Ever felt like giving up? In this episode of the Exit Rich Podcast, Clay Banks, the innovative mind behind Haven Lock, joins Michelle Seiler Tucker to share his “try again” story. They dive deep into Clay’s unforgettable Shark Tank experience (remember that door?!), revealing behind-the-scenes insights and strategies that set his pitch apart. From the challenges of pitching to the Sharks to the lessons learned on his entrepreneurial journey, Clay shares invaluable advice for business owners and aspiring entrepreneurs. His entrepreneurial journey will inspire you to keep pushing forward, no matter the challenge. Tune in!

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Watch the episode here

 

Listen to the podcast here

 

If At First You Don’t Succeed Try, Try Again

Valuable Insights On Shark Tank – Clay Banks From Haven Lock

Welcome to another episode of the show. You’re in for another big treat. We have a special guest on. I love this guest so much. I’m working with this guest. His name is Clay Banks.

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Clay, welcome to the show.

Thanks for having me. It’s been such a pleasure getting to know you. I am excited to be on the show.

Thank you. Let me tell a little bit about you. Clay Banks is a seasoned entrepreneur with over 23 years of experience having co-founded eight companies.

There were a few failures in there.

We’re not talking about failures. We’re talking about eight companies. You founded eight companies. That’s what we want to focus on. We want to focus on the growth, not the failures because you can’t succeed if you don’t fail.

That’s right. I agree.

You founded 8 companies that raised over $7 million. He gained national recognition on season 10 of Shark Tank as a cofounder of Haven Lock. This is a great company. As a Cofounder of Haven Lock, his show contributed to one of the all-around goat shows, meaning Greatest Of All Time Shark Tank episodes. When I watched this episode, I could not stop laughing. All of you are in for a huge treat. Welcome to the show.

Thanks for having me. I am glad to be here.

Shark Tank Spotlight: The Haven Lock Story

Let’s get into Shark Tank. Let’s get into this. Get ready to laugh. Fasten your seat belts. This is going to be a crazy ride. One thing I want you to pay attention to when you’re reading this episode is the focus he and his partner have. Pure focus and determination and never taking our eye off the prize prize. That’s what everybody should really pay attention to. Let’s get into the Shark Tank episode.

Alex said, “My name is Alex Bertelli and I’m a former Army Special Operations helicopter pilot and the CEO of Haven, the world’s strongest smart lock.” You said, “My name is Clay Banks. I’m the COO of Haven. We’re from Nashville, Tennessee, and we’re seeking $500,000 in exchange for 6% equity in our business.” We don’t want to spill anything and give away the beans here, but your partner’s not your partner anymore. That’s why he’s not on with us. How did you come up with that valuation?

We’d already raised a Series A. Fortunately, as we were getting on the plane to go to Culver City to film in LA, we used that as a line in the sand with investors that we were recording to say, “You’re either in or you’re out.” We had raised $1 million at a $10 million valuation at that moment. When we were pitching those investors, we knew based upon studying different shows in the past that the Sharks were looking for a higher percentage of the company. Through those negotiations with those other investors prior to going on Shark Tank, we had carved out that specific allotment, which brought it down to a $7 million or $8 million valuation. I can’t quite remember, but it was less of a valuation for the Sharks than what we had closed our A round with.

We’re going to get more on evaluation in a little bit because that comes later on in the show. Let’s get into the fun of this. Alex said, “Not long ago, Clay and I both experienced a series of break-ins in our neighborhoods. In reality, a break-in occurs every eighteen seconds here in the United States. We quickly realized it doesn’t matter if you lock your doors or not. The traditional deadbolt isn’t getting the job done.” Let’s focus on that really quickly. I wasn’t planning on stopping here, but eighteen seconds in America a break-in occurs?

Every eighteen seconds of break happens in the United States. 1 in 36 homes will experience a break-in.

Is that even in gated communities?

1 out of 36 homes no matter what neighborhood you live in. When we were starting this company, our origin story was that I live in Williamson County in Franklin, Tennessee, right outside of Nashville, 1 of the wealthiest and 1 of the safest counties in the world. A 35-year-old man moved in with his mom in my neighborhood and was breaking into homes in the middle of the night. That’s why we started this company. Alex lived in Sylvan Park in Nashville. His neighbor had his door kicked in on New Year’s night around the same time that our neighborhood was getting broken into. That’s what caused us or originated the idea of how we came up with this product that could detect it and prevent home break-ins.

I remember hearing in the show it takes two minutes to break a deadbolt.

Except for the show, it took a lot longer. In most cases, smash-and-grab attempts can be in and out of the house within two minutes.

Everybody, take notes here because these are not just entrepreneurial lessons. These are also lessons on how to protect your home and your loved ones. You showed the standard deadbolt and said, “While it may feel secure when you lock it, an experienced intruder can get in with about five kicks. Alex, show them how easy this is. Kick it hard.”

The Unbreakable Door: A Lesson In Physics

I love this because they were so calm, cool, collected, and never stressed out. You talk about determination. You talk about focus, which is what I talked about at the beginning of this show. What went wrong? All the Sharks were saying, “You can’t break into a deadbolt. We don’t need this product.” It was working against you although you have them engaged more than probably any other Shark Tank guests I’ve ever seen. What happened?

When we started building out this product or this concept, we had built a testing rig in a warehouse. It was anchored to a pylon holding the building up or holding the roof on so it’s a constant state. When we built our studio, we had to practice this with Finmax, which is the producer, for months of doing rehearsals here in Nashville before we ever flew out there.

