Take Valuable Lessons From Mark Cuban's 3 Biggest 'Shark Tank' Failures
Mark Cuban is one of the most famous investors to ever grace ABC's "Shark Tank." Selling Broadcast.com to Yahoo for $5.7 billion in 1999, and his majority stake of the Dallas Mavericks, Cuba has a canny eye for opportunity and his investments have tended to bring him massive success.
Emulate Him: 4 Simple Money Habits From Mark Cuban That Could Transform Your Life
Sign Up: Start Growing Your Net Worth With Smarter Tracking
However, not all of the products that received his coveted "Shark Tank" deals have done as well. Here is a look at some of the shark's bites that didn't taste so good.
A Breathtaking Failure
One of Cuban's biggest failures had to be the Breathometer. The idea could have been a revolutionary way to curb the problem of drunk driving. An entrepreneur named Charles Michael Yim pitched what he claimed was a smartphone Breathalyzer. According to Yim, this plug-and-play mobile phone accessory would allow users to analyze their blood alcohol content to see whether they were above the legal limit. Yim even claimed the app could arrange for safe travel through a ride-sharing or cab-calling feature.
Cuban and his fellow "Shark Tank" investors liked the idea so much that they collectively paid a million dollars for a 30% stake in the company. However, Yim spent the money on "networking" trips to exotic locations like Bora Bora and the Caribbean. That kind of networking has a hefty price tag and before the product ever went into development, the "Shark Tank" funding was gone.
Yim said Cuban contributed $500,000 and Cuban called it "my biggest beating."
HyConn or High Con?
You would think any invention intended to help firefighters do their job more quickly and effectively would be a winner. Jeff Stroope brought just such an idea to "Shark Tank": HyConn was a forward-thinking product designed to connect fire hoses to hydrants faster and with less effort.
This innovative product caught Cuban's attention, leading to a negotiated deal of $1.25 million, contingent on Cuban's sole ownership of the company. What originally looked like a solid plan for a needed product soon went up in smoke.
The reasons HyConn failed depend on whom you listen to. Cuban claims that Stroope overstated the company's sale prices to artificially inflate its value, while Stroope is on the record as saying Cuban's famous ego got in the way of the product's success.
Toy Go Boom?
Topping the list of ideas that looked better on paper is Toygaroo, less of an invention for a product and more of a service offering.
Creator Nikki Pope billed the Toygaroo as a "Netflix for toys," and the idea proved to be so popular with the sharks that it earned an initial investment of $200,000 (in exchange for a 40% equity stake) from both Cuban and Kevin O'Leary.
Some toys turn into collectibles, which can be worth quite a bit of money years after they're first made. But one important detail that Pope and her investors may have forgotten — and one that any parent could have reminded them of — is that most toys break. Despite the initial enthusiasm for the idea, which hoped to help parents defray the cost of toys that their little ones eventually get tired of, Toygaroo couldn't sustain its business model due to overwhelming operating costs.
Toygaroo quickly went Toygoodbye and the company succumbed to bankruptcy within a year of its launch. This is a learning moment about the potential consequences of underestimating the total costs associated with running a business. The grand idea matters, but it pays not to lose sight of the finer details — they can make or (like toys) break your business.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: