When you travel or go about your day, carrying multiple gadgets can become a frustrating hassle, which is why the concept of technology-enabled clothing has completely changed how we think about modern apparel. But behind the scenes of creating these innovative designs is a complex web of patents, contentious business negotiations, and the reality of pitching high-stakes investors. In this episode, host Michelle Seiler Tucker sits down with Scott Jordan, the outspoken founder of SCOTTeVEST, to discuss his famous and highly contentious appearance on Shark Tank. Scott pulls back the curtain on why he refused to bundle his successful retail brand with his licensing entity, TEC, and why he ultimately walked away from a million-dollar offer. Tune in to learn why pursuing a patent-heavy strategy might not be the best move for your startup, how to build a highly profitable direct-to-consumer business, and why prioritizing customer experience always triumphs over litigation.
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Shark Tank’s Biggest Mess: “It’s Not Rocket Science It’s Pocket Science!” With SCOTTeVEST
Behind The Scenes Of Shark Tank: The 5% Equity Controversy
Welcome to another episode, where we interview Shark Tank guests. This is going to be a wild and crazy ride, so pack your lunch and fasten your seatbelt. We got the one, the only, Scott Jordan, Founder of SCOTTeVEST. He was on Shark Tank. Now, he’s crazy, so get ready. This is going to be the most entertaining show you’ve ever read in your entire life. Let’s bring it.
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Scott, welcome to the show.
Thank you very much.
You got to bring up the level.
I have stuff to follow. Craziness is coming.
Ladies and gentlemen, the craziness is in the show. Let’s go.
“Next into the Tank is Scott Jordan, who hopes to entice the Sharks with the patent for his clothing technology.” “My name is Scott Jordan. I’m the Founder and CEO of TEC. I’m seeking a $500,000 investment in exchange for 15% of my company.”
There’s already a lot to unpack here. Number one, Founder of TEC. What is your role brand here, Scott?
Why could you not say SCOTTeVEST?
It’s because I applied for the show with SCOTTeVEST and I was accepted to be on the show and I got the contract. This was 2012. In the contract for that third season, they had a provision that said every person who was on the show gave 5% of their company to be on the show, whether a deal is done or not. My business was worth quite a bit of money then and even more now. I did not want to give 5% of a very valuable company to the producers of the show, Mark Burnett, ABC, and the like. I pivoted and offered them 5% of EEC, which is a wholly owned subsidiary that I controlled the revenues for, which is a real company, but it had nowhere near the valuation of SCOTTeVEST. That explains it.
It’s insanity for the producers to request 5% of a company. I’ve never heard that before. I’ve interviewed other Shark Tank guests and never heard that. You’re asking for $500,000 for 15% of your company. Here we go.
“I’m a gadget guy. I got to have my stuff with me wherever I’m going. At any given moment, I’ve got my cell phone, my digital camera, my tablet, my laptop. All the gadgets and gizmos and headsets and batteries that go along with it. The list is never ending. Technology certainly has made my life easier, but it can be a lot of stuff to carry around, especially when you travel as often as I do.”
I couldn’t agree more. As a woman, they don’t make clothes. I couldn’t agree more because you got your cords hanging out your bag. You got your headsets hanging out of your bag. Everything’s hanging out of my bag always when I travel. What a great concept. You came out of this for peer necessity, I assume.
I was frustrated carrying my own stuff. I would turn to my wife. I was practicing law at a very large law firm and traveling a lot. On the weekends, we’d go for a hike. I’d hand my wife like four items to carry for me in her backpack or purse and she turns to me and says, “I’m not your personal Sherpa. Why don’t you come up with an idea to carry all this yourself?” I was like, “That’s a perfect idea.” I came up with the idea of basically a better-looking version of a fisherman’s vest for travel.
The best ideas come out of necessity for the person. It’s like, “There’s got to be a better mousetrap here.”
“What if I told you I have everything on this desk in the vest I’m wearing?”
Let me tell you something. I always talk about this. When you go on Shark Tank or you’re pitching investors, you’re going to have a good sell the sizzle line. You have a good hook. Laying all that stuff out on the table was one of the best hooks I’ve ever seen. You look at all that stuff and say, “How in the world can you get this in one place?” Go ahead.
That’s half the battle, half the thing. All I wanted to do was unload because what you see on that table, the keyboards, the laptop, the iPhones, you can see some of it there. I had every one of those items in my vest and I wanted to take it all out because that would have sold. What you’ll see from here on out is an argument between a lawyer and four sharks and not anything about the product. As a result, you’ll see.
I get that, but you’re giving it away. I do love how you took everything out and put it on that table because that’s quite impressive. You can get this much stuff in a vest. He is a lawyer. Get ready for the battle of your life.