Every time that we had tested this and even homes that we had tested this on, you could kick in a door typically in about 4 to 5 kicks every single time no matter what the structure was. However, what we didn’t realize on Shark Tank is you’re on a flat stage. For people who’ve never been on the show, they film twice a year. We were in the September filming. They have, give or take, about 70 companies that are flown out to Culver City. Think of it like a train. For four days, there’s a train of entrepreneurs pitching the sharks. The sharks are here and we are rotating the train cars every time. We go to pitch and then 1 goes off and the next 1 comes on.

One stage comes off and the next stage goes on is what you’re saying?

Correct. All of the entrepreneurs are lined up in order to pitch the sharks. Our set was really large. It had to be rolled in on caster wheels and laid on the set. It’s lying flat on the set. What happened was, and we didn’t know this until we were recording, that when Alex went to kick the door, the set moved. A lesson in physics is what it was. His force or the energy that he was applying to the kick of the door was being transported onto the floor. We didn’t know this even until after this was going on. Every time we rehearsed it, this was never the case because it would never move when it kicked. It was against a constant state pylon in the warehouse. It was a hard lesson learned in physics.

That wasn’t our first pitch. We had pitched thousands of times. We had prototypes and demos that did not work. I’d been on stage pitching before and the prototype didn’t work when I brought it on stage. For us to keep our composure, that was not out of the ordinary for us, but I’ll give it to Alex. He was dead determined to kick that.

After we debriefed, had a lot of laughs, and got back on the plane, he was like, “My Army buddies would’ve never let me live this down if I could not break through that door.” We had that mentality that nothing was going to stop us. We got this big laugh that it will most likely go on air. At the time, we were good. We felt confident in our business.

I’m going to guess maybe the filming was about 1 hour and a half to 2 hours long. What you watch on this episode is give or take seven minutes. You don’t hear us pitching our story about our Terminix deal. You don’t hear us telling the story about Erin Lotfi whose home was broken into on a Military base. We helped save her nine-month-old daughter. That didn’t make TV. That’s okay. We still believed in what we were doing.

What made TV was not being able to break the door down. Let’s move on, but there’s a go-to nugget here for entrepreneurs. That is to always find out what your situation is, what you’re going to be performing on, what the surroundings are, the physics, the weather, etc. It’s easy to go back to hindsight, but it is very hard to predict that. The better you can predict what your surroundings and your environment is going to be, the better prepared you’ll be in order to not have something like that.

Always find out what your situation is. The better you can predict your surroundings, the better prepared you'll be. Share on X

It worked out in their favor and it was comical, but for anybody who goes on Shark Tank or does anything significant, we like it to go off smoothly. It doesn’t always happen. It’s like Steve Jobs with Apple. He crashed and burned when he was demonstrating. Do you remember that? When he was demonstrating Apple, he crashed and burned.

Elon Musk was rolling out the Cybertruck. They threw the rock into the window and it cracked the window. We see Cybertrucks all the time. Those entrepreneurs are resilient and they’re not going to let one small failure set them back or stop them from getting to market or doing what they believe is necessary for the world. We had the same mentality. It didn’t stop us one bit. I haven’t watched this episode in a few years. It aired in 2019. It’s 2024. It still brings back funny emotions. It went viral. It’s part of my story. I never once thought of it as, “This is going to kill the business or stop me from creating.”

 

It was a risky move. I always say, “You need to sell the sizzle. You need to be unique. Do something different than nobody else is going to do.” It worked for you. The silver lining or the golden lesson there is as entrepreneurs, we can’t give up after the first kick. We got to keep kicking. Let’s see what else happens here. You said, “Typically, a break-in can happen in less than two minutes in the United States. 1 in 36 homes in America will have a break-in. Smart locks based on the deadbolt are no better.”

Alex said, “Let’s show them how Haven works.” You said, “Haven sits at the bottom of the floor right next to the existing threshold. When activated, the wedge-based barrier lifts up. Using simple physics, this makes your entire door ten times stronger to prevent home break-ins. To use it, you simply step on the gate to open the door. To shut the door, you lock it with the gate with the foot pedal and you can see there’s no deadbolt here.”

He gets through the deadbolt.

He finally did break it, which was incredible. They would never let him live it down if he didn’t. That product is so incredible. Sometimes, it’s difficult when you’re selling something that can be very emotional as far as saving your home or saving your family. You saved the 9-year-old daughter when there was a break-in. Sometimes, it can be difficult to illustrate that and get that message across. Even though he didn’t break it the first time, I love how he kept trying. He turned it from, “This is a horrible situation,” to, “This is a funny situation. This is what can happen. Here’s the solution.” The solution is your product, and it’s a great product. Is there anything you want to add here really quickly? We got a whole show to get through.

In any environment, you’ve got to be able to think on your feet, adapt, improvise, and overcome. We were able to do that based on Alex and my history of pitching the company together. It was the biggest one and the biggest stage but it wasn’t our first time facing issues or challenges during a pitch.

In any environment, you have got to be able to think on your feet and adapt, improvise, and overcome. Share on X

That’s important too because so many people go on Shark Tank for the very first time and they’ve never pitched before.

We had probably raised, give or take, a little over $1 million by that time. To get to that point, we did hundreds, if not thousands, of pitches in person, on stage, and in front of groups. We felt really confident in the questions that they were going to ask. For us, the easier part was being able to answer the questions and be prepared for what they were going to ask us.

