Spirithoods: A Lifestyle Brand
Marley Marotta and Alexander Mendeluk were first into the Tank this week, seeking a $450,000 investment in exchange of 15% of their company and lifestyle brand, Spirithoods. The two entrepreneurs pitched the Sharks saying that their exotic hats represent more than just a hat company; Spirithoods is a lifestyle brand which brings the adventurous spirit of the wild into everyday life while helping to protect endangered animals.
Spirithoods launched in 2010 and has since had sales of $9.3 million. Their products are carried by Zappos and Nordstrom online, and also maintains an online presence of their own. In their presentation, Marley and Alexander really showed it all. Aside from impressing the Sharks with their sales figures, they brought in models to show off the eccentric hats and assist the Sharks in trying them on. In addition to this, they described their product and brand very well, and pinpointed their company's mission statement and core values. They explained what that their brand is about a lifestyle, and brought some proof from some of their crazily dedicated fans, as they said that some of their customers have tattooed the company logo on themselves. They described their fans as a community and as a tribe, both powerful words to use when describing a brand.
Like any investor, at the end of the day the Sharks have to like and feel passionate about what they invest in, They have to believe in the company and in the entrepreneurs, but also believe in themselves that they can make their investment profitable. In this particular case, the sales pitch was not to be blamed for the Sharks' disinterest. When asked about their breakdown in sales over the last few years, Marley and Alexander responded after a surge in sales in their second year of $4.5 million, sales the past couple of years decreased to around $3 million. Both Kevin O'Leary and Barbara Corcoran didn't like this significant drop, and went out. Robert went out for a different reason, which was that he recently invested in a similar helmet business and didn't see much success. So although he asked the entrepreneurs if he can keep his Spirithood, he was not interested in making an investment.
Marley and Alexander next diverted their attention to Mark Cuban, trying to sell him the idea of getting their hats into stadiums and branding them with team colors. Mark however didn't particularly like this idea as he just didn't see it happening and felt the price was way too high to be able to sell to fans. He said that in order to do so, the Spirithoods would have to sell for something along the lines of $19.99, which is $80 less than what they were currently selling them for, and $10 less than what they were currently making them for in Los Angeles. That left Daymond, the only Shark that made his fortune in the fashion industry.
Daymond was interested in building up the brand and licensing out the products to various other lifestyle brands. However, he felt that an investment would be very risky because the hat category is currently down-trending. He therefore justified this gamble with an offer of $450,000 for a 50% stake in the company. Being that this offer would take a lot more than they were asking for, Marley and Alexander requested permission to step outside for a minute and discuss it. Daymond warned them that many times this move is a mistake as it gives the Sharks time to collude or have second thoughts about their offers. This is exactly what happened. The Spirithood cofounders came back into the Tank with a counter-offer for 22.5%, and Daymond backed out saying that he already had buyer's remorse, even before buying it.
By now, any entrepreneur looking to get onto Shark Tank should know fully well the risk that comes with stepping out to discuss an offer. It is not always the wrong move, as many times the investment on the table is nonsensical or completely undesirable. However, before making the decision to step out for a second, the entrepreneurs should weigh the risk and assume that the deal will be modified by the time they come back in. In Spirithood's case, this move was bold, but it may have made sense. They most likely did not want to give up 50% of their company for any price, and so had nothing to lose by taking a step back. On the other hand, the deal on the table was coming from the Fashion King Shark, who has a small reputation of knowing a thing or two about branding as well. Taking the chance to lose such a partner is a brave move, but hopefully one that was thought through in this case.
Spirithoods ended up leaving the Shark Tank without an investment, but with the feeling that they made the right decision and did what was best for themselves and for their company. They presented very well and did an excellent job in describing how their company was more than just a company, rather a community and tribe consisting of very dedicated fans. Spirithoods is definitely a cool product and undoubtedly sells well to skiers, snowboarders, and other cold-weather sports fanatics who like playing hard and looking cool at the same time.
Overall Performance: Presentation: 45/50. Strategy: 22/25. Product: 19/25.