@ Packback Books: When You’re in the Tank, it’s Not that Easy, Right?
By: Pete Troshak
Twenty years ago if I told you that instead of going to the local book store to get the latest bestseller you would be downloading books on a device the size of a pad of paper that can hold the equivalent of a small library, you would have never believed me. The way we digest print media has changed, and along with that comes opportunity for innovative minds to market and sell books in new ways to niche markets.
Young entrepreneurs Casey and Mike have created their company, Packback Books, to address one of these niche markets. The duo was looking for $200,000 for 10% of their company. Their
offers pay-per-use access to college text books on a rent-per-day basis at $5 per day. The average rental would cost the student $34 a semester as opposed to the price of buying the textbooks, which even used can cost over a hundred dollars each. Packback Books only has a deal with one major publishing company so far, and pays them 75% of their income for each rental which is apparently the industry standard for licensing publications for rental. The publisher’s gain from Packback Books renting their books because they earn revenue with no effort on their part, and it is better than the alternative, which finds many students buying used books with don’t benefit the publishers at all.
Here's what went down in the Tank:
Daymond dropped out because it isn't a market he has experience with, and Barbara dropped out because she doesn't believe the service will be a success.
Kevin O'Leary has loads of experience with the other publishers Casey and Mike are trying to make deals with, and warned them that they will be as bald as him by the time they reach an agreement with all of the major companies in this market. He dropped out due to what he believes will be a long uphill climb before the company is successful. Robert didn't see the company becoming profitable at all, and went out as well. Mark Cuban though believed in the service and wanted to invest, but wanted more equity than what they came in asking for. So, the two partners went out to the lobby to discuss a new proposal for him. When they returned, they countered him asking for 17.5% for $200,000. Mark then countered with $250,000 for 20%, and what happened next was pretty unexpected. Casey countered with $200,000 for 20%. Did you catch that? Casey spoke too quickly and knocked $50,000 off the price by misspeaking, which caused shocked reactions from the rest of the Sharks and an immediate "yes" from a smiling Cuban. Seeing these reactions, the entrepreneurs realized the error, and Mark allowed them to agree to what he previously proposed: the $250,000 for 20%. Casey and Mike agreed and there were hugs and high fives exchanged between them and Mark.
In a post-pitch interview, Casey explained his error as that he meant to say $250,000 for 17.5% but just slipped. The show closes with him saying “when you’re in the Tank, it’s not that easy, right?”
The Packback Book guys pitch was overall a success. Despite most of the Sharks really not being interested, they were able to get a substantial financial deal with Mark Cuban, who is one of the best possible partners for them among the Sharks in the Tank. Their pitch did teach two valuable lessons though:
1) Listen carefully and don’t speak too quickly
– Casey made an error and proposed an offer to Mark that was less than Mark’s last offer. Since Mark was the only Shark still involved, he could have easily tried to hold them to that and threaten to drop out if they didn't agree. It wouldn't have been the best way to negotiate and start a business relationship with someone, but it was an option for Mark to act that way.
Business negotiations are not always pretty and usually not this nice; make a mistake like this in most dealings and it will cost you. In business dealings you need to pay attention carefully, think before you speak, and when you do respond, take your time. Casey and Mike got off easy, losing only a possible 2.5% of their company, but it's still a loss, and this type of mistake could have been much more costly.
2) Don’t let a useful Shark swim away without a fight
– Mark is a great partner for Casey and Mike, his knowledge of running tech companies and business savvy has a great chance of helping them to succeed. But they did let the Shark with the best connections in this market swim away without giving up a fight. Kevin O'Leary has an extensive amount of experience and contacts in the publishing industry. Having his endorsement and backing of their service would have potentially made their road to profitability a lot smoother and straighter. Granted, Kevin seemed very opposed to getting back into this industry so it would've been a tough sell, but in the part of the negotiations that were broadcast, Casey and Mike really didn't put up a fight when he dropped out. They could have shown some more passion in their service, and in doing so, it might have made Kevin reconsider or at the very least let the other Sharks know how strongly they believed in their business. This was the key moment of these negotiations. Even though they eventually made a deal and left happy, the outcome might have been even better for them if they had put up more of a fight. But then again, when you’re in the Tank, it’s not that easy, right?