Thread: Shark Tank: Week 9 - Sheet Music?

How old was the company again?

He didn't really say but he had basically gone through the first round of investments within the previous 6 months.

It's really less about the money invested it more about the structure that the guy had in place.

He had the names, the musicians, the product produced and positioned.

Mark C. mainly invested because his going to take a Venture Capital buyout probably within 6 months after presenting it to more investors.

I don't understand it that well because I'm more a Mom and Pop business guy. I wonder what I could get for an investment in my company with profit of $800,000 this year?

I wouldn't take the money but I've always wondered.

I had the same question as you too. I felt that a $3.75 million post-money valuation (hope I used the term correctly) was too high. But then in reality, a lot of the deals they show on TV don't go through or the terms get changed. For example, there was an episode where two guys got an investment from Kevin for their tea company. But after it was filmed, the Sharks teamed up and they sold the company to Jamba Juice.

Check out this blog post by VC Mark Suster titled "Should Startups Focus on Profitability or Not?" It should help answer your question. He talks about the trade-off between profits & growth. "You can drive profits up by not investing today’s dollars in tomorrow’s growth."

Will misomedia be able to sell $4 million in sheet music from their app is another question...

I'm going through valuation of one of my businesses at the moment. Ideally 1.4, but I have the sales to back it up - there's no way I could ask triple that with 40k in sales... hell that's only a month's gross....!

I think my next business I'm just going to create some sort of technology nobody understands and make millions.

Originally Posted by Steven Williams

It's really less about the money invested it more about the structure that the guy had in place.

He had the names, the musicians, the product produced and positioned.

Mark C. mainly invested because his going to take a Venture Capital buyout probably within 6 months after presenting it to more investors.

I don't understand it that well because I'm more a Mom and Pop business guy. I wonder what I could get for an investment in my company with profit of $800,000 this year?

I wouldn't take the money but I've always wondered.

I would say if there is no debt and the 800k is after paying yourself the price would be anywhere from 2.4 - 4 mill.

Congrats on the success!

To me, and I might be wrong, the app industry of today reminds me of the dot com industry of the late 90s. People seem to just throw money at it because it's "new" and "growing" but it's hard to tell whether there is anything substantial there. I think that there will be an oversaturation of the app market and that there will be something resembling the dot com bust, only on a smaller scale.

Originally Posted by Trevor Kuntz

To me, and I might be wrong, the app industry of today reminds me of the dot com industry of the late 90s. People seem to just throw money at it because it's "new" and "growing" but it's hard to tell whether there is anything substantial there. I think that there will be an oversaturation of the app market and that there will be something resembling the dot com bust, only on a smaller scale.

So true. And there have been a lot of tech IPOs lately too: Zynga, Pandora, and Groupon, to name a few. As long as it's still profitable for the investors, it'll keep happening.

I like all the new tech innovations that are coming out every year, but whether all of it is sustainable remains to be seen. Eventually companies like Instagram and Foursquare will have to figure out ways to be monetize, be bought out, or shut down.

I can see the valuation.

They do decide to sell the app for $0.99 and bring in $80k a month. I think there is a pretty broad appeal that type of app. If you look at the video game Rocksmith, it's very similar in that you play a real guitar and learn the instrument as you play the game.

The app removes the need for an Xbox and TV, all you need is your guitar, a connector and an Ipad or tablet and you can practice and learn anywhere.

You couple that will the ability to download new music as it comes out and the potential income per customer is pretty huge and consistent.

I could see it being a multi-million dollar business.

Tulips.

No you can't see the valuation by any standardized valuation model.

For $600K I could build a better app/company.

The sharks must have had additional information not presented on TV or they are degenerate gamblers.

Over 50% of the price must be the quality of the entrepreneur and his pitch...that's crazy.

If the founders died, the business would be valued at under $600K.

I would bet money against Mark Cuban getting a return.

Originally Posted by Steven Williams

I don't understand it that well because I'm more a Mom and Pop business guy. I wonder what I could get for an investment in my company with profit of $800,000 this year?

I wouldn't take the money but I've always wondered.

For the shark tank guys, I doubt they would invest in a mom and pop unless there is ability to scale. They wouldn't put investment into a business making $800k unless it had potential to make $8m.

I've always wondered who would buy a business for 3x earnings and wait 3 years to get back their money. Unless the business was making $800k and would be truly passive to the investor I just don't see an investor doing it. Now someone who doesn't understand and is buying a job would probably think that it's a great deal.

I went to a lecture with Damond John and he told us that on shark tank he will do about 10 deals a yr on the show but in reality he will only team up with 2-3 of the 10 becuase after further investigation of the business he said yes to things did not pan out. He also said that what we see on tv takes about 8 min but it really can take between 45 - 1 hr for each business. The sharks know nothing about the companies that are pitching to them before hand and there is no script.

Originally Posted by biophase

I can see the valuation.

They do decide to sell the app for $0.99 and bring in $80k a month. I think there is a pretty broad appeal that type of app. If you look at the video game Rocksmith, it's very similar in that you play a real guitar and learn the instrument as you play the game.

The app removes the need for an Xbox and TV, all you need is your guitar, a connector and an Ipad or tablet and you can practice and learn anywhere.

You couple that will the ability to download new music as it comes out and the potential income per customer is pretty huge and consistent.

I could see it being a multi-million dollar business.

Oh yes - that is what I see too. BUT, so far that number would strike me as odd $40,000 in sales in over 6 months? Wouldn't that say to you that they just aren't cutting it? Every other person on the show that says "we need this money for marketing! we don't have sales because we can't market properly!" ... what is the difference here?

Is it because of Ingrid and Timberlake? Are they going to be the spokespeople for this?

Originally Posted by rocksolid

I went to a lecture with Damond John and he told us that on shark tank he will do about 10 deals a yr on the show but in reality he will only team up with 2-3 of the 10 becuase after further investigation of the business he said yes to things did not pan out. He also said that what we see on tv takes about 8 min but it really can take between 45 - 1 hr for each business. The sharks know nothing about the companies that are pitching to them before hand and there is no script.

what's sad is there is no follow up on many of these companies, i.e. they only show deals going through but rarely all the other ones that did not work out

Mark Burnett receives 2% of profits for the rest of time for every business that appears on the show.

Even if they do not make a deal. That is easily millions a year for the rest of his life.

Originally Posted by PatrickP

Mark Burnett receives 2% of profits for the rest of time for every business that appears on the show.

Even if they do not make a deal. That is easily millions a year for the rest of his life.

Source?

Sounds like a great deal for mark Burnett!

The 6th Shark?