“Technology enabled clothing. TEC is a patented system that lets you carry everything you need, know where it is, and access it easily in specially designed pockets. We’ve engineered our pockets to fit almost any device, and these pockets are layered into clothing so that there are no bulges and everything is balanced. Many of these hidden pockets have unique features. Check this out. Clear touch fabric that allows you to see and control your device right through the fabric without ever taking it out. We’ve even developed a patented system to wire your headphones right through the lining so you no longer have to contend with this tangled web of wires every time you have a call or want to listen to your music.”
Do we have one patent or two patents?
It was one patent that was relevant at the time. It was a very broad patent and international as well for the incorporation of wires and clothing.
It was a broad international patent.
“Licensed TEC to every major clothing company because I know that this can become the next huge ingredient brand like GORE-TEX®, Velcro, Polartec®, and so many others. TEC is poised to revolutionize the clothing industry, and this is a billion-dollar opportunity. I’ve told you about my pockets. Now, it’s time for you to reach deep into yours.”
I love that tagline. Let’s see what they’re going to do here. Anything you want to add? Any comments?
To let you know, I rehearsed that. Every hike I went on with my wife all summer long, she got so sick of hearing it. The perception is that when you see that, you see it from beginning to end. When they tell you to practice, they say there are no do-overs. There were like ten do-overs because they couldn’t get their technology right. That x-ray thing, I’m like, “What you see,” and then they couldn’t get right. A television show. I want you to realize that. They expect you to do it perfectly, but they don’t do it perfectly by any means. They get to edit whatever they want, but they tell you no.
You were on one of the early seasons, so they’ve improved a lot.
It was early, but it’s a network television show. They should work this stuff. I’m sure all these bugs are still going on.
I don’t know. One way to find out is go back on.
It’s not going to happen. You’ll see. It won’t happen.
I know. I’ve watched it.
“I’m flipping through the back of Men’s journal magazine, and there was a similar product. I thought, ‘What a great idea.’ Is that you?” “It is a great idea, and it is my product. I formed a retail company to prove the concept of technology-enabled clothing. I’ve been running that company for a number of years waiting for the patent. Now that it is issued, I’m here seeking an investment in technology enabled clothing as a licensing company to bring this system the intellectual property along with the registered brand name and the product know-how to other clothing companies.” “Tell me about the retail business because that proves the concept.” “Yes, it does.”
If I dared mention the name of my company, SCOTTeVEST, it would have triggered that 5%, even though they would have edited it out. Imagine yourself standing on that stage with the lights gleaming down and you’re not getting any sleep the night before. Having to discuss a company that you were living and breathing without being able to say the name of it. It was the hardest thing I’ve ever done.
Your hands are tied because you couldn’t mention the true name of the company. SCOTTeVEST was already well-known. It was already well recognized.
They were very worried that I was trying to get a back end into promoting SCOTTeVEST and avoid that 5% commission. Which, by the way, Mark Cuban said he wouldn’t go back on the show because of me until they got rid of that clause because he recognized valuable sophisticated business people would never go on that show. It’s a lot of money for a finder C.
It’s a shame he had to go on during that time, but at least Mark Cuban got it removed. That’s insanity. I would have never done that. Who would? Startups that don’t know any better. All you startups reading, don’t do that. Read the contract. Read the contract. Read the fine print. Get a good attorney. Hire Scott even though he doesn’t practice anymore.
“It’s $5.1 million and we’re on track to do $12 million.”
I want to pause on that because you were at $5 million when you were on stage. That year, you were over doubling your revenue in one year. Is that accurate?
This happened many years ago. It was hard. I was on the stage in July or August. Our predictions were that we would get to $12 million by the end of the year in part based upon being on the show. We ramped up a ton of inventory with the expectation that we would sell. Unfortunately, we didn’t sell anything as a result of the show. Nothing. Zero. We did not double that year. We’ve done more than that, but I’m not here to share any financial numbers or whatsoever. We’re a private company and we hold our numbers very close to the vest, pun intended.
I’m here to say that they’re doing really well. No pun intended but I like the pun.
“The retail business. Is that real?” “That’s not part of this.”
I want to back up one second. I want that to sink in what he just said. Most people go on Shark Tank to sell and to sell lots and millions of dollars. His hands were so tied. He could not sell anything whatsoever. He couldn’t even talk about his brand. He couldn’t do anything. There was real no reason for him to even go on the show because he was handicapped, basically. They handicapped him to be able to go on there and talk about his brand and sell products. Never get locked into a deal like that.
The Great Web Server Crash And The Hidden Cost Of Being “Handