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Gweek 155: The cheap RC plane I talked about

Posted: July 16th, 2014 | Author: | Filed under: Startups | 1 Comment »

Five years ago (!!!) I gave an Ignite talk on cheap RC airplanes.  In one of my prouder geek moments Mark Frauenfelder, a maker-hero of mine, posted it to Boingboing.   And that was that.

Until today, when I had the amazing opportunity to be a guest on an episode of the Gweek podcast with Mark and my good friend Dean Putney. We covered a lot of ground (Robot Turtles, Little Bits, Homestar Runner, EC Archives, and of course Potato Salad) but I had a particularly good bit of fun returning to the ‘cheap planes’ topic.  Except now, of course, for a few hundred bucks more, you can upgrade to a cheap UAV. You should listen to the whole show here:


but there are some things a podcast just can’t do justice to properly, so here are some supplemental links. During the podcast I talk about my favorite plane.  I am on my second one; the first got caught up in surprisingly strong winds off the coast of Aruba and was lost at sea. It costs $20, and the electronics to fly it will run you less than $100.

Start with the plane.  This is the Turnigy Bonsai.  It is an elevon plane, meaning that the two flaps act as ailerons (one up/one down) or elevators (both up/both down). There’s no rudder, so to turn you roll right, then pull up. It’s easier than it sounds and a lot more fun than rudder planes. ($23.45)

HobbyKing® ™ Bonsai EPP Wing 600mm (ARF)  (US Warehouse)

The Turnigy Aerodrive SK3 – 2118-3100kv  motor will let it fly straight up… while accelerating. Note that it’s about twice as beefy as what the plane’s designed for so you’ll need a bigger battery too to offset it. ($14.25)

Turnigy Aerodrive SK3 - 2118-3100kv Brushless Outrunner Motor (USA Warehouse)

Props have two numbers. The first is diameter, which gives you lifting power. The second is pitch, which gives you speed. Increasing either puts more stress on your motor. This 5×5 APC-style prop will push our little 17g motor to its limits. Zoom! Be sure to mount it with the letters facing away from the motor. ($1.57)

APC Style Propeller 5x5 (2 pc) (USA Warehouse)

The aforementioned motor is actually a brushless AC motor (thanks, Nicola) so you’ll need a “speed controller” to convert your DC battery to AC pulses that can run it. The H-King 10A ESC is a fine choice for the job ($6.75).

H-KING 10A Fixed Wing Brushless Speed Controller (USA Warehouse)

You’ll need batteries to fly the thing. The 460 mah 2S packs on the left are on the light side, so you have enough lifting power for a camera as well.  ($4.44 each) The 850 mah 2S packs on the right will give you more flight time if you’re not carrying up a camera.

Turnigy nano-tech 460mah 2S 25~40C Lipo Pack (USA Warehouse)   Turnigy nano-tech 850mah 2S 25~40C Lipo Pack (USA Warehouse)

Don’t forget a charger. The Turnigy 12v 2-3S basic charger will do the job; just be sure you have 12v laying around somewhere to power it. If you don’t, the B3AC will work, although you’ve have to salvage a US power cord if you’re from around these parts.  ($4.49)

Turnigy 12v 2-3S Basic Balance Charger   HobbyKing® B3AC Compact Charger

In either case, you’re going to need something for the battery to plug in to. They use JST connectors. They’re half price if you assemble them yourself. I say, splurge. ($2.07)

Female JST battery pigtail 12cm length (10pcs/bag)  (US Warehouse)   JST Female 2 pin connector set (10pcs/set)


And here’s that camera. If you don’t have a fast microSD card, grab one of those too.  ($8.85)

Turnigy KeyChain Camera w/o memory card (USA Warehouse)


Almost done: you’ll need servos to move the wings. Just two of them, since there’s no rudder. It seems counterintuitive to have roll control but no yaw control, but trust me, it’s much more fun that way. I like the HXT500. You might want to get a spare too. ($3.64 each)

HXT500 6.2g / 0.6kg / .08sec Micro Servo (US Warehouse)
The biggest investment: your transmitter and receiver. I use a Spektrum but I think the Turnigy 5X should do just fine. It has the delta mix function you’ll need to combine your aileron and elevator channels.  Just be sure to remove the plastic case from the receiver to save weight. ($24.99)

Turnigy 5X 5Ch Mini Transmitter and Receiver (Mode 2)


Last but not least, I like attaching the wingtips with industrial-strength velcro so you can rip off the wingtips and throw it in a trunk or suitcase. ($1.64)

Polyester Hook & Loop Velcro V-STRONG (1mtr) (USA Warehouse)

And there you go. A lightweight, insanely powerful plane that can fold flat in your suitcase and shoot screaming aerial videos for $99.78. You’ll need to do a bit of soldering to put it together, of course. And if you don’t want to destroy your new toy immediately, you’ll want to spend an hour playing with an RC simulator (you can get a joystick here and software here or lots of other places) so you can work out orientation and stick skills in a low-impact environment.

