Update: Swimming with sharks can be painful

September 15, 2012
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Indianapolis entrepreneur Derek Pacqué pitched his business idea to potential investors on national TV and walked away empty handed—by choice.

On the Sept. 14 season premiere of the popular ABC show “Shark Tank,” Pacqué asked the panel of experts for $200,000 in exchange for a 10 percent stake in his startup CoatChex, a ticketless coat check system he developed as a student at Indiana University.

Their reaction was chilly, at best.

The so-called sharks—billionaire entrepreneur Mark Cuban, real estate tycoon Barbara Corcoran, venture capitalist Kevin O’Leary, fashion and branding expert Daymond John and tech mogul Robert Herjavec—tore into the 23-year-old Pacqué when he admitted the company doesn’t have any customers yet.

Cuban called the fund-first, sell-later strategy a “horrible, horrible, horrible idea,” given the glitches that are an inevitable part of any new technology product.

John, Corcoran and O’Leary quickly passed on the investment opportunity.

“You don’t have a plan for distribution and sales, which is the greatest challenge,” O’Leary said.

Herjavec said he like the idea, but challenged Pacqué’s $2 million valuation of the business. Ultimately, he declined to invest.

Cuban saw more potential in the idea. “If it does what says it does, I can flip it in Silicon Valley in about 15 seconds,” he said.

He offered $200,000 for a 33-percent stake in CoatChex, valuing the unproven firm at $600,000. After a quick phone consultation with co-founder Gerry Hays, who teaches venture capital and entrepreneurial finance at IU, Pacqué said no.

Pacqué told the incredulous sharks that he made his pitch too early—he applied to appear on the show on a whim—but vowed to prove that CoatChex will work.
 
“I’m in dead shock that I just turned down a deal from Mark Cuban,” he said on-camera after the exchange. “I don’t know what happened.”
 

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  • What happened
    What happened was, he didn't have confidence in his NEXT idea. Sell this one. Flip it. Make the coin and move on to the next idea. Epic fail by the kid and his teacher.
  • Big Picture
    Actually, probably a better call than it appears - a failure on their part to see the BIG picture - it's not something to "flip" that quick. It's an entire "system" (bailment technology) - he's got something for more than checking coats, it can be used for valet parking, ticket verification for everything from Super Bowl tickets to parking tickets - it's amazingly versatile, they just didn't see it. Long term - he'll be a "shark" someday!
  • MISSED OUT!!
    I watch the show every week and it's too bad that the "teacher" who might be a good teacher but NOT a real business person told Derek to pass on the deal! Cuban was looking past the initial idea and could see the BIG picture. Too bad Derek didn't have more confidence to make the deal. A once in a lifetime offer!
  • He actually is working with Cuban!
    I met Derek at the I.U. football game and Mark Cuban is working with him on this venture!

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