Gines Auto Service
Hole in the Ground
On the Rise
David Hoopes: Putting People First
Candice Davis: In the Driver’s Seat
Home Sweet Office
The State of Security
Don’t Stand on the Sidelines
Cutting Through the Haze
Industry Outlook: Higher Education
In the Hot Seat
Losing its Luster
Utah’s Control4 Goes Public
Companies to Watch
One hot day, as entrepreneurs Dallas Robinson and Mike Buonomo were working a door-to-door sales job in Texas, the pair began brainstorming ways to raise both money and awareness for their fledgling lip balm company, Kisstixx, which they developed while students at Utah Valley University.
“We were out knocking on doors, sweating like crazy, and we sat down on a curb to put our heads together,” recalls Buonomo. As it happened, open tryouts for the television show Shark Tank were just two days away, in Texas. Shark Tank is a reality TV show in which five potential investors evaluate pitches from inventors and entrepreneurs. If impressed, the investors make business proposals to the entrepreneurs.
Robinson and Buonomo were working in Texas to earn money to support their venture. Since the Shark Tank tryouts were two days away, the pair had Kisstixx product delivered overnight and began working on their presentation. At the tryouts, says Buonomo, “we had to wait in line all day to get to meet an executive producer’s assistant’s assistant.”
After the tryouts, they waited and prepared.
Buonomo says they didn’t find out until two days before taping that they were chosen to appear on the show. “We never knew that we were going,” he says. “But we were told, ‘Make sure you know your numbers. Make sure you’re ready.’”
When the call came, they were ready. They knew their numbers, they had researched the celebrity investors and planned an attention-grabbing presentation (which involved coercing two of the rival investors into kissing each other). And they had an ace in the hole—a last-minute, $500,000 purchase order from Walgreens that boosted their company’s valuation.
Buonomo and Robinson went into the taping with a request for a $200,000 investment in exchange for a 20 percent stake in the company. With only $80,000 in actual sales, most of the investors thought they had over-valued their company.
“We actually expected them to beat us up on our valuation a little bit more,” explains Buonomo. “But we didn’t want them to feel we were unconfident in our brand.” While most of the investors quickly backed away from Kisstixx, one took the bait.
Mark Cuban, owner of the Dallas Mavericks, offered them the $200,000 investment for a 40 percent slice of the company. “We were willing to go up to a certain percentage, and Mark came in just under that percentage,” says Buonomo. They gladly accepted the deal.
“The outcome was just about as good as we could have asked for,” he says.
Kisstixx has found tremendous success since the Shark Tank episode aired in March 2012. The company is working on another contract with Walgreens, and it also has deals with most major retailers in 12 countries. Buonomo and Robinson are also working to expand the product line with high-quality lip glosses and double-ended lip balms, and “we’ve still got more that are in the works,” says Buonomo.
The business relationship with Cuban has also flourished. “He told us he was actually taking a chance on us because he doesn’t have any experience in retail,” Buonomo says. “We definitely see him as a business partner, so when we have big decisions, we can turn to him for advice.”
While most entrepreneurs will never appear on Shark Tank, many will pitch to angel investors or venture capital firms, or will participate in speed pitching events or other business plan competitions. Buonomo has some sage advice—gleaned under the bright lights of a TV studio and its national audience—for other entrepreneurs who plan to approach potential investors.
Research the Investor(s). In this case, research involved learning about all five of the potential investors. Buonomo says he and Robinson also watched every episode of Shark Tank—repeatedly. Based on their research, they decided to focus their pitch on Cuban. “We made sure that we said the things that he wanted to hear, and that it was truthful,” Buonomo says.
“Mark Cuban invests in the person,” he explains. “He will look at your passion, your drive. You need to show him that you know your numbers.”
Also, they hand-selected investors Kevin O’Leary and Barbara Corcoron to kiss. The two investors frequently clash on the show. “We picked Kevin and Barbara because we knew they hated each other—we knew that it would be great TV,” says Buonomo.
Know Your Financials. “You have to know your financials or people will beat you up,” he says. And it’s more than just knowing your current sales figures and balance sheet. You also need to have a realistic, multi-year sales projection and an exit plan.