And there you go! You’re ready to fly.

Of course, I also mentioned some more advanced RC flying, like the Techpod that I’m working on right now with reported flight times of 2-3 hours, and the FPV rig that gives you a real-time “pilot’s eye view”. I talked a bit about flying a Hobbyking Mini-Swift over Maui, HI (also a good starter plane, although not quite as crash resistant as the Bonsai and a bit harder to fly) and promised Mark I’d upload the video. Here’s a 1 min supermix of a few flights over Haleakala crater (first half) and over the coast near Kaanapali (second half).   Yeah, that’s my daughter waving at the plane flying overhead. And if you just want to see a single 3 min flight start to finish, here’s me doing a few passes over the beach at sunset.


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Market first

Posted: March 29th, 2014 | Author: | Filed under: Startups | 6 Comments »

I’m told Amazon writes the press release for a product before beginning development.

I don’t know exactly how the process works, but this has been sloshing around in my head mixed in with a bunch of other tidbits. Like the trick of running ads that lead to a signup page before you build anything to see how many people are interested. Or the notion that a crowdfunding campaign validates demand before you go build it (although it requires a lot more investment).

Pike Place Market

Recently Apptentive asked me about marketing techniques for apps.  The first thing that came to mind is that if you already have the app, and are just now starting to think about marketing, you’re probably hosed.  Great apps, services, websites, and the like are built with the marketing in mind from day  one.  How will the world think about this? What’s the pitch? Why will people share? How are they going to hear about it?

Put all this together and I have a modest proposal: if you are creating a new startup, you should figure out your marketing first.  Create your Kickstarter video (the nickel version, shot with dummy props on your phone and crudely edited together) first and see how many views you can get for it on Youtube.  Mock up the app store page and A/B test it against screenshots of competitors using a survey. Write the press release, post it online, and see how many people would buy.  Run some ads and see how they convert.  Write up a blog post with the idea and see if it goes viral.

Once you find something that resonates, you have a north star.  It’s not just that you’ve figured out how to market your product, it’s that you now know what’s most important about your product.  What you’ve created, the thing that generated excitement – that’s what you need to bring to life.  Staring at a blank screen it can be hard to know where to start – now you know.  Features that excited people get written.  Those that aren’t part of your pitch get cut.

I haven’t really done this before – when I figure out what I’m doing next I plan to give it a try.  If you have, or if you do, please let me know how it works out!

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Anatomy of a $631,230 Kickstarter Video

Posted: December 19th, 2013 | Author: | Filed under: Startups | 7 Comments »

First things first: the last of the Robot Turtles Kickstarter production run is still available on Amazon for $34.95 plus $9.95 US shipping, with international shipping available. If you order today, Dec 19, you should get it in time for Christmas!


Screenshot 2013-12-19 02.25.48

In early September, I launched a Kickstarter campaign for Robot Turtles – a board game that teaches programming to kids ages 3-8.  It became the bestselling boardgame in Kickstarter history, and while there were a lot of moving pieces (and a lot of luck) involved in making that happen, I think the video was a big part of the project’s success.