We do have to move on, but I love how you were so smooth in talking about the statistics and how you have the solution when the sharks are still cracking up laughing. He is trying to break the door in. You have to do that. You can’t lose your cool. You have to be calm under pressure. Well done. You said, “Haven is still standing strong. We’ve done some demos and we’ll show you.” Mark said, “Alex, you’ve gone down in Shark Tank history. You’ll be immortalized. Are you okay?” How sore was he after?

He was good.

He didn’t need a massage or a spa?

No, he was good.

Alex said, “I’m going to grab a quick drink of water. Clay, why don’t you start?” You said, “Sharks, we’ve got two products that we manufacture. We have a Haven Mech on this side. We have an electronically controlled one. Mark’s got it down here on this side. It’s got a key fob like you have with your car. It also has a smartphone app where you can share e-keys. I would be able to send you access to my house and schedule that. I would get a notification when you come and go.”

From Bookstore To Everything Store: Evolving Your Business

This is what I love. I love this. I always tell business owners, “You need to ask yourself three questions, and you should ask this quite often more than you don’t.” Most business owners never ever do this. You’re going to be able to relate to what I’m saying because you’ve done it here. You always need to ask yourself what business you are in, number one.

Amazon did this way back when they started. They were like, “What business are we in?” Amazon said, “We’re in the bookstore business. We sell books. You then have to ask, “What’s our superpower? What do we do better than anybody else?” Amazon said, “We do distribution better than anyone else.” You then ask, “What business should we be in?” You ask, “What business are we in? What’s our superpower? What business should we be in?” You guys invented this product for safe haven. You have to ask yourself whether you are a product company or a software company.

We’re both. A seamless transition to being able to use a locking device that made it easier for the customer.

We’re going to get back into those three things again as soon as we show the school if that’s okay with you.

Knowing Your Costs And Mastering the Pitch

You said, “We sell it on our website for $182. It costs us $67 to make it. Our landed cost is $82. Our profit margin on that is 55%.” Mark asked, “What about the Bluetooth version? How much?” You said, “The connect version we sell for $349 on our website. Right now, the cost of goods sold is $175.” They beat you up a little bit on pricing here. We’re going to get into that in a second, but they beat you up on pricing.

All entrepreneurs need to know their costs. You knew your cost. It wasn’t your first rodeo. It wasn’t your first pitch. You knew your cost, no problem. They’re going to beat you up a little bit on a software cost, which was unfair because that was on your first order and you didn’t have the time. Since then, you’ve been able to get that cost weighed down, correct?

Correct. The more frequently you get into pitching a business, you walk away from every one of them and go, “What would I have said differently,” or, “What should I have said,” or, “What would I position better?” After this show, we got really good at raising capital because it made us think harder about how we would answer that specific question regarding margin.

At the time, we were a couple of years old. We had barely done a couple of small batch production runs. Our costs were the worst they were ever going to be. As you progress in manufacturing, and I’ve taken multiple products to market, your cost of goods should be only improving. They’re the worst they’ll ever be and then they only get better.

What I should have said to Mark is, “We project our margins to be X. They are Y and this is what we’re doing to bring them to X.” It was to show him the pathway that we’re taking and the actions we’re taking to get our cost of goods down. I had that story in my mind at that time of what we were going to do but I didn’t say it. We got better at pitching later on and I would always start with, “Here’s where they are, but this is how we’re going to get to where they’re going to be,” with real tactical information about specifically what we’re doing to improve the manufacturing process, delivery process, or whatever.

 

It’s imperative when you go on Shark Tank to try to be preeminent, know exactly what they’re going to ask at all times, be prepared like you always have to be, and always be ready to answer, but it is tough because it’s a very short show. It’s stressful and there’s a lot coming at you at one time so it’s difficult to remember everything you’re going to say. Even though you knew it and you had it, you didn’t get it out there. Would it have made a difference? Maybe or maybe not, but you knew it.

Everybody needs to think way far ahead. I do that with clients. I think so far ahead, “What are they going to ask next? What is a buyer going to look for when evaluating a business? What skeletons are the buyers going to look for? What is it that the buyer needs in order to move forward on the sale of this company?” It’s the same thing on the sell side. You always want to know what they are going to ask. It’s very difficult. You’ve pitched numerous times and you did a great job. You were one of the best pitches I’ve ever seen up there, but you can’t remember everything. It’s difficult to remember everything when you’re under those lights.

What you don’t see is there are probably a good 50 to 100 people in the darkness that are everything from legal to assistants, stage assistants, and all kinds of different people out there. You’re in this room and all the lights are on you. It is a different environment but it was a cool experience. I can leave it at that.

Let’s see what’s next. Kevin said, “That’s a lot.” You said, “We can get that down. It’s our first batch of production at that cost.” Kevin asked, “Do you have a patent issued on this yet?” You said, “Yes. We got an issuance from the UK. We’re still pending in the US.” Lori said, “There’s nothing like this that’s on the floor and that stops somebody from entering.” You said, “It covered the entire door and for sliding doors.” It’s important to get a patent. We all know that. Did you get a utility patent?

Yes. We had multiple different claims. Ultimately, we walked away with 3 or 4 patents that were issued in multiple countries.

Have you been challenged yet on your patents?

No, not that I’m aware of. I’ve since exited the company. I sold my equity position in ‘22. Up to that point, no. Now that I’m aware of, no one has ever challenged it.

As a product guy helping other business owners, entrepreneurs, and inventors take their products to market, it’s imperative to get that patent. Even if you have a patent pending, it’s imperative to do that.

