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I'm not much of a fan of Shark Tank - I think the BBC Dragon's Den is more accurate and more picky.
Still, there was an interesting object lesson there last night. The inventors of a widget were offered the money they wanted for 75% of the company (they'd offered 20%) but the terms for the 75% were "I will give you your money and guarantee to cover all necessary future costs to make this successful regardless of what they are..."
Now most people, including the inventors and some of the other sharks heard the 75% and gasped.
I heard - you're giving me a locked in future valuation where my share is locked at 25% regardless of future investment? HELL YES!
They actually got a slightly sweeter deal as one of the other Sharks realized these guys were on the ropes personally for the effort they'd put in. Still, even without the cash upfront this was a good deal for all involved.
Still, there was an interesting object lesson there last night. The inventors of a widget were offered the money they wanted for 75% of the company (they'd offered 20%) but the terms for the 75% were "I will give you your money and guarantee to cover all necessary future costs to make this successful regardless of what they are..."
Now most people, including the inventors and some of the other sharks heard the 75% and gasped.
I heard - you're giving me a locked in future valuation where my share is locked at 25% regardless of future investment? HELL YES!
They actually got a slightly sweeter deal as one of the other Sharks realized these guys were on the ropes personally for the effort they'd put in. Still, even without the cash upfront this was a good deal for all involved.