How big?  Well, it’s hard to say because Kickstarter’s analytics are limited.  But 72,181 people played the video and 13,765 pledged. Assuming everyone who pledged played the video (which is bogus but will have to suffice), that’s an implied conversion rate of about 20%.  Which is crazy high.
I’ll tell you the whole story of the video, but here’s the TL;DR.
1) You get to convey at most two ideas: one that you say, and one that you show.
2) It’s worth the money to hire a pro, but…
3) Let reality shine through.
Screenshot 2013-12-19 02.26.40On the one hand, I knew that the hook of the game was the uniqueness and incongruity of the idea: a *board* game that teaches *programming* to *preschoolers*.  Teaching programming with a board game? Teaching programming to preschoolers? Both of those things sound unusual, and putting them together was could be a great conceptual hook.
On the other hand, I actually didn’t invent the game to teach my kids programming.  I invented it because I thought it would be fun to play with them.  I hate Candyland and much of the other random nonsense that passes for kids’ games.  I wanted to create some awesome family moments and put them in a box.
This was a problem.  Marketing and complexity are a bad combination.
But I decided against my own better judgment to split the difference, and this is what I did.  I decided to make the talk track of the video about programming.  Explain the game, how it works, and talk about sharing programming with kids.
Screenshot 2013-12-19 02.27.03But all the visuals were about one clear message: Happy Family.  Game equals Happy Family.  Over and over and over again.  (My only regret was that my wife’s school schedule didn’t fit the shooting schedule, so it was mostly dan + kids – but needless to say, there would be no Robot Turtles without my amazing and supportive better half!)
One day I realized that the summer was almost over and if I didn’t launch my campaign soon, I would miss Christmas.  In a bit of a panic I dashed over to my friends at Bootstrapper Studios, a video production house with several $100k+ kickstarters to its name.  They dropped everything for two hours and we whiteboarded a plan.
At that point I realized I had two problems.
1) I didn’t have any pictures or video of anyone besides my kids playing the game.
2) That was because nobody besides my kids had ever played the game.
In a bit of a hazy panic I went to a Geekwire networking event that happened to be scheduled for that evening.  I dashed around for about forty five minutes, begging startuppers with kids to bring their offspring to my house the next day.  I worked feverishly late in to the night to build a backup prototype out of equal parts inkjet paper, spray glue, and desperation.  There were now two copies of Robot Turtles in existence.
Screenshot 2013-12-19 02.26.44The next day I filled the house with borrowed cameras and lights.  I ambitiously (ok, stupidly) decided it would be a combination playtest/video shoot, so I handed the befuddled parents a hastily-jotted instruction sheet, promised the kids a “really awesome snack” once they finished, and stood back to watch them figure it out.  During the 30 minutes between visitors I rewrote rules, smoothed wrinkled cards, and chugged black coffee.
By the end of the day it was clear I was on to something.  The parents and kids all seemed to love it.  I hastily put the house back together before my own kids got home.
The rest of the experience was quick but measured.  I shot some “practice” footage of my kids explaining the game, then an hour of them explaining it over and over again.  As it turned out the practice footage (complete with road noise) was awesome and the scripted stuff was tossed.  Bootstrapper came over and shot some footage of us playing together.  I used to find the amazing track “Happy Ever After” by Niklas Aman and licensed it appropriately.
The worst part was the “ask”, where I implore people to back the project.  I wrote it out, hated it, rewrote it 20 times.  Then sat down with Bootstrapper to shoot it and realized I needed to memorize it.  20 takes later it still sucked, and the version you see near the end is the two least-bad ones stuck together.  I still wince when I watch it.Screenshot 2013-12-19 02.27.07
They started sending cuts over and we started refining: should we use the girls waving or the boys cheering? The explanation with the blurry video or the one with the noisy audio?  Can you make that cut less obvious? Is my nose really that big?
The answers all sorted themselves out and before I knew it, September had arrived and the video went up.
The game’s out of print, but I just listed a few extra copies on Amazon.  I hope you get a chance to check it out!  (Oh, and if you haven’t seen it… here’s the video).

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Robot Turtles midmortem at $250k

Posted: September 16th, 2013 | Author: | Filed under: Startups | 30 Comments »

boxshot_top-smallRobot Turtles has been an amazing ride.  From a goofy idea in the shower, to some clipart, to a print on demand game for my family… to a $250,000 wild ride that doesn’t seem to be done yet!  As of this writing I’ve just crossed the halfway point (12 days down, 11 to go) and wanted to catch my breath and write up some observations while my memory’s still fresh.

In the months leading up to this, I was fortunate to pick the brains of some of the most successful Kickstarter campaigns around.  Most of the advice here is poorly comprehended and mutilated facsimiles of the wisdom from

…and lots of other smart people I’m forgetting and will be very embarrassed about omitting.

Here are some of the things I learned you should think about.