Especially if you’re trying to build enterprise value and ultimately sell or exit the company, the acquirer is going to 100% going to put more value on the company if you’ve got intellectual property.

When we appraise a business, we’re appraising a business on what we call the 6 Ps in my book called Exit Rich. The most valuable P of them all is Proprietary. Proprietary can take you from a 3 to a 4 multiple on up to a 5, 7, 8, 9, 10, and sometimes even higher if you have those proprietary assets specifically if you have patents.

You always want to make sure that you keep those proprietary assets in a separate corporation so that if you were to get sued for any reason whatsoever, you are protected and you don’t lose your IP because that is the number one value driver. Those are the synergies that buyers are willing to pay top dollar for and create a bidding war and outbid everybody else to get those patents.

That’s great advice. You talk about setting it up in a separate entity. The amount of value it brings on an exit is paramount, for sure.

It’s exponential. I sold a company that had eighteen patents that was losing money. We sold it for $18 million. You can figure out it was $1 million per patent. I can’t say all of you can get that, but it is doable. Even if your business is losing money, the patents have value to them. Lori asked, “Could you do it at the top too?” Alex said, “Yes. That’s the other exciting thing we want to tell you about.

Due to recent current events, schools started approaching us to put this in individual classrooms. It’s a huge market. There are over 115,000 schools in this country.” Kevin said, “This is to protect the classroom from anybody getting in.” You said, “Our plan is to lock down a classroom within one second and give teachers, security resource officers, and SWAT team access to the lock.” Mark said, “That’s a good idea.” Daymond said, “That’s a great idea.”

Protecting Our Schools: The Power Of A Mission-Driven Product

This is where my heart was like, “Oh,” because you know you got to reach somebody’s emotions. It’s one thing to lose all your most precious belongings. It’s far worse to lose your loved ones. It’s even, to me, far more touching when you think about these schools, all the shootings, and everything that’s happening. There’s not much protection out there to keep these children safe that I have seen. When I watch this video, I’m like, “That is so powerful to be able to protect these children.” There is another clip here before you get into the software because I know you’re chopping at the bit.

Where you had me is at school. When you are selling a product or pitching a product, you have to think about the emotions. You have to think about what pulls those emotional strings. What makes somebody buy? What makes somebody want to do business with you or with your company? You really have to tie those emotions into it because people buy on emotions, not on logic. When you start talking about the schools, I have a daughter. There are so many Americans that have children and we worry every single day we send our kids to school. This was huge to me. I was surprised you didn’t lead with this.

I can tell you why. We had prototypes in about 4 or 5 schools at the time. The producers felt that since we didn’t have a product technically in the market, they did not want to bring a prototype to the set. Back then, this was in 2018, an active shooter situation or a kid was bringing a gun on a school campus every 2.3 days. The producers felt that even if we did bring our prototype on set and on camera, if an active shooter event were to occur leading up to the airing of the episode, they would have to pull it because ABC did not want to be showing or promoting a product in the event of a tragedy.

I get that. That makes a lot of sense. We go on and Lori is like, “Why didn’t you bring it?” I couldn’t throw the producers under the bus, but in reality, there was a really good reason why we didn’t have it on set. 1) It was a prototype and we were still testing. 2) We didn’t want to be seen as promoting a product in the event of a tragedy.

That makes huge sense. You have to know timing is everything when you present a product. To me, I’d want to see that first, but you’re making sense because you don’t want to seem like you’re promoting something during a tragedy. You said every two and a half days at school.

Back then, those were the stats and they may still be the same.

I was going to ask you what it is now.

I don’t follow the crime stats as I used to. I’m involved in different businesses now. The stat back then was only getting worse. We felt like we wanted to be part of a solution that solved that problem. We knew that our lock wasn’t the only solution but we had a piece of it if we connected all the dots to the right other partners. Security works on layers. You have layers of security. We were one of those layers. In concert with all the other layers, we could be more successful at protecting our students. We wanted to be part of that, which was a pretty cool mission to be behind.

I can’t think of a better mission to be behind honestly. It’s still a big issue in this country. Let’s see what comes next. Barbara said, “I don’t think you told us what your sales mark is.” You said, “We crossed the $250,000 mark of total sales.” Kevin asked, “Where are you selling it?” You said, “We sell it online on our own website.”

Daymond asked, “How much money have you raised?” You said, “We’ve raised $1.5 million.” Mark said, “That’s a lot.” Daymond asked, “How much debt do you have, if any?” You said, “We have 2 investors with a convertible note debt of a total of $500,000.” Lori asked, “Are you two the sole owners?” Alex said, “We currently own 25% each and then we have investors on top of that with additional equity to sell.”

Navigating Equity And Maintaining Control

The sharks’ reactions are not happy. This is a huge lesson for entrepreneurs because I’ve seen it time and time again. Fortunately, it didn’t happen in your situation and you were able to exit. We’ll talk more about your exit towards the end or at the end. I’ve seen this happen time and time again. It’s happened with a lot of Shark Tank guests where they give too much equity. If you were 25% and Alex was 25%, who was the managing member there? Who was making decisions? Who was in control?

We ran a co-CEO model for most of the time of the business. He ran the CEO role. I ran the COO role. We had a board of directors that governed it between that.

You relied on the board of directors to make those final decisions if there was a headbutt.

We had a five-member board. He and I both were on the board with three other members.

