Eterneva
Eterneva is a comapny from Austin, TX, that promises to help you remember your loved ones after they've passed regardless of how much is appaently left of them.[1] According to the entrepreneurs, Eterneva will help people remember their loved ones by turning their ashes into diamonds that can be worn around. Supposedly, all it takes is a half-cup of ashes to make a diamond, though experts differ[1] [2].
According to the entrepreneur, this half-cup of ashes can be returned to Eterneva to be purified and then turned into a diamond in a mashine that costs between $50,000 and $1,800,000, which is pretty wide...
The average order is paid upfront and ranges between $3,000 and $20,000, which, again seems like a pretty wide number to name. The entrepreneur did say that their average order is around $8,000.
According to the founders, it costs Eterneva around $3,000 to $5,000 to make a diamond, which, again.... how big do these ranges need to be? Especially since it takes ten months to make one diamond. When the cost of the machine is figured in... this seems... suspiciously... low...
The idea behind Eterneva was inspired by a mentor of the the lady entrepreneur behind the company who died of pancreatic cancer. The entrepreneur wanted to do something to honor her and had already been working on a basic lab-grown diamond business.
The entrepreneur stated that pets are a big part of the business but did not specify exactly how much.
In the first year of doing business, Eterneva did $913,000 in sales. In the current year, the company expects to bring in $2,700,000 in sales. In terms of fundraising, Eterneva has raised $1,200,000 on a $12,000,000 valuation, meaning that their offer to the sharks has no discount figured into it. The entrepreneur brags that all of their investors have had previous business exits of "$200 million or more".
Making A Deal
Mr. Wonderful, doing his thing, states that he sees no reason to invest in Eterneva because it's a business he can do himself--there's nothing proprietary about their product or their process.
Daymond, meanwhile, takes issue with the fact that the entrepreneurs are occupying a spot that a company without investors might otherwise hold.[3] Mark seems to jump on this bandwagon when he asks the entrepeneurs whether they're happy with the commercial Shark Tank is making for them, seeming to believe that they aren't there for an investment at all given their prior track record with raising money. But the entrepreneur responds that they really are looking for a deal with a shark because their current line up of investors can't help them get into people's homes. This doesn't assuage Damond and he drops out.
Lori states that something about the deal doesn't feel right to her and, therefore, she's out.
Mark says he likes the celebration of life idea but still doesn't think they're looking for a deal but the entrepreneurs claim that they really, really are. To test them out, Mark offers $600,000 in exchange for 15% equity (and a revalutation of their company from $12,000,000 to just $4,000,000, or a bite of $8,000,000). They counter him at $600,000 for 6% in order to keep their valuation at $10,000,000 and, for Mark, seems to prove his point.
Robert comes in agreeing with Mark's point and stating that he doesn't love the idea of other investors. So he offers $600,000 for 10% equity, seemingly to prove a point, and stating that sharks bring a value that other investors don't. Kevin, maybe for the hell of it, tosses out a $600,000 for 12% offer.
The entrepreneurs ask if Mark and Robert would be willing to team up at $1,000,000 for 10%, a clever counter because it would give each shark 5%, would give them more money, and would also keep their valuation at $10,000,000. But Robert doesn't bite. According to him, their pitch fell apart as soon as they mentioned having other investors since he believes that sharks deserve a premium. The entrepreneurs attempt to lure him in by tossing an additional 2% in advisory shares but Robert's still not impressed and still doesn't think they want a deal so he drops out.
Mark also says that he wants better if they really want to make a deal.
Kevin loses patience and says that he'll just go and buy his own diamond making machines, with black jack, and hookers![4]
With Mark as the last shark still willing to make a deal, the entrepreneurs offer him 6.5% equity and 1% in advisory shares. But he counters that he'd take 6% on the cap table with 1% in advisory shares if both entrepreneurs will give up 1% of their own shares to him.
Despite all the shit the sharks had been talking, the entrepreneurs agree! And, because of the way the deal was structured and the advisory shares, we valued this deal at just 6% straight equity, meaning Mark only bit $2,000,000 from the value and Eterneva got to keep their $10,000,000 valuation.
Notes
- ↑ 1.0 1.1 An article in the NY Post just after this episode aired stated that there isn't enough carbon left in ash to create diamonds... (source).
- ↑ Mark Cuban defends Eterneva as "not a scam" in the Dallas Morning News (source).
- ↑ In fairness to Eterneva, this seems unfair. Eterneva, like every other business that appears on Shark Tank must pitch to various levels of producers who then promote them up and eventually onto the show. Think of a system not unlike baseball's minor leagues. If Daymond really has a problem, he should take it up with the producers, not with the entrepreneurs who are just trying to do what seems best for their business.
- ↑ Futurama reference (source)