I made Robot Turtles for my family, but it wasn’t long after we started playing with it that I realized the idea was catchy. I tried to describe the salient points as  briefly as possible, and came up with this: Read the rest of this entry »

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Robot Turtles: the board game that teaches preschoolers to program

Posted: September 9th, 2013 | Author: | Filed under: Startups | 1 Comment »

Would you believe that I got so excited about the project that I forgot to post it to my own blog?!

Beep the Turtle

I launched a game on Kickstarter called  Robot Turtles.  You can see the video on the right hand side of my blog, or view it here on Kickstarter.  I’m humbled and amazed by the response – as of now, six days in, it’s at $188,000, or about seven times what I’d hoped to raise.

I want to get this in the hands of as many eager grownups as I can, because having played it, it’s just an amazing way to interact with kids.  So if you’re thinking of something for a son, daughter, niece, nephew, grandchild, or kid next door – for a present, for Christmas, or just because they’re cool – I would appreciate it if you’d give it a look!

And please share the Kickstarter page on your favorite social networks – right now, more people have found it by email and social network referrals than anything else.  Orders go in to the printer Sept 27 and then it goes out of print, so I hope you have time to get a copy!

And for those readers who are already backers: thank you, thank you, thank you for making this project a success!

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What I Learned from the Breaking Bad Percolator

Posted: August 20th, 2013 | Author: | Filed under: Startups | 6 Comments »

Those of you who caught my talk at Ignite 21 already know that I’m a thoughtful coffee convert, going from 1-2 cups per week to 2-3 cups per day when I discovered that I was a fast caffeine metabolizer by having my DNA sequenced, leading me to buy a bunch of bluetooth peripherals and breathe while sleeping again.  (What can I say; the talk covered a lot of ground).

I’ll post the talk in a week or two when it’s available online, but after extolling the virtues of my coffee consumption mechanism of choice over and over again, it’s time to put it on line.

For most people, coffee is a lifelong habit.  Suggesting improvements is like optimizations to their shampooing technique… it’s just not really a subject of life that’s much open to change.

But I was going at it from a fresh slate.  I always liked coffee, but had never mustered up the necessary commitment to get a really good addiction going.  As a result, I drank it when it was around, and didn’t when it wasn’t.

That was going to have to change.  My inspiration was this piece of sculptured magnificence, which was named “Yama Northwest Glass 25-Cup Cold Brew Drip Coffee and Tea Maker, Black” by its creator, but which I will refer to henceforth as the “Breaking Bad Percolator”.

One of the Google Kirkland coffee bars (yeah, ‘one of‘) features this piece of caffeinated elegance.  I became a regular, and it’s output was sublime.  And holy henna, was it ever strong.  12 ounces and I was ready to go. A second cup and I was a useless, quivering blob for the bulk of the afternoon – only made that mistake once.

The wonderful nature of this thing is due to two factors.  First, it turns out that you’re supposed to dilute the output of this amazing contraption 3:1 or more with water, but nobody told the barristas. (If you still work there, please don’t!)  Drinking cold-brew coffee without diluting it first is AWESOME, more or less akin to putting four shots of espresso on ice in intensity (ask me how I know). Second, because cold brew has less acidity – you get more of the acid out of the beans with hot water (Wikipedia says it so it must be true) – so it’s far, far smoother than the aforementioned espresso on the rocks.

And as a bonus, you can bulk-brew it and it keeps wonderfully for more than a week.

So after deciding to take the summer off, I decided I had to replicate the magical output of this machine at home.  And the iteration began.

I began low-tech.  I got a giant mason jar, added 12 oz coffee and 7 cups of water, shook, and left it over night.  The next morning was tasty but gritty.  Filtering it to drinkability took ages: I would sieve it, pour it through a paper cone with the help of one of these, and then do it again because the first time left a weird scum. The first filtering took forever because the paper clogged up, so I had to tend it constantly, pouring more in.  But it tasted pretty good.

My next effort was a Bodum Iced Coffee Maker, which has been helpfully discontinued. It’s basically a french press with a larger capacity and a cap so you can leave it in the fridge all night without putting the stink of the coffee bean your kids yogurt.  I tracked one down, ordered it… and the seal had cracked.  (Discontinued – probably sat in storage forever).

Not to be dissuaded, I tried a regular coffee press.  Eh.  Still had that scum on top, so I still had to do a pass with the filter.  Not as bad, but still not coffee nirvana.  Around this time I tweeted:

Iterating to cold brewed coffee Nirvana. Salvation remains elusive.

