The Toughest Negotiation in 'Shark Tank' History? CertifiKID's Brian Ratner Dishes the Behind-the-Scene DetailsBy Brian Ratner, CertifiKID Co-Founder & President
Posted Apr 16, 2019
If you watched CertifKID's appearance on 'Shark Tank' last week, you know that our Co-Founder and President, Brian Ratner's, negotiation with Shark Kevin O'Leary was intense. And what you saw was only about 25% of it!
What else happened behind the scenes that didn't make the final cut? And what was the drive and motivation behind Brian's intense negotiating? Read all about it in his own words below.
We went into the Tank asking for $600,000 in exchange for an 8% stake in CertifiKID. Three Sharks made us an offer, Kevin O'Leary, Barbara Corcoran, and Daymond John. We were obviously delighted to get three offers, but disappointed that all three initial asks were for more than twice the equity we were offering. We were prepared for this possibility and had gamed out all the scenarios and set limits on what we were willing to give up. However, we had not figured on Kevin including a liquidation preference in his offer which proved to be a bit of a distraction!
Despite the fact that we felt we were unique for entrepreneurs that go on the show in terms of our maturity as a business and profitability and sales/revenue numbers, we knew that the Sharks always want a premium and any basic valuation is not typically the benchmark they use in formulating their offers and negotiating. Their thinking is that they are not regular passive investors because of the assistance they will give you going forward, the future exposure you will get on their social media channels, and the show’s exposure. We had more flexibility with this premium issue because we didn’t have other external investors to factor in when considering the opportunity to partner with one of the Sharks.
MARK CUBAN, BARBARA CORCORAN, KEVIN O'LEARY, LORI GREINER, DAYMOND JOHN
© 2018 American Broadcasting Companies, Inc. All rights reserved.
While we were open to all of the Sharks and saw the benefits that each of them could provide, Kevin O’Leary was clearly one that we were targeting. We did extensive research on all of the Sharks prior to the show and a few things stood out about "Mr. Wonderful" that we felt made him a great match as a business partner: (1) he scrutinizes especially hard those entrepreneurs asking for larger investments (his investment in CertifiKID is in the top five in value that he has ever done in 10 seasons); (2) he likes businesses that make money and are conservative with expenses; (3) he is all about teaching kids and parents how to save money; (4) he loves female-led businesses; and (5) he has done several investments that intersect with our core market – the mom and family space.
We had limited time to negotiate and thus felt we should focus on the Shark we thought best understood our business and could be the strategic partner we need. This is why after we received three offers – from Barbara, Daymond, and Kevin – that we decided to counter Kevin and try to do a deal with him. Of the three offers, Barbara asked for the most equity and wanted to turn CertifiKID into a franchise model (which was extensively discussed during our time in the Tank but didn't make it into the episode), which wasn't of interest to us. And while Daymond asked for the least amount of equity, it wasn't clear why and how he thought he could help us. Meanwhile, we felt Kevin 'got it' right away. This context was clear during the Q&A but also didn't make it into the episode.
BRIAN RATNER AND JAMIE RATNER (CERTIFIKID)
© 2018 American Broadcasting Companies, Inc. All rights reserved.
I knew Kevin is historically a very tough negotiator, so I felt I needed to move quickly into a focused exchange with him. Obviously in doing so, you saw that Daymond took himself out. I know it looked like I was trying to get blood out of a stone in the end, but remember I was trying to get Kevin to go to 17.5% equity from his 20% initial ask (plus liquidation preference) and he just wasn’t moving. If you’ve watched the show, you know he doesn’t move off his initial offers very often.
Having watched so many of the episodes, my sense is people often don’t fight hard enough. I understand why as the experience is so intimidating and you always hear the Sharks say “don’t negotiate”, or “if you don’t accept, I may change or withdraw the offer”, so there is clearly risk. However, I’m a lawyer and do a lot of negotiating (and have learned a lot from my mentor, Michael Hausfeld, who is a master negotiator), so I was in my comfort zone. When I saw the opening, I tested fighting a bit to see how it would be received. When it seemed like Kevin, in particular, was embracing it, and even respecting it (at one point proclaiming, “I’m loving you” and “I like your negotiating style, you’re honest, you’re fair…”), I felt invited to push a bit further for the deal we wanted. Jamie told me after she was afraid he was going to kick me out and say, “You’re dead to me”!
Although a 19% stake in CertifiKID was a bit more than we wanted to give up, getting Kevin to come down at all from his initial ask (and to drop his liquidation preference) was a victory. I knew I was out of rope and it was time to accept.
Now, having finally gotten our episode to air and being able to publicly talk about our deal, we feel even more confident about our decision to partner with Kevin. Having the O’Leary team join the CertifiKID family is going to open so many doors and create so many opportunities for CertifiKID to be the go-to resource for family fun and experiences across the country. It already has. His listeners and audience are ours. His mindset is in perfect tune with ours. The sky is the limit and we are truly feeling “wonderful”!
CertifiKID Founders, Jamie and Brian Ratner, with Kevin O'Leary on 'The View'
Read more about CertifiKID's 'Shark Tank' experience.
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