RewardStock: Five Star Traveling for One Star Price
Vacation junkies and globetrotters alike will tell you that money is usually the deciding factor in whether or not a trip is possible. But what if money wasn’t an issue at all? If you travel often, then pay attention because this next product is made especially for you.
Episode 5 of Season 10 featured John Hayes, from Raleigh, NC, as the second entrepreneur in the tank. He made an ask of $200K for 5% equity in his company and similarly named product, RewardStock. RewardStock is an automated reward travel adviser and booking service designed to get the most out of travel rewards programs.
You create a profile, earn points, then based on your profile, RewardStock calculates the best travel options available to you. John conceived the idea during his honeymoon in the Maldives. Through a convoluted series of transactions and conversions between different airline and hotel reward programs, John was able to spend only $200 on a trip that should have cost him $4,000!
That’s a 95% discount- not even Black Friday sees deals that good! Frequent flyers should really keep that in mind.
John’s practical and high-energy pitch easily captured the Sharks’ interest. The only thing better than his savings were his actual experiences, which is why when he brought out dancers and a fire twirler, much like the ones he’d seen on a recent trip to Hawaii, the Sharks couldn’t look away. RewardStock not only saved money, but it also allowed for some very priceless moments as well.
In addition to the $29 yearly subscription fee, RewardStock also made its money through $5 referral fees collected whenever the site connected a user with a product that earned them travel points.
Kevin O’ Leary took a particular liking to the concept, saying that he saw a lot of synergy between John’s product and HoneyFund, another company he was invested in. But even with a favorable first impression, John sadly made the mistake of showing up practically empty-handed. When Barbara Corcoran asked him about his revenue, John revealed that his company had only managed to gross $50,000 in the past two years since the beta site launched.
“Wow,” Lori said.
“That’s it?” Kevin asked.
The Sharks were obviously underwhelmed by those numbers, but there was a silver lining to this story. RewardStock was actually being offered for free during these last two years, as a means of gathering feedback from about 10,000 users.
So, that $50K was actually earned purely through referral fees. John explained that in addition to the $700K he fundraised and the $20K he’d personally invested, he also possessed a convertible note with a $3.5 million equity cap that would convert to about $400K when his Shark Tank deal went through. This is how he calculated his product’s $4 million valuation.
Still, you shouldn’t step into the Shark Tank without actual profits to show. John walked in with something similar, but not quite and the Sharks had no way to gauge RewardStock’s market performance because of it. You need the right bait to catch a big fish, so it should go without saying that if these Sharks don’t smell sales then they’ll quickly swim away.
And at this point, that seemed to be the case. Sarah Blakely wasted no time voicing her opinion. She needed to be passionate about the things she invested in and John’s product just didn’t match her preferences, so she wished him luck and backed out. Lori had a similar gripe, as she thought the product was very smart but felt that it was too early for her to feel comfortable investing, so she also backed out.
It’s very likely that John’s lack of business structure steered them toward declining his offer, as RewardStock only had a four-person team running the show and there was only one full-time coder other than John. It was currently free and John was even considering keeping it free to focus on gathering revenue through referral fees alone. John spent all this time testing and there was still more testing that needed to be done.
This was why Barbara also decided to back out. John was still searching for an optimal business model and she felt that it would take too much time and money for him to build it. She also wasn’t confident about his idea to rely on referrals only for revenue, and frankly, neither am I. It’s simply too passive an income stream to build a foundation on, so it explains why Barbara wouldn’t invest in a product that’s still finding its bearings in the market.
After all, $50K in two years is far from impressive.
Although, that doesn’t mean that RewardStock isn’t a future star product. Even though it’s still on the rise, its social and economic potential is enormous! Not recognizing that is where the other Sharks got it wrong, however, Kevin and Mark certainly had better eyes for this deal.
Kevin expanded on his previous comments saying that RewardStock aligned nicely with his other invested platforms. His only issue was that because of the product’s potential, he wanted more equity, so he offered to front the $200K for 10% equity instead of 5%. John thanked him for the offer but turned to Mark first to hear his thoughts on the matter, a very smart move.
Mark would also provide the money but needed the same 10% equity.
"At 5% you're gonna need me more then I'm gonna need you", Mark said, however, John's big hang up with dishing out equity was with his convertible note since that was where a lot of his company’s valuation came from.
Mark’s solution was to craft a new offer of $320K for 10% + a 1% advisory shares on the note when it converted. Kevin looked nervous the entire time, as he could feel Mark yanking the deal away from him. Those terms were optimal, Mark’s offer gave John more capital and solved his convertible note issue so after a long pause, John said, “Mark, you’ve got yourself a deal.”
There’s no doubt that RewardStock will become a brand name for trip planning, so John wasn’t the only winner here, Mark was too. If the savings are anything close to what John experienced in the Maldives, then RewardStock easily has the potential to change the way traveling is done forever. The good news is that, with Mark Cuban backing it, this WILL grow. That makes you a winner as well, so consider what this product means for you because your next vacation could pay for itself!