No Deal

SPARE


SPARE is a company from Los Angeles, CA that has created a "virtual ATM network" by recruiting merchants into providing cash to customers. SPARE is an app-based service through which customers must connect their bank accounts and can then find merchants willing and able to dispense the amount of money the customer has requested.

While the entrepreneur behind SPARE has said that he is looking to help the "un-banked" or "under-banked"[1], the withdrawal fee on $20 is $3. It was unclear as to whether, like traditional ATM fees assessed by banks, a user of SPARE would also have to pay their own bank's out-of-network ATM fees or whether the entrepreneur has found a way around this. This fee is split 33% toward SPARE, 33% toward the merchant that dispensed the money, and 33% toward the payment processor. The maximum withdrawal amount through SPARE is $100.

At the time of airing, and over the prior two years, SPARE had partnered with 2,700 "mom and pop" merchants. The entrepreneur stated that the next important partnership he intended to make was with a hardware cash register manufacturer that can include their software in as many as 933,000 more stores.

The number of merchant might explain the relatively small numbers of daily withdraws. Currently SPARE averages between 2,500 and 2,700 withdrawals a day, or less than one per retail partner.

In terms of prior investment, SPARE has raised $500,000 through friends and family and a convertible note they issued.

Making A Deal

Mr. Wonderful is the first to exit the deal because of the value the entrepreneur placed on the company. Lori states that, while she likes the concept, she also doesn't believe that she'd bring much to the business and is also out.

Barbara is pretty up-front when she flat out says that she can't relate to needing a service such as this and exits the deal. Daymond questioned whether merchants would want to keep so much cash on hand and, likewise, goes out.

The entrepreneur finds himself with only Mark to convince and Mark isn't impressed with receiving only 3.5% of the company in exchange for $500,000 and asks the entrepreneur to come up with a better value for him. The entrepreneur replies with a 5% offer but Mark still isn't having it. When the entrepreneur asks Mark to give a number, he replies with 15%.

The entrepreneur shoots back with 12% and Mark seems interested. He pushes for 2% more but in advisory shares and the entrepreneur accepts.

Because of the way company valuations are determined here, advisory shares aren't included because they have already been factored into the value of the company. However, saving himself that 2% in equity didn't exactly protect the value of the company in any meaningful way as he still experienced a bite of over $10,000,000! Still... at least he can tell himself he has Mark Cuban as a partner as he cries himself to sleep at night.

Scroll chart to see it all!

Scroll chart to see it all!

  1. While "un-banked" directly refers to people who do not keep their money in a financial institution, "under-banked" is a term of art that generally means whatever the speaker wants it to. After all, what is "under-banked" exactly? To some, it represents those unable to get loans (for a myriad of reasons) while to others it means those who have checking but not savings accounts.




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This page was last edited on 14 February 2020, at 12:10.