After decades as an investor, billionaire Mark Cuban has developed a keen instinct to determine if a company is pitching too well.
Cuban channeled that instinct on Friday’s ABC’sshark tankCo-founders Ras Gong and Ahal Patel told investors that over-the-counter pills packaged in refillable glass bottles are expected to be profitable. 2022 revenue is $14 million.
Still, Cuban said he had to “call BS out a little bit,” not because he doubted their impressive sales, but because he didn’t understand why the business was still not profitable.
“You’ve got a sustainable package,” Cuban said. Not applicable.”
Cuban skepticism may come from his own expertise in the field, or his competitiveness. Like Cuban firm Cabinet Health cost plus drug We provide generic drugs at a fraction of the price of major pharmaceutical companies.
Shark Worries About Profitability, Finally Makes Deal
Gong and Patel said Cabinet Health had no cash flow because it invested unit profits in research and development. He added that all sizes and shapes of glass containers actually require FDA approval.
Launched in October 2019, Cabinet Health wants to reduce and ultimately eliminate single-use plastics in healthcare. The company’s business model, which is on track to break even by October 2023, has customers purchase prescriptions first in glass containers and then receive refills in compostable packaging.
The co-founders entered into negotiations seeking $500,000 for a 2.5% stake in Cabinet Health, which values the company at $20 million.
Cuban wasn’t the only shark disillusioned with green companies. Barbara Corcoran was the first investor to back out of the deal. The company wasn’t profitable yet, so she said, “I’ve been waiting forever to withdraw my money.
Kevin O’Leary said he was willing to pay to get more shares. He offered $500,000 for his 12.5% of the company—at a valuation he’s $4 million.
Guest Shark Tony Xu, co-founder of DoorDash, was also interested. He offered his $500,000 against his 10% of Cabinet Health. Xu added that his expertise in scaling startups could help push more products directly to consumers.
Gong and Patel liked the sound. They turned to her Lori Greiner and asked if she would be willing to join the deal as a third partner.
Greiner quickly declined, pointing out that he didn’t like the $20 million valuation.
So Gong asked O’Leary and Shu if they could share 7% of the cabinet’s health for $500,000. With less equity than either investor had hoped for, Gong said the founders were willing to add up to 2% royalties on all products.
O’Leary said they made a deal, but only if the founders were willing to pay royalties until he and Xu each earned $500,000, which is double the split investment. Become.
Gong and Patel accepted the deal and left happy, even valuing the company at around $7.1 million instead of the $20 million valuation they were asking for.
“Having Kevin and Tony on board will allow us to bring sustainable packaging to more drug cabinets and learn from the best,” said Gong. “We took a small valuation hit, but what really matters is that we are on a mission to eliminate single-use plastics from healthcare.”
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