Posted on 8th February 2010 by Brian Crouch in Business
Watched the Jan 29 episode of the Shark Tank a few day ago (ABC) via Hulu. Very interesting invention by entrepreneur Jill Quillin: LipStix Remix. I love product ideas like this, that thwart consumption waste (apparently almost a third of every lipstick tube goes unused), and help individuals economize. It even offers users a chance for creativity: they can blend their own unique colors.
One thing bugged me during the show, though. Two of the investors openly discussed freezing out Barbara Corcoran, and made an offer for 40% of the company for $105,000 stake, which was a pretty good offer. Mrs. Quillin then left to confer with her husband; it’s a big decision and obviously she want to share the news with her partner. Well, while she was gone Daymond John asked Barbara to get back in on it, so he could snag another 10% equity.
Now, it’s the Shark Tank, not the clownfish tank, so that’s just the way they feed, but still…
Mrs. Quillin returned, and upon hearing the offer of $105,000 for 50% instead of 40%, said: “That’s the quickest ten percent I ever lost.” She took the offer.
I do not know for sure how I would have reacted: I wasn’t there under the bright studio lights, across from investors/ potential partners who were making a solid offer. The pressure must have been immense: these people can open doors in weeks that would take years of effort to open, for most of us.
Yet, I did wake up with one formulation of a response to the equity-grab that might have worked: “Thank you for being so interested in this profitable idea that you’re willing to add a third partner. And I really admired your offer of 40% stake between the two of you (Kevin Harrington and John). What does make me wonder is the logic behind the equity stake change: you’ve added a partner. Your cash outlay has thereby been reduced to $35,000: your risk is that much lower. So… could you help me see how your reduction of risk translates to my losing of a higher percentage stake in my business?”
Ah, who am I kidding? I probably would have said, perhaps regretting it later: “Excuse me, you’re reducing your capital risk but you want me to sacrifice more ownership? Last time I looked, the less you risk, the less I give up. I’d be willing to give 50% for $132,000.”
Still, I think Mrs. Quillin stands to make quite a lot from this idea for the rest of her life once she gets her patents. Her presentation was top-notch and clearly impressed the whole group. If she ever pursues an exit from Lipstick Remix (I am betting a cosmetics firm could buy her patent for a princely sum) there should be a lot of company board positions waiting for her.
I hope the investment she got on the show creates a lot of jobs.
Entrepreneurs, your community and society at large need you.
Not many people that I know of went into business for the primary purpose of creating jobs for others. The goal is usually income/profit: jobs may be created as a side effect, a means to an end. To a few, the good of job creation is more likely to be a “necessary evil” factor for making profits.
This why I was so impressed to watch the story of a young man who had invented an alternative to wheat-based playdough using a patented soy-based mixture: his single-minded focus on creating jobs in his hometown, Bloomfield, IN was inspiring.
The product, Soy-yer Dough, is for kids with wheat allergies, and/or celiac disease, apparently a sizeable market. Sold out of his home, he has moved 19,000 units. Although not a frequent TV watcher, I caught the segment the ABC show “The Shark Tank” that featured this innovator.
In negotiations with the sharks (ABC’s term for people who risk their money in exchange for equity), his initial rebuffs were refusals to take jobs from his community. The investors were eager to get ahold of his patent for licensing his idea to Play-Doh, which had made a preliminary offer on his patent for $500,000, before he even went before the Shark Tank panel. He didn’t budge on yielding control of the business until he was assured that negotiations would include bringing jobs back to Bloomfield; the investors also persuaded him that their combined capital could do even more for his hometown’s employment. It was downright heartwarming to watch…. after the deal was made, the inventor, Sawyer Sparks, addressed his neighbors back home: “This is for you, Bloomfield.” Provincial? I think not. Think about what Sawyer was willing to do: it’s every bit as much “giving back to community” as a corporate gift for a philanthropy.
When I was a kid, I don’t recall fantasizing about creating jobs for others. I wish I had. Like lots of other pre-teen kids, any imaginings about a future career ran the gamut from fame & fortune as an actor or rock star, to adventure as a fireman or soldier, to authoring as I got older…”What do you want to be when you grow up?” for most kids is not: “A source of jobs.” Too bad, too. Because it doesn’t appear to be too common even in adults.
