with two models taking a shower together on the set of the show. They explained that they had created a technology that maintains pressure throughout the two shower heads providing a spa experience to couples. Tandem can be attached to most standard extant showers without help from a handyman. The co-founders sought an investment of $400,000 in exchange for 10% of their startup, explaining that they wanted to expand Boona beyond Tandem.

They claimed that the Tandem, which was priced at $249, and their other products had been successful, earning Boona a customer base of 5,000 people and a rating of 4.7. Furthermore, they had raked in millions of views on social media and more than 50 thousand followers on TikTok. 

When asked about the numbers, Skaloud and Feiereisen projected $1.7 million in annual revenue by the end of that year, and $5 million the following year. The Sharks were mighty impressed when they learned that the company had a 54% profit margin. It all seemed to be going well until the Sharks asked the two about their goal with the company. “We want to build a brand,” Feiereisen said. “We have a lot of IP [intellectual property] around this product, but we’re not banking the business on it. I mean, the next obvious opportunity for us is just the handhelds."

The answer did not please the Sharks, particularly, Mark Cuban and Kevin O'Leary. Mr Wonderful was the first to raise concerns over the idea, saying "Some of the greatest deals in ‘Shark Tank’ history [are] when the entrepreneur focused on that one application and maxed it out.” Even though Skaloud assured them that it was their focus as well, O'Leary wasn't convinced.

Cuban expressed that it was the biggest mistake that startups make and falling into the trap of building a brand is not feasible for them. “They want to be a brand, as opposed to just executing on selling their product. [But] what builds a brand is your execution," Cuban said. 

The co-founders quickly pivoted by saying that the Tandem was their main focus and the other products would only support it. However, by then, the sharks had already stepped back from the deal.

Barbara Corcoran dropped out saying she couldn't relate to the product and was concerned with the water pressure being cut in half. Robert Herjavec and Lori Greiner also cited similar reasons before moving on. 

Welcome to the "Advice Tank"

After the others dropped out, the Boona co-founders were left with only Cuban and O’Leary. Cuban said that the Tandem was going to be a cash-generating machine for the company, and he advised the two co-founders to just grab the cash and not try to grow too fast. He then went on to discuss the deal on the table and said, "But that’s not conducive to an investor because if it’s $400,000 for 10%, you have to generate $4 million in after-tax profits just for me to get my money back ... I’m out." 

O'Leary then offered Skaloud and Feiereisen two choices. The first offer was an investment of $400,000 for a $40 royalty per unit till $1.2 million is paid back, and a 10% equity stake. The second was $400,000 to become their third partner with a 33.3% equity stake.

When the co-founders countered with an offer of 20% equity for $600,000, Cuban jumped in with some advice. He told the co-founders to not give up so much equity as they didn't need the $600,000 with the kind of sales they had.

When the two spent too much time deliberating, O'Leary retracted both offers. “You’ve got to make a decision, and you can’t do it, that tells me you’re not sharp enough ... You came to the advice tank," O'Leary said. 

The pair left the tank empty-handed but were grateful for the crucial advice and learnings from the Sharks.