AFTER a fiery pitch, the boys from Cardly accepted a $250,000 deal from a “pissy” Naomi Simson — but in the end, it was a write-off.
Patrick Gaskin and Tom Clift, founders of the boutique greeting card start-up, raised the hackles of the RedBalloon founder on Tuesday night’s episode of Shark Tank during a heated back and forth in which the pair initially refused to budge over the small stake they were offering in the business.
Ms Simson said she loved the business but “hated” the measly 7 per cent stake in exchange for $250,000 the guys were seeking. “That says to me, ‘We weren’t really looking for an investor here today,’” she said, accusing them of simply looking for exposure.
“I don’t think they’re here to do a deal, and I’m really pissy,” she told the rest of the panel.
Despite being a relatively young start-up, Mr Gaskin and Mr Clift valued Cardly at $3.57 million off just $30,000 in sales.
“I have 500,000 customers every year,” Ms Simson said. “I also have a business-to-business gifting business, and that also has hundreds of thousands of possibilities of sending these cards. I am not doing it for 7 per cent. Why would I?”
As haggling continues, she adds: “I don’t see why I should give you 15 years of my experience and my customers, so that I can sit on the side for 10 per cent. It’s just … it’s rude.”
After offers from internet entrepreneur Steve Baxter and Boost Juice founder Janine Allis, Ms Simson came back with a complicated final offer: 15 per cent for $150,000, plus a $100,000 loan that converts into an extra 5 per cent stake if she can deliver 50,000 customers within six months.
But despite finally shaking hands, Cardly says it just didn’t work out.
“We didn’t end up doing the deal,” Mr Gaskin told news.com.au. “We went through the due diligence, that all went fine, but we decided to seek funding from somewhere else. It was our decision to walk away.”
He said Cardly was about to close a $250,000 funding round for 20 per cent, at a valuation of $1.25 million, from a “couple of major venture capital firms and a group of well known angels”. “We’ve got a great relationship with Naomi and she’s keen for us to work together and power a solution for both RedBalloon and Redii,” he said. “We’re keeping the lines of communication open.”
Mr Gaskin said it was a “little bit of artistic licence” to suggest that the pair were being “rude” or were “having a go” with their valuation. “Admittedly when you go into a situation like that you give yourself a bit of wiggle room,” he said.
“So we knew the valuation was a bit higher than we could justify. There was a fair bit of backwards and forwards on us justifying our numbers.”
He said in the nine months since the episode was filmed, revenue has doubled, and was growing 20 per cent month on month. “Fifty per cent of our sales come from repeat customers,” he said. “We’re working hard at the moment building out a business offer to allow other businesses to leverage our technology.”
Shark Tank returns next on Tuesday at 7:30pm on Network Ten
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