I’ll give you a scenario. I’m not going to say the company. There’s a company that took on equity investors. They took on a big investor, and that investor had more equity than the owner. It was a venture capital group. They started phasing out the owner because they didn’t like the owner and they did not agree with the owner. They had very different philosophies, different values, and different ways.

What happened with them is they invested more. They invested a lot of money and had more equity than the original owner did. Since they didn’t like the owner, they didn’t see eye to eye, they didn’t have the same value systems and beliefs on the way to go to market, and there were too many arguments, so they started phasing that owner out. That owner’s still there but that owner is not an employee. That owner no longer can work for the company. That owner can have some say. The owner’s wife is still working in the company. They phased him out.

He was crying on the phone for several hours with me because he was so devastated that he grew his baby and was phased out because he didn’t have the money to keep it afloat or he gave away too much equity, or he didn’t really think it through all the way and get the right advisors. You have to be very careful when you’re taking all these partners because it can get diluted. That’s what the sharks are talking about. That’s what can hinder you from getting another investor going forward. Is there anything you’d like to add to that?

You’re right and we see it all the time. Look at the takeover of Twitter to X when Elon moved in and took control. It happens all the time, especially for high-growth companies that have to have capital to scale and scale fast. We were fortunate that Alex and I still got to maintain a lot of control in the business. Up to the point when I left, he and I pretty much made all the decisions with the support of our board. That happens.

When you call a business your baby, you’re bringing out real emotions that entrepreneurs have. We do treat them like they’re family and babies. They’ve got to grow up to be productive citizens that are autonomous on their own. We do take a lot of sense of pride in a lot of sense of ownership in developing that baby. In this case or in some cases like the one you talked about, when other people start taking on big control of interests or equity stake in the business, it becomes less of your baby than you think it is on paper and contractually but mentally, you still own 100% of it. That never goes away. I’m no longer an owner of Haven Lock at all but I still feel a sense of pride and identity in that business. I want to see success.

 

That identity is what causes the seller’s remorse. It causes sellers not to move forward on the sale of their company. You’re right. As the company continues to grow, you have to dissociate yourself from the emotional baby side of the business. This is a real asset, making a lot of money that has huge potential. It’s a complete and total mind-shift change.

It wasn’t so bad that it was his baby. What was so bad about it was that he had all these great ideas. He was getting sponsors, he was getting audiences, and he was crushing it. They went from $5 million when they were on Shark Tank all the way up to $75 or $80 million. That was under his direction, so he was devastated when they pushed him to the side.

Let me tell you this. This has happened time and time and time again. You have to be careful when you take on those investors. You have to be crystal clear on what you’re looking for. You’re right. I call it the life cycle of a business, which is the same as the life cycle of a human. You’re in the incubator. You’re not even born yet. When you come up with this idea of a business, you’re in the incubator. You then go from the incubator to a newborn that needs 24-hour supervision to a 2-year-old and all the way up into an adult business. That’s the stage we all want to get to. You have to be very careful in taking in that capital. If you are going to do that and raise capital, you need to contact somebody like Clay because he is an expert at it.

One thing to think about when you bring on outside investors, friends and family money, or any third-party capital is it is a liability that you owe back. They want a return on capital. When you do that, it switches gear in your mind to a different layer of ownership and responsibility. I run a business with no investors. I don’t answer to anybody. I make my own decisions. When you have investors and stakeholders involved, the layer of complexity and the layer of responsibility gets much deeper. That’s where I see a lot of founders who think they want to raise capital but don’t yet can’t comprehend that. It’s a lot of responsibility.

The biggest thing is you want to make sure you don’t get phased out of your company.

That’s very true.

You want to know who maintains those controls. Let’s see what’s up. Alex said, “Tell them about the purchase order we got in Arkansas.” You said, “In Melbourne, Arkansas, we installed three locks about a month ago. They had an open house and the parents loved it. The next day, I got a call from the superintendent and he said, “I’ve got 94 classrooms left to do in this school. I want to put in an order.” Barbara said, “That’s a big order.” That’s a huge order. That’s another lesson for all you entrepreneurs. Know your audience. Schools were their perfect audience. Know your audience. Go to these open houses. Go to trade shows. Get your product out there. You fulfilled those orders. I’m sure there were many orders that came after that.

Know your audience. Go to open houses, trade shows – get your product out there and try again if you don't succeed at first. Share on X

Unexpected Applications And Expanding Your Market

Once we got the product, what we didn’t realize was how much certification and layers of fire safety and code compliance were needed for a commercial product. When we started out residential, we only had to have Bluetooth certification for FCC purposes. It was a super simple test and very easy to conduct. We did that. When you go into a commercial building, you’ve got ADA requirements, life safety requirements, fire safety requirements, and then all kinds of layers of testing.

When we got into going after that market, that opened up a whole nother layer of investment opportunity and market opportunity to be able to go and build and design a product that was a little bit different than what you saw in Shark Tank. It’s a different form factor. The same intellectual property from our patents was put into the school product. We did much larger partnerships with other companies as distributors and installers. At that point in time, we were prototyping. I had three test units in that school. We may have had 4 or 5 other schools doing pilot testing. These were very early stages.

It goes back to you don’t know what you don’t know. You were prepared in residential and then when you try to go into a school environment, there are all these different layers, a fire code, etc. Business is all about finding those right partners, finding those right advisors, and trying to gear up and make sure you lay all those steps correctly so you’re not failing so far backward but failing forward. You don’t know what you don’t know, so make sure you align yourself. What about apartment complexes? I would think that product would be huge in apartment complexes.