— Dan Shapiro (@danshapiro) April 22, 2013

Which lead to a nice twitter exchange with Corey Doctorow, where I discovered his treatise on radical hotel room coffee independence. And there he goes mentioning the Toddy again.

If you’ve spent more than a few seconds investigating cold brew coffee methods, you’ve discovered the Toddy monstrosity.

It’s uuuugly.  And cheap, at only $35.  The instructions looked like voodoo, involving ‘layers of coffee’.  But the reviews… well, I suppose I should give it a shot, right?

…and I’m a convert.

It takes me about 5 minutes to prep enough coffee for the entire week.  The liquid ichor that drips forth is as good as anything I’ve had, perhaps just shy of the BBP.  It’s $35.  I hide it when it’s not in use.  It’s ugly, goofily designed (the handle slides off; there’s no lid), but damn it WORKS.  And it works fast.  And it works deliciously.  It’s so good that when I want hot coffee, I zap a mug full of cold brew, because it’s better than making “fresh” with my now-defunct french press.

A quick note about beans before I wrap this up: garbage in, garbage out.  I tried a dozen blends with multiple different brewing systems, and the bad ones turned in to terrible iced coffee, the good ones turned in to  brown magic.  Middle Fork Roasters is outrageously delicious, locally produced (if you’re in Seattle), and the best I’ve found.  Any decent bean will do nicely.

So, then, here then is my recommendations: Get the cheapest solution (Toddy) or the most expensive (Hama).  Do not lollygag about in the middle.  Hama for looks and the last 5% of excellence; Toddy to get your joe on with a minimum of fuss.

And if you’ve got a long night ahead with little to do of consequence… then, and only then, try a second glass.


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Leaving Google (for now)

Posted: July 22nd, 2013 | Author: | Filed under: Sparkbuy, Startups | 6 Comments »

Some places are just delightful to work.

Two years ago, Google bought my startup, Sparkbuy. Ever since I’ve been leading a delightful double life as a PM on the Google Ads team and the CEO of Google Comparison Inc, a wholly owned subsidiary Sparkbuy Swan Songof Google.  It’s been an amazing run – we’ve been working on bringing transparency to products like credit cards, new vehicles, and auto insurance.  I’ve worked with engineers and PMs who are among the best in the business.

And all the rumors are true: Google is truly a magical place to be.  Actually having healthy food available all the time, for free – both in the literal and cognitive load sense – is amazing.  The people are terrific.  Everyone, at every level in the organization, cares deeply about the company and it’s mission.  For each person outside the organization pointing their finger and yelling at something Google’s done, there is guaranteed to be at least one Googler, standing up in a company all-hands, quietly and respectfully giving the executive team hell about the same thing.

I’ve worked at Microsoft, and I’ve worked at Realnetworks, and I have a lot of friends who’ve worked elsewhere in the tech industry.  And I’d humbly submit that if you’re working at a BigCo and you haven’t at least applied to Google to check it out, your career strategy is nonoptimal. In fact, if this describes you, ping me on Twitter – I’d be happy to discuss 1:1 in a bit more detail and, if it’s the right fit, refer you in.


When I sold Sparkbuy, I took an advance from the very nice people at O’Reilly Publishing to write a book about startup CEOs.  It’s been two years and they have been very patient while I’ve finished the first draft and not much else. (Fortunately, the spectacular Matt Blumberg has written his own book on the subject which should tide you over).  But it’s time to get that done.  I also have another, non-software product that… well, more on that shortly when it’s ready to share.

So the fantastic folks at Google have agreed to let me take a leave of absence for a few months to scratch some of these itches.

It’s going to be a great summer.


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How to do Hardware

Posted: July 22nd, 2013 | Author: | Filed under: Startups | No Comments »

I’m delighted to announce that I’m advising Highway One, a new SF-based incubator for hardware startups.Quadcopter

Why does the world need another incubator? Because hardware’s hard, and hardware’s different. And Highway One is magical.

It’s not an accelerator for hardware startups, it’s a hardware accelerator. They are all about getting your designs rolling off assembly lines, fast.

I believe in this because HW1 is a part of PCH, one of the largest and most reputable manufacturing companies in the world. They manufacture for Fortune 500 companies, and are rumored to be the only non-Chinese company manufacturing for Apple. As a startup you can’t get access to these folks’ manufacturing expertise or factories for love or money.

