'Shark Tank' – Season 4, Episode 15 recap: Equity over Royalty

“Shark Tank” returned from its brief hiatus last night on ABC to hear pitches from four new inventors looking to hit it big with their products and ideas. However in the end it came down to the simple question of which do you value more - equity or royalty? Here’s how the night went down!

This week’s sharks: Barbara Corcoran, Daymond John, Kevin O’Leary, Mark Cuban and Robert Herjavec

Inventor: Jennie Nigrosh
Product: The Green Garmento
Offer: $300,000 for 20 percent stake

Utilizing the phrase “be fantastic…use less plastic,” Jenni Nigrosh entered the tank with her idea for environmentally safe garment bags. The product was interesting in that dry cleaning packaging is a $200 million a year business and the bags would help save business owners money. Nigrosh pointed out that using the traditional plastic garment wrap costs dry cleaners between 5 and 15 cents per bag and for every person they switched over to her “Green Garmento,” owners could actually turn a profit.

Still, the multi-purpose bag Nigrosh was proposing hit a wall with the sharks as many of them actually liked the traditional plastic bags more because they could use them for other purposes and they didn’t like having to open a non-see through garment bag to see what was inside.

“The Green Garmento” also proved to be hemorrhaging money as four years in, Nigrosh and her husband were actually losing $10,000 a month and while they had $400,000 in sales, they had NO profit. As Barbara Corcoran put it, the sharks would be “buying into a problem,” and one that was later revealed be estimated at about $1.26 million in debt, thanks to a already in place 9% royalty from other non-revenue investors.

Daymond John said it best: “Your business unfortunately turned from cleaning bags into a body bag…I’m out.”

End Result: No Deal

Inventors: Matt Canepa & Pat Pezet
Product: Grinds
Offer: $75,000 for 10 percent stake

Offering a healthy alternative to chewing tobacco, two former baseball players were the next to enter the tank. The product called “Grinds” were coffee pouches that players could use as a replacement for chewing tobacco in the dugout. With chewing tobacco being a $4.5 million business, the sharks recognized there was room for a niche brand like this one. Already in use by the Chicago Cubs (where Canepa formally played for three seasons) and the Boston Red Sox, the product gave users a flavored coffee kick that somewhat mirrored the benefit received from the tobacco, but wouldn’t lead to health problems down the line.

Initially though sales started out slow but just as they were about to find another line of work the San Francisco Giants won the World Series and team manager Bruce Bochy called the inventors and told them not only did he use it, but he credits it with helping to save his life. With that type of support, the pair poured more money into their business and saw it rise from $3,500 in sales to a projected $300,000.

Encouraged two sharks entered the fray with Kevin O’Leary offering $100,000 and sticking to his typical no equity offer in exchange for a royalty (in this case 25 cents) while Robert Herjavec pulled in Daymond John to offer $75,000 but with a 15 percent equity. While the pair tried to counter, Daymond pointed out they were “stepping over dollars to save pennies” and that was all it took to lock in a deal.

End Result: Joint deal with Robert Herjavec and Daymond John for $75,000 in exchange for 15 percent stake.

Inventors: Scott Duff and Carlos Ortiz
Product: My Cold Snap
Offer: $50,000 plus 12 percent royalty for 100 percent stake

“Never invest in a business that is rolling down hill….but a boulder running down hill cannot be stopped.”

The above quote by Robert Herjavec summarizes this deal perfectly as it was a train wreck from the word “go.” Duff and Ortiz did something very rare in the tank by offering 100 percent equity. Essentially they were ready to sell the entire business and live off a royalty, but all that really did was make it seem like they were trying to sell a sinking ship for someone else to fix.

The product was basically a portable ice chest that could snap onto a can of soda or beer and keep it cool outside of a larger ice box. However it was soon revealed the business had been around since 2004 and then literally “put on ice,” for eight years after Duff and Ortiz saw the promotional products company that was backing them go out of business. For the product’s $250,000 in sales the pair only made a $25,000 profit and couldn’t move the 20,000 units they had laying in storage which set off red flags with all the sharks who quickly all got out of the water.

End Result: No Deal

Inventors: Rebecca Rescate & Chris Hindley
Product: Hoodie Pillow
Offer: $90,000 for 15 percent stake

Back in season one Rebecca Rescate entered the shark tank with her product “Citi Kitty,” which turned any toilet into a litter box for cats. Former shark Kevin Harrington made a deal with Rescate and now “Citi Kitty” is hitting $5 million in sales. Last night Rescate returned the tank with a new product and set off a bidding war.

“Hoodie Pillow” is basically just what is sounds like…a pillow with a hood. It also contains a pouch for your remote control and/or phone as well as a place to run your headphones through for easy access. After the sharks balked at the idea, Rescate reminded them of her prior success with an even crazier idea and then told the would-be investors that this product had already sold 3,000 units in just 8 weeks off of a single Facebook link for a total of $60,000 in sales. She then pulled out the travel version of the “Hoodie Pillow” and in the process set off a feeding frenzy.

The deals went fast and furious with all the sharks but Mark Cuban getting involved. In the end, Robert Herjavec snuck into the mix and made an offer of $90,000 but with a 5 percent higher stake and pulled out the win. Herjavec told Rescate he passed on her once and he wasn’t going to make that mistake again!

End Result: Deal with Robert Herjavec for $90,000 in exchange for 20 percent stake.

“Shark Tank” airs Friday’s at 9 p.m. EST on ABC.