We had a customer in Atlanta. They were a residential customer. They bought the floor base lock. When you get into business, you think you have a minimum viable segment. Sometimes, that grows or sometimes, it changes or pivots to a different audience. Apartment complexes that rented out to low-income housing, when their renters would start to become near being evicted, they would trash the place. They would rip the sinks off the walls and burn holes in the carpet when they knew they were getting evicted. The apartment complexes started buying the locks before to keep them out in that eviction process.

That’s a whole new quest. Apartment complexes are buying them versus individuals.

Especially in the low-income housing Section 8 neighborhoods, the owners of those properties were trying to protect the inside of the apartment while it was being not rented because people were breaking in and going into the apartments when no one was living there.

That’s crazy but that’s another great use.

You have to think of the cost to repair. If they burn a hole in the carpet and rip the sink off the wall or whatever, the cost to repair that was more than the lock.

Raising Capital Wisely: The Use Of Proceeds

It sure justifies the cost of them buying the lock. Let’s see what’s next. Daymond asked, “What are you going to do with the money?” Alex said, “Our biggest problem is inventory. We’re going to use part of your investment to go out and scale inventory with our suppliers.” This is very important because a lot of entrepreneurs can’t answer that question.

I’m an investor. I invest in companies. I buy companies, flip them, and exit rich with them. That’s the number one question, “What are you going to do with the money?” Many entrepreneurs are in the headlights. They have no idea what they’re going to do with the money. If you’re going to go on Shark Tank and you’re looking for capital, you’re going to be crystal clear in how you’re going to use that money and how that’s going to catapult the business to the next level. Do you have anything to add there?

For sure. My older, more experienced self would not answer that question the same way.

That’s important. You have to go back to your younger self and more mature self and see because you always answer questions differently. That’s a great point.

As I’ve learned and gotten better at working, coaching entrepreneurs, and raising capital, you’re right. You have to be very succinct and detailed about where capital infusion and equity capital specifically create enterprise value where 1 plus 1 equals 10. Inventory is not a good use of equity capital. Buying inventory and selling it is good for growth. You can show opportunity and top-line revenue, but it’s not adding enterprise value. It’s not adding intellectual property creation. It’s not adding to the headcount.

I consult and coach entrepreneurs when they’re putting their ask slide together or building their investment thesis and talking about what they’re going to do with the money or the use of proceeds. It is not toward marketing because that is not scale and inventory. If you do need to put some toward “marketing”, it’s more about branding than it is marketing. There’s a big difference for the people that don’t know and don’t have time for that conversation.

That’s another show.

We want to build a brand and invest in a brand but not use equity capital for marketing. That’s too much for this conversation. Back then, we did need money for inventory. We made it in America. We had long lead times for that product. It was a hurdle. That’s probably the best thing we could have said at the time but after having a lot more experience, I would answer a little bit differently.

That’s good advice. If somebody wants to reach out to you, how do they get in touch with you? Usually, I do it at the end of the show.

InPaceLine.com.

Mark said, “What you’ve done is brilliant.” You said, “Mark, let’s do a deal.” Mark said, “The challenge is your economics are awful. Your margins are awful to support what you need to do.” You said, “We’re starting our manufacturing. We have made 2,000 locks and got those into the customers. We paid way over for those first 2,000. We’re not going to pay that for the next 10,000 or the next 20,000.”

Kevin said, “You’re going to have a pretty hard time figuring out how to get the scale and figuring out what works and what doesn’t. I don’t want to be part of the journey. I’m sorry.” Both you and Alex said, “Thank you for your time.” Barbara said, “You have a huge mountain to climb and something that I don’t think we’d get our money back. For me, a no.” You said, “Thank you, Barbara.” Alex said, “Thank you very much. I appreciate your time.” Barbara said, Thank you for your pitch.”

Mark said, “It’s going to be truly difficult from a cashflow perspective. It’s going to take you raising your price to generate the margins until your costs come down. Even then, the margins aren’t there. I’m out” Lori said, “This is really smart. The problem for me is I like to really understand a product when I invest in it. You might be too early, so I can’t invest at this point. I’m sorry. I’m out.” Alex said, “Thank you very much for your time.” Were you surprised that all those sharks were out?

The Importance Of Aligning With The Right Investors

Keep in mind that that was probably an hour-long conversation. They didn’t all come in and say, “No,” back to back like that.

That’s good for TV.

First and foremost, put it through that context. After looking over the Shark Tank investment model that each shark has, we were not the type of business they were looking for. We were pitching the wrong audience. They were not our investor persona. We got better at raising capital later because we had a better, more defined investor persona, someone who really understood the market.

Do you think it was the wrong audience per se or do you think it was not having the right pitch for that particular audience?

We were the wrong pitch for them specifically.

What do you think they were looking for that you weren’t delivering?

1. A) They wanted a bigger piece of the company than we were able to give up.

I would say I never make an investment for 6% and I probably never will.

If you go back and look at all the deals that have been made or at least aired, a lot of them don’t ever go through to get the investment. They’re looking for between 25% and 30% ownership. We had no room in a cap table for that low amount of money.

Going on though wasn’t such a mistake. Did it help catapult your business? Did it help raise awareness? Did you get sales from it?

