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On March 2nd I was with friends of Kisstixx founders Dallas and Mike for the big reveal of their appearance on Shark Tank on ABC TV. 300+ showed up for the party complete with refreshment, even gummy sharks, beach gear, and a kissing photo booth–volunteers only. I got to know Mike and Dallas when providing startup and public relations advice while they were part of the CEDO business incubator where I served on the board.
The party moved into the UCCU arena to view Shark Tank on the big screen. Applause erupted as the young aspiring Kisstixx founders faces appeared and the investor feeding frenzy started. It was a little strange having Mike and Dallas just below me and seeing them on TV. The crowd oooh’d & aaaah’d with each twist of the story. When 2 investors tested the product with a kiss, the crowd went wild.
Of the 5 investors, Mark Cuban, the showman owner of the Dallas Mavericks, made the only offer. He offered the $200,000 requested but demanded 40% of the company. Mike and Dallas seemed to catch their breathe and slightly recoil from the doubling of the 20% ownership they had offered. However, what made Mark’s offer compelling was that he offered to finance inventory, a huge benefit for a company needing large stockpiles of product to scale.
So, did they make the right decision accepting Cuban’s offer? My students in the UVU Entrepreneur class I teach each Saturday debated back and forth. Was 40% too much? That was one of my first questions and at least one class member thought that 30% would have been his limit.
Most of the class, and our very special guest from Mexico via Skype, Paul Ahlstrom, agreed the benefits outweighed the downside. Paul, along with Nathan Furr, wrote the rising standard for successful start-ups, Nail It Then Scale It.
Admittedly we discussed this case without several facts like current cash “burn rate.” However, having consulted with Mike and Dallas during their stay in our Orem CEDO business incubator, I know this is definitely a “lean launch.”
Here are some of benefits to Kisstixx for the Cuban alliance:
- Rock Star- Kisstixx gets a mega star to promote their stuff
- Doors open – Doors that were closed will now open with Cuban’s endorsement
- Counsel – Cuban is a terrific businessman. Dallas says he is very involved now with Kisstixx, one on one
- Time – This may be the biggest of all. There are some 800 pound guerrillas doing lip balm. Kisstixx has chosen to protect their stuff using “trade secret” rather than “patent.” This means they have to be fast to dominate. Especially if they are the next “pet rock,” as Paul states, not having seen the deep bench of follow on Kisstixx products, then time is precious. Cuban gets them on the shelf fast.
- Inventory – Kisstixx will now get some big orders, exponentially larger than previously entertained. That means inventory and I thought I heard Cuban say he will finance it as part of his skin the game. That’s huge!
What do you think?
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