Twelve months after securing one of the biggest deals in Shark Tank history, ONTHEGO Sports founder Mick Spencer has revealed the deal never passed due diligence, but he and his business have continued to thrive regardless.
In May last year, the first episode of season two of popular pitching and investment reality TV show Shark Tank aired. First up in that episode was Spencer, who was seeking a $300,000 investment at 10% equity for his custom made, purpose driven sportswear manufacturing company.
After some negotiating, Spencer left the tank with the promise of a $600,000 investment under his belt, in exchange for a 30% joint equity stake to sharks Janine Allis, Steve Baxter and Andrew Banks.
At the time, Spencer told SmartCompany heading into the tank with a strong plan and an outcome in mind “really helped”, and with the investment, it was all about scaling the business.
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“We spent the first four years building a really great business and building a foundation that’s really set up to grow,” he said.
However, speaking to SmartCompany this week, Spencer revealed the deal never went through. But he says the business has continued to grow and claims the business has increased its valuation by 250%. At the time his episode of Shark Tank was filmed, Spencer valued the business at $3 million.
“I gave the sharks a 20% discount on equity on the basis they invested their money within 30 days, and that they would donate a certain period of time each month to get connections on board and to use their name,” Spencer said.
“When we went into due diligence the deal was delayed, and there were gaps in the pitch and negotiations on set compared to what happened in real life.”
“As a founder, equity is everything”
Looking back, Spencer says he is “absolutely” happy with the decision. While Spencer declined to reveal how much revenue the business is generating, he says ONTHEGO Sports has experienced revenue growth of 150% since the Shark Tank episode was filmed.
“If an investor put that amount of money into the business today, they would get around 5% equity,” he says.
The experience has also taught him a lot about getting the right investors in the business, which is in the final stages of announcing a new capital partnership to drive future growth.
“It taught me that as a founder, equity is everything. The lipstick of the big deal was exciting, and it would have been nice to have them as shareholders, but we wanted to make sure our seed investors were totally aligned to the company’s values and vision,” Spencer says.
There’s another important upside of appearing on Shark Tank too, says Spencer; ONTHEGO Sports received a huge amount of publicity thanks to the prominence of the deal, which Spencer says, for small businesses that’s sometimes “all you need”.
But despite the recognition the episode provided him, Spencer and his team have been working hard to grow the business and land new partnerships.
“A key message for founders here is something like Shark Tank is just one step in your journey. You don’t become a millionaire and retire in the Maldives because you’ve been on Shark Tank,” he says.
Over the last year, ONTHEGO landed a number of key partnerships with sports associations such as Hockey Australia and produced collections in collaboration with cricketers such as Steve Waugh. The company’s Chinese manufacturer also purchased a small stake in the business.
For business owners and startup founders, Spencer believes it’s essential to bring in the right investors who fit well with the business, saying it’s about “understanding what success looks like for them as well as you”.
“Startups sometimes rely a lot on the capital provided by investors, but if you bring on people with too much equity in the early stage, you’re going to make some people very wealthy,” he says.
“Make sure you drive the deal as hard as possible, as every minute bit you give away now could mean less for you in the future.”
Revisit all the highlights from Shark Tank season two.