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Breathometer Updtate: Shark Tank Season 5, Episode 2

Andrew is a self-educated business owner and entrepreneur with plenty of free advice (which is worth exactly what you pay for it!).

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Did the Deal Go Through?

Yes... well, probably.

In a highly unusual Shark Tank deal, all five sharks invested in the product, seeing the huge value that an affordable personal brethalyzer would bring to the average consumer. Mark Cuban put up to $500,000 in exchange for a 15% equity stake, and the other four sharks, Kevin, Daymond, Lori, and Robert all agreed to split the other 15% John, O'Leary, Greiner, and Herjavec split another 15% for $125,000 each (Cuban also received board seats, offering him a measure of control over the company's direction and vision). However, the plot thickens...


How Did the Business Do After the Show?

Here's where things get really interesting. Initially, Breathometer was available in Walmart and Best Buy, and rocketed to some $5 million in profits. This is when the FTC stepped in with some harrowing news for the company (and its investors), though. It seems as thought he product wasn't truly effective -- or effective enough -- at determining a person's level of intoxication, the raison d'etre for the existence of the Breathometer. So, the FTC ordered refunds for everyone who purchased the device (this was back in 2017), and so the company was forced to pivot to Mint, It is possible that Mint recouped some of the lost investment money for the sharks who invested, since they have spoken more fondly of the company post-FTC-debacle, but information on the company's current success has to be inferred from their lack of presence on Amazon and from the fact that their slick, polished website is still selling the Mint.

What Do I Think?

From the perspective of the sharks who invested, this actually isn't an open-and-shut case, at least to my mind. First, the FTC disaster left scars on the investors and their reputations, at least to a degree, and that's not amazing. Refunding a significant percentage of the folks who purchased the original product must have really, really sucked. On the other hand, given the fact that the company has pivoted to a different product (which was referenced during the initial pitch more as a sidebar idea), it's easy to imagine that the company might have some resale value today. There are two ways an investor can get paid from an investment: dividends and accrual of value. Here, the dividends seem unlikely, as there were scant profit (negative, in fact) for the first five or more years of the investment life of the company. However, the company is almost certainly worth something today. If I had invested $650,000 for 30% of this company, I'd hope for the company to be well north of $2 million today, and it's entirely possible that's the case based on IP alone. If the company was sold, it might well make a profit for the sharks.

This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.

© 2020 Andrew Smith

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