The Sharks' New Groove

By: Matt Turner,
Writer and Entrepreneur

The GrooveBook pitch was one of my favorite pitches to date. There are several elements in it that truly provide entrepreneurs keen insight into both building a business and successfully closing a deal with investors.

One thing that truly impressed me about Julie and Brian Whiteman was their knowledge of their business. They knew all of the numbers that an investor likes to see when assessing any investment opportunity.

With a cost of $2.99 per month for their photo subscription service, their cost of $2.30 left them with $0.70 profit per book. However, even with 18,000 subscribers in 8 months, they were still losing cash. With this business model, it would take 30,000 monthly subscribers to break even on their $21,000 of cost each month, with a profit of $0.70 per subscriber per month there after.

Another thing that impressed me was their commitment to this business. Having invested $400,000 of their own money, their passion for the business was quite apparent. Their ask of $150,000 for 20% of their business wasn't pulled out of a hat; it was well thought through and appropriate.

The thing that impressed me most in this pitch though, was Mark Cuban's business acumen and ability to take control of this deal. I really respect Mark's ability to see the unique value proposition of this business and immediately assess a good deal and gain access to it.

I suggest rewatching this episode from Mark's perspective. Once he determined his proposition, he powerfully created the situation he wanted most. As Mr. Wonderful was working on swaying the Whitemans, Mark stepped in and pulled Kevin aside. And even as Robert and Lori were trying to negotiate a deal, Mark very powerfully re-framed the other offer as an unintelligent one, telling Brian that he is "too smart for that deal".

His communication, business acumen, and ability to take charge of this deal were definitely very impressive. He demonstrated in this pitch why he is so respected in the business community at large, and why he has been able to grow so many businesses successfully.

When negotiating, Mark creates a "win-win situation" that gives the entrepreneur what they need, and still allows him to get what he is looking for.

Now, could the entrepreneurs have done this themselves? Yeah, probably.

Obviously, Mark will have a lot better chance getting an immediate call back from these major photo companies. His perspective on this side of the deal and his awareness of how to proceed gives him great power. The entrepreneurs can make the same phone calls and license out their service without giving up equity. However, as Mark himself always says, 20% of something is better than 100% of nothing. With Mark and Mr. Wonderful on board, the entrepreneurs are financially aligning with two people that for sure are going to create the best results possible.

As an entrepreneur, it is important to appreciate the two very different avenues these entrepreneurs had the chance to go down.

This pitch serves to remind entrepreneurs that it is essential that you know exactly what you want in your own business as you move forward, especially when talking to potential investors.

Overall, it was a successful deal all around. The Whitemans kept control of their company, got the $150,000 they were looking for, and have 20% of royalties on all sales that the Sharks bring in through the licensing deal.

What insight can you gain from this pitch that will help you move your business forward?