Absolutely, it did. When it aired in April of ‘19, we did $19,000, $20,000, or $23,000 in sales that night and the next day, it trickled in. They do re-airings all the time. We would look up on our website sales every day and go, “Something spiked.” It’s then like, “It’s because it re-ran on MSNBC or something.” That helped build momentum. It built awareness. It built social proof. Those are all needed for businesses. What we got better at after Shark Tank is we got better at knowing who our customer was and how to sell the outcome of what our product provided. We were able to replicate those large days from a Shark Tank experience to an everyday occurrence.

 

Why do you get a deal or don’t get a deal on Shark Tank? You have to look at the credibility of the exposure. You have to look at the lessons and the coaching that comes out of there. You then got to look at whether it was the right audience. Maybe it wasn’t the right audience, but it was not a mistake to do it because you did gain exposure and sales. You learned a lot and redefined who your ideal audience is.

I’m all about doing small tests to understand how you prove product market fit. I wouldn’t call Shark Tank a small test even though it didn’t cost us financially a lot to do it. We had to build our set and do some things around that, but it wasn’t that expensive relative. What we were able to figure out after Shark Tank is that our customer persona was not the Shark Tank audience. Shark Tank has eight million viewers per episode. We were able to get data from that episode airing that told us, “These are our buyers. This is how we communicate to those buyers.”

From an investment standpoint or from buying your product standpoint?

From customers buying the product standpoint. What that enabled us to do is bring a lot of people into our ecosystem through our website, email funnels, and flows and figure out that only a small percent of those people who visited the site purchased. What was it within those purchasers that we could say better in our advertising, Meta ads, and stuff later that we became able to repeat the sales cycle much faster and much cheaper than a one-off event of going on Shark Tank? It also helped that it went viral, bringing more exposure to the brand. That gives social proof, right?

Absolutely because not too many of them go viral. I’m glad Alex didn’t kick the door the first time. Let’s talk about the end of this. Alex said, “Daymond, Let’s do a deal.” Daymond said, “I’m very interested in it, but sometimes, it is what’s in the best interest of the entrepreneur too. I can give you a shark deal. You may have to raise more capital and then you’d get diluted.” Barbara said, “Give them something to start with.” Mark said, “Let them decide.”

Alex said, “The only reason we’re here is to get one of you on this team to guide us, mentor us, get us into distribution opportunities, and help scour our cost down. We want you on this team.” Daymond said, “You are not going to like what I’m going to say because me taking more of the company than you own is not in your best interest. I need you to be a little selfish for yourself. I’m not going to give you an offer. I’m out.” He is out. That’s it.

I have a lot of respect for Daymond there. Acknowledging that at that moment, and this is not to say that other guys and other sharks aren’t, he really understood it from a founder’s perspective. He’s saying, “I wouldn’t do this deal so I’m not going to offer it.” He had his own parameters. That’s his design. It’s up to him. He was looking out for our best interest and I have a ton of respect for people like that.

I agree 1000%. Daymond has a heart. I’ve talked to shark guests who have partnered with Daymond. He doesn’t appear on the show so much but he has a big heart. He did the right thing by you two. Sometimes, as an investor, you do have to look at what’s the most important thing for entrepreneurs. When I have to help a client sell their company, I’ll say many times, “You can’t sell your company right now.”

It’s not in their best interest.

They’ll be like, “Why?” I’ll be like, “It’s because of how you built the company. You didn’t build on all 6 Ps. You’re still heavily involved. You don’t have the right team. Your business is not sellable right now and it’s certainly not sellable for what you need to retire on. You need to do these things, grow the business, and then come back. Let’s put it on the market.” I do the same thing. I tell sellers all the time, “Don’t take that deal. That’s a horrible deal.” At the end of the day, you want to make sure when you’re going to sell your company, when you’re going to raise capital, or when you’re going to take on a partner that they look at the entrepreneur’s best interest and not their own bank account.

A lot of respect for Daymond in that situation. What you didn’t see was us negotiating back and forth. Mark  calls him out and says, “Make them an offer.” He did make us an offer. Ultimately, we did the right thing by not taking the deal. I have a lot of respect for Daymond after it.

We’re done talking about Shark Tank. You’ve exited the company. You worked with other companies to take them to market. You are a big tech guy. I want to go back really quickly to the three questions, which are, “What business am I in? What are my superpowers? What business should I be in?” Can you answer those quickly? I then want to move on to what you’re doing, what’s next for you, and how people can contact you.

To back to your example, you used Amazon starting out as a bookstore and then they got really good at distribution, software, and execution of delivering books, and then spun up into an everything store. We know of Amazon as everything store. They couldn’t start out as the everything store. They had to be good for somebody first. If you try to be everything to everyone, you become nothing to no one.

If you try to be everything to everyone, you become nothing to no one. Share on X

That’s the biggest mistake that I see entrepreneurs make. If you try to be something to everyone, you become nothing to no one.

100%. With Haven Lock, we could not go to the school market first. There was so much complexity that we could not prove validity and product market fit. The barrier of entry, so to speak, was so much higher in the school market than it is for the residential direct-to-consumer market. We had to cut our teeth down in the consumer market first so that we could get to that next step.

It’s not to say that was done by design. We didn’t initially start there even though when we first started coming up with business plans thinking this through like, “One day, we could sell it into schools and churches,” and whatever. That is how entrepreneurs need to think about how they get to the mass market or how they get to scale. They cannot be everything to everybody at the beginning.

Look at Instagram. When it first came out, it was a company called Burbn. They shared photos. They were really good at sharing photos. Instagram is what it is now because they were good at one thing first. That’s a good example and so is the Amazon example of being good and offering a lot of value to your minimum market segment.