Except through this. If you work with HW1, you’ll not only work with PCH’s top engineering and management talent, you’ll actually travel to Shenzhen with them to go learn how to manufacture stuff, in situ, in volume, with the pros.

On top of all that, they will hook you up with a cash investment of $20k for 3%-6%.

Oh, and the best bit? Brady Forrest is going to be running the thing.

You can apply now at And if you happen to be (or can get to) Seattle this Wednesday, ping me on Twitter – there’s a private event with Brady that will give you the inside track with a few seats left.

If you’re building hardware, you really ought to be a part of this.

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Camping like a startup

Posted: July 6th, 2013 | Author: | Filed under: Startups | 2 Comments »

Originally published on Sulia

We went camping with the family this weekend. We’d never done it before. That’s OK, first time for everything.

We spent a lot of time figuring out our location, because that would be hard to change later. We didn’t worry much about our precise campsite until we got there and wandered around a bit.

We asked some folks with lots of experience for advice. Most of it was good, some was contradictory. A lot of it was ignored.

There were a few problems we knew we needed to solve, like how to build a fire. Read up on those beforehand.

Read lots of other “how to” stuff, which did build our confidence but mostly just killed time before actually doing it.

We put it off for a long time because it was scary. When it was done, we were poorer, wetter, smellier, and a lot happier than when we started.

I highly recommend camping with the family.

And doing a startup.

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Shark Tank: The 3 worst startup mistakes made on TV’s best reality show

Posted: May 21st, 2013 | Author: | Filed under: Startups | 3 Comments »

This article first ran as a guest post in Geekwire.

For a long time I’ve felt like I must be either the first or last entrepreneur to discover the ABC series Shark Tank.  For the uninitiated, it’s pure startup voyeurism: a company stands in front of a panel of 5 plutocrats, pitches, and either gets an investment or gets laughed off the stage.  It wasn’t until Jeremy Liew’s great review of the latest episode that I realized I wasn’t alone.

But watching Shark Tank, I find myself grimacing repeatedly.  It’s like nobody pitching has ever read a half-decent book on negotiation. I keep seeing the same mistakes, over and over again.  Here are the three worst.


By far the most embarrassing mistake any of these poor companies make is actually failing to negotiate.  They show up and make their pitch.  They get asked some questions.  Suddenly, the sharks are piling on about what’s wrong with the deal. The entrepreneur is visibly flustered.

Suddenly, one of the sharks floats an offer.  Maybe a second one joins in.

You can see the look of gratitude and relief on the entrepreneurs face.  How gracious of them to offer to invest in their flawed child!  How generous of them to help.

Pshaw.  None of these folks are chumps or charity cases.  Do you know why they trash your business before making an offer?  So you’ll take the offer.  It’s not one of the nicest negotiation techniques, but it’s plenty effective.

Here’s the simple rule.  If someone makes you an offer, it’s because they’re interested.  If they’re interested, you should negotiate.  Not accept; negotiate.

Of course, there are right ways to do this and wrong ways to do this.  You’ve seen plenty of entrepreneurs on the show (and in life) start grandstanding about company value, only to have the Shark shake their head and declare themself “Out”. Don’t do that. Don’t be ridiculous.

Instead, make a reasonable and polite counteroffer.   “I’m really excited by the prospect of working with you.  How about 20%?”  Even if they appear to be tottering on the edge of leaving the deal (and remember that they have every interest in making you think they’re about to bail for maximum negotiating leverage), a polite response like that won’t hurt anything.  The worst you’ll get is a “no”, and now they know that you’re not a total pushover.

And of course, if you’re a hot item – if more than one shark is interested – make them bid!  Get them each to give you numbers, and don’t let them collude to drive your price down.  With multiple offers, use a line like this.  “Each of you would be a huge asset here, but my goal here is one fully-committed partner and the best deal for my shareholders.”

Know what you want

You’re going to come in with something clean and simple, like “$50,000 for 10% of the company”.  They’re going to counter (because unlike the contestants, the Sharks always negotiate) with something like “$100,000 for 8% and a 5% royalty”.

When this happens, people get this funny look on their face, like Mr. Wonderful just sprouted wings and started handing out gumdrops.  There’s no excuse for that.  The Sharks have a limited array of tricks up their sleeve, and you should have considered all of them before setting foot in that room.  Here’s the exhaustive list (please comment if I’ve missed one):

Stake size: The most obvious.  They’ll offer the same money in exchange for more of the company.  This is easy to plan for by deciding ahead of time on the worst case dilution you would accept.

