Mark Cuban Doesn’t Understand Product, But Invests $400K In Company Because His Daughters Do
This story is part of a new series of features on the subject of success,Benzinga Inspire.
One of the Sharks featured on Shark Tankmay have broken one of his investment rules with a recent Shark Tank deal.
What Happened: Mark Cuban likes to invest in companies that have products he could see himself using or that could be used by the Dallas Mavericks, the National Basketball Association team he owns.
On a recent episode of Shark Tank, Cuban offered a deal for a company whose products hell likely never use.
Season 14, episode 15 of Shark Tank aired in early March and featured a pitch by makeup company Youthforia.
The company launched in April 2021 and had $2 million in sales prior to appearing on the episode, according to CNBC. The company had seen some levels of viral success thanks to TikTok and mentions of its color-changing oil blush that reacts and blends into customers skin. On TikTok, Youthforia has over 130,000 followers and over three million likes.
The Sharks liked the TikTok success and were also impressed with the companys founder and CEO Fiona Co Chan.
Kevin OLeary offeredCo Chan $100,000 for 20% of the company along with a $300,000 loan and a cut of distribution pay.
Its a bet on the jockey on this deal, OLeary said of Co Chan. Youre really impressive.
Co Chan wanted to hear from the other Sharks, with Cuban and Barbara Corcoran not putting out bids yet. Co Chan tried to lure them in by saying there was a launch of more shades of blush coming, which neither was thrilled about.
When you have something thats completely differentiated, you ride that, and you dont do anything else, because that just dilutes your efforts, Cuban said. Sometimes, you shouldnt listen to your customers.
Co Chan turned to OLeary and offered 5% equity for $400,000 and a 50 cent royalty for each unit sold by the company up to $500,000.
OLeary countered with an $800,000 offer for 10% equity and a $1 royalty on each unit.
This is when Cuban decided to step in, offering $400,000 for 10% without a royalty and said the reason he was interested in the makeup brand was because his daughters and wife would understand the product, which he didnt.
Cuban offered to wear the color-changing blush himself as part of demos.
OLeary countered with a $400,000 offer for 7.5% and a 75 cent royalty on sales up to $1 million.
Ultimately, Cuban got Co Chan to accept with his final offer of $400,000 for 8% and no royalties, which he offered just to prove a point and ended upbeating OLeary.
Related Link: Mark Cuban Made $18,000 A Year And Got Fired: 5 Things You Might Not Know About The Billionaire
Why Its Important: The company and Co Chan drew praise from the Sharks during portions of the pitch and after Cubans offer was accepted.
Herjavec and Corcoran, who sat out on the offers, said they were impressed with Co Chans negotiating skills.
Kevin, you have to get up and leave the Shark Tank, Herjavec said. Fionas taking your chair.
The offer for Youthforia that was accepted makes the first deal Cuban has ever done with a makeup brand, which could provide several lessons. Cuban has often stuck to his principles in investing in products that he would use himself or the Mavericks would use.
Hearing how much the other Sharks loved the company's CEO and the product going viral on TikTok, Cuban trusted in his family and made the investmentbecause he could see his daughters and wife using the product.
Youthforia is available on Amazon.com and also atUlta Beauty ULTA stores. While we wont likely see the makeup products at Mavericks games in the future, they could end up becoming a staple in the Cuban household.
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Photo:Gage Skidmoreon flickr