You got to pick that one thing. There’s a book that Gary Keller from Keller Real Estate Company wrote. It’s called The ONE Thing. You have to find that one thing or that one superpower and really focus on that. That’s what Amazon did. They focus on distribution. As entrepreneurs, we always scroll.

I’m still guilty of it.

I’m guilty of it too but I have good team members and good advisors who say, “One scroll at a time. Slate the scroll and then we’ll move on to the next.” It’s that one thing at a time. I encourage everybody to ask themselves those questions. What business are you in? What’s your superpower? What business should you be in? Those three questions, believe it or not, are more transformational than anything else you can ask yourself about your company.

It’s not a quick answer. I’ve given this exercise to my business partners, companies I own, and my clients. They’re like, “I don’t know.” It does take some soul-searching. Tell us about what you’ve been doing since Shark Tank. What’s next for you? How do you help people? I know that you help people get their products to market. I know you help people with tech companies, AI, and software.

I use this quote, “You’re the most qualified person on the planet to help the person you used to be.” We all have these experiences in our lives where we have progressed, gotten better, and learned from our mistakes. I want to be that person to help that first-time founder building usually a hardware or software tech product get it to market and understand how to do that faster and cheaper than what it took me to get to market.

You're the most qualified person on the planet to help the person you used to be. Share on X

His business was not a product. It’s more of software, right?

Both. It was very complex. We had a 52-week lead time. There were a lot of materials and components that went into it. It was a complex product. I’ve done another business.  I run a business called GloriLight. It’s a kid’s nightlight that projects bible verses to teach kids the word of God.

It could be good for teaching humans the word of God.

We did more in sales in that business than the other business in 2 years than what took me 10 years before. It’s because of the lessons learned. It’s because of the network that I’ve built and the know-how when you’re not doing something for the first time. For those first-time entrepreneurs, we said it earlier. You don’t know what you don’t know. That’s what limits them to getting to their dreams and into building something successful. I’m helping other founders get to market faster. I’m running a venture fund. I invest in certain companies that align with what I want to be part of. I also do some consulting or some advising to other brands building products and getting them to market.

Lessons Learned And The Path Forward

I love that. The only thing I was going to say there is that as business owners or entrepreneurs, you have to raise your hand because you don’t know what you don’t know. A lot of them are afraid to admit that. They keep their nose down and they have their finger in every pot. They think, “I can do this. I’ll work harder. I’ll do this or do that.” You have to align yourself with an expert. You have to align yourself with somebody who has been down the path that you want to travel because it’ll shorten your learning curve dramatically. I’m glad Clay is doing that.

We as entrepreneurs have to step up and say we need help. Sometimes, the biggest mistake that entrepreneurs make is they don’t say they need help. They don’t say they don’t know what they don’t know. More importantly, it is also very difficult to vet these people and find out who’s really good. You have to do your due diligence. I know that we’re going to be doing some work together. We already are. I like that quote. Say that quote one more time.

I’ve used a couple.

The quote that you said here at the end.

“You are the most qualified person to help the person that you used to be.”

That can’t be further from the truth.

Think about what you were as a little girl, as a college-age student, and then as a young adult. As an entrepreneur, the things that you’ve gone through and the lessons that you’ve learned, someone else is ten steps behind you. Someone’s a mile behind you going through those same steps. I want to help those people who are designing their first product, trying to get to a market, trying to raise capital, trying to build enterprise value, and ultimately trying to sell a company if that is your goal and ambition.

I’m your partner in that crime.

In most cases, some exit is the pinnacle of business success. If you can build something that someone else will buy, that is the ultimate goal. I want to be helpful to people in achieving that journey. I get to work on some pretty cool stuff. I’m excited to be working with you.

I’m the exit rich queen. My quote is, “It’s hard to read a label from the inside of the bottle.” We need an outsider’s perspective to read the warning signs and keep you out of the danger zone. Let people know.

The website, InPaceLine.com, is the best way to reach me.

Do you have any last words of wisdom?

For business owners, the theme of this is not giving up. Whether it’s a Shark Tank pitch that goes awry, you have to get back to the fundamentals. Get back to the basics and to the reason and the why that you’re building that business. Ultimately, your North Star will dictate the direction of where you take your business. I want to leave everybody with, what is that North Star for your business? It will not guide you in the wrong direction. I enjoyed the show. I enjoyed the conversation. I enjoyed getting to meet you over the past couple of months. Thanks for having me.

 

Thank you. You’re welcome. You are a great guest. You dropped a lot of golden nuggets. I love it. I love my audience. Thank you again for tuning into another episode of the show. Each episode is like drinking through a fire hose. It’s a lot of content all at once, so go back and check this episode out. I know you loved it.

It’s the holidays. Share this with your friends. Share this with your audience. I always say your network equals your net worth, so share this with like-minded individuals. Anybody that you know is trying to start a product or get a product to market, trying to raise capital, or trying to get their tech company up and running, reach out. You can reach out to me. You can reach out to Clay. We’re working together.

I can’t wait to see you next time. Make sure you subscribe to the show if you’re interested in learning how to get on Shark Tank and making sure you know your numbers. Always reach out to Seiler Tucker. We’re here for you with whatever you need to help you build your empire so you can build a scalable, sustainable, and sellable business when you’re ready. Contact us if you are ready, and I know you are, to build that sustainable, scalable, and sellable business. Thank you. Until next time.

Thanks.

Thank you.

 

Important Links

• Clay Banks
• inPaceline
• Exit Rich
• The ONE Thing

 

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