Controlling interest: If the ownership is 50%, then no major decisions can happen without both you and the Sharks agreeing. If it’s 51%, then they can fire you the next day and liquidate the company if they think that’s a good idea.  And don’t fool yourself – if things are going sideways, they probably will.  Decide what you can live with.  If it’s 51%, remember the words of Mr. Wonderful: “I can fix you, but you probably wouldn’t like how I would do it.”

Number of Sharks: Most entrepreneurs get giddy over multiple investors (or, as they’re known in the startup parlance, “party rounds“).  Truth is, if you have more than one or two Sharks in the deal, you’re getting a lousy deal.  First, because each of them has a comparatively small stake, and therefore a small incentive to help.  Second, because if you’re in a bind, each of them reasonably expect one of the others to help out (the Bystander Effect).  Third, because the alternative to being in the same deal is offering competing deals – since that didn’t happen, you almost certainly took it in the shorts on valuation.  There’s only one situation where multiple sharks in the offer is good: when they are getting a 50% or greater interest.  That’s because while one person with 51% runs the company, two people who split the round are each just 25.5% owners.   If I was giving up 51% of my company, I’d want that stake split between as many Sharks as I could get – since my vote, plus any one of theirs, would constitute a majority.

A royalty:  You should know ahead of time what kind of royalty your business can support, and realize that a never-ending royalty seriously limits the long-term viability of your company by permanently lowering your margins.  And realize that once a shark gets their money back, they have a much smaller incentive to see you succeed – people are more motivated by fear of loss than opportunity for gain.

Help:  Some of the sharks have specific assets that may be useful.  Mark’s got stadiums and movie theaters, Damon’s got retail distribution, and so on.  Many of the deals are done because the entrepreneurs want access to those networks.  Do your homework before you get on so you know what help you can realistically expect from who.

Contingencies: This is the one that kills me.  If they say “I will invest contingent on X”, that’s the same as saying “I won’t invest, but might change my mind if you do X”.  A typical structure is that they will invest contingent on a valuable introduction to Their Friend Abe going well.  Well, real investors introduce their companies to Abe, and also Belinda, and Charlie, and Dolores, and a whole alphabet of partners because they’re committed.  Contingencies are just shopping around, saying “I’ll see what my friend thinks”.  Avoid offers with contingencies if you have any other options.

Don’t ever leave the room

“I’ll offer 25%.”

“I’ll offer 20%!”

“I’ll do it for just 18%!!!!… wait, could you leave the room for a minute?”

Pop quiz: when you return, your options will be:

a) 25%, 20%, and 18% because they just wanted some private time to talk about how much they liked you

b) 15%, 13%, and 11% because they’ve been negotiating against each other while you were gone

c) Just 18%, because the other two dropped out

d) 30%, but good news!  We’ll all be investing together to help you.

Don’t let Sharks collude.  There’s a reason the federal government outlaws business collusion: it drives the prices in the wrong direction.  If the Sharks try any of the “please step out for a moment” shenanigans, just let them know you’re on to their tricks.  Explain that you want one committed partner who doesn’t need to seek the approval of others, and if you walk out the doors you’re not coming back.  They only do the “step outside” when they really want a deal, so all the leverage here is in your court.

Of course, the most egregious error here is people who actually volunteer to leave the room.  Don’t call your spouse.  Don’t call your mentor. Don’t call Steve Wozniak. And for heavens’ sake, don’t go outside to talk to your cofounder who’s standing right there. Do your homework up front, know where everyone’s bottom line is, and trust your cofounder to implement the strategy you discussed without going outside and whinging about it first.  Then make the deal, or walk out with your head held high.

Life is Shark Tank

I love this show because it’s the only reality TV I’ve ever seen that feels real.  I’ve had friends sell companies for the original offering price. I’ve stared stupidly at an angel investor, finding myself totally thrown by the suggestion that we add a board member. And I’ve knowingly pitched a room full of angel investors, where the actual printed agenda  calls for me to walk out and sit quietly in the hallway where they collude on price.

If you haven’t had the pleasure, pull up a comfy chair and watch a few episodes.  Just remember when you watch Shark Tank: your role models aren’t the entrepreneurs.  They’re the Sharks.

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