Walk the halls of a business school and ask people what they want to do with their lives, what they want as a legacy. I think, as probably do you, that not terribly many would speak passionately about adding to the payroll. True, many of them would think about growing their business and impacting their city, but you don’t hear “I want to hire, hire and hire some more” every day, do you?
A good business is usually the creation of innovative individuals, who grow it and might end up opening the doors to new employees, even if that’s the last thing they wanted! More people able to feed their families, build or buy houses, buy furnishings, art, books, games, classes, trade in their community. The exchange of value leading to even more value… That scary unemployment number affects us all, even if we’re not in the ranks of the laid-off. The job creator thus affects us all too… and thee people seem to be relatively rare creatures.
Not long ago I read an interview with successful husband-and-wife entrepreneurs, a really nice couple, whose work has become famous and whose site receives massive traffic. If they decided to, they could monetize their notoriety, scale their work, and create scores of jobs… and they know it. When asked about growing the business, they replied, point blank: “We would have to hire people to grow the company, and we don’t want to hire.”
Absolutely nothing wrong with that, but serves to show that success in creating a market for a good product, does not equal creating jobs, necessarily. It takes an individual act of will to create them, in addition to the quality of their business offering… the unemployment number will not go down without individuals making that decision. It can be a complex undertaking, with regulations, costs, risks, and potential for stress. Once the payroll grows, if things slow down, the entrepreneur is faced with the choice of operating at a loss, or terminating some of the positions. All the more reason to say the person that takes the risk is courageous.
Don’t more people use the terms: getting a job, finding a job, landing a job, than creating a job? I think owning your own business is a huge step in that direction: you’ve created a “job” for yourself. How can the entrepreneur be supported, to encourage the willpower to invest capital and energy to grow beyond solo entrepreneurship?
Most of us are asked to donate our money or time, or donate services or product-in-kind to support charitable causes. You’ll hear that called “giving back to the community.”
I can’t think of an individual who gives more back to the community than the person who sets his or her mind to expand opportunities for others through direct employment. Every job created is an achievement, a victory. What if disadvantaged inner city kids grew up thinking about creating a business, about hiring their friends, before they started thinking about finding a job?
People like Sawyer Sparks should give us hope. We need a lot more like him.
“Whatever you can do, or dream you can do, begin it.
Boldness has genius, power, and magic in it!”
-William Hutchinson Murray, The Scottish Himalayan Expedition.
This Christmas, I plan on telling many of my friends, “You’re a Scrooge.” I expect them to give me a hug and thank me.
Is this a Randian Objectivist overture, praising my friends for being unapologetically, counterculturally capitalistic, focusing on the business bottom-line while the prevailing social norm is to be self-sacrificing?
No, it’s a commentary on the fact that the ongoing usage of the “Scrooge” appellation is unfair to Dickens. The character, Scrooge, transformed into a generous and kind-hearted man after his evening of paranormal activity. Yet the enduring connotation of the name is of a stingy, miserly, mean old humbug.
I suppose that the fairest application of Scrooge would be towards a person who had exhibited mean tendencies, especially towards Christmas or other holidays of gift giving, who became someone everyone wanted around, compassionate and warm.
Dickens doesn’t go into these details, but I’d like to imagine that Scrooge not only lived a happier personal life after the spirits visited, he had a more successful business too. Better customer relations, better employee productivity and retention… and as revenue increased, he probably created some new positions. Small business growth, which would feed more families than just Bob Cratchit’s.
I don’t think Dickens should be interpreted as condemning business, or capitalism, or profit, or entrepreneurship per se (at least not in “A Christmas Carol”), just the withered soul that a skewed focus can produce. There’s a balance. Life’s for living, and money is a social invention and the means for supporting it, not the end in itself.
Scrooge came to understand that… it’s a story of redemption, by way of supernatural intervention. It’s not how you start, or even remain for most of your life:it’s how you finish that counts.
He dressed himself all in his best, and at last got out into the streets. The people were by this time pouring forth, as he had seen them with the Ghost of Christmas Present; and walking with his hands behind him, Scrooge regarded every one with a delighted smile. He looked so irresistibly pleasant, in a word, that three or four good-humoured fellows said, “Good morning, sir! A merry Christmas to you!” And Scrooge said often afterwards, that of all the blithe sounds he had ever heard, those were the blithest in his ears.
When my wife has a 12-hr floor shift, my "weekend" starts early. 5:30am. Our 2yo is nearly potty-trained, so she woke me up, diaper in hand. 3 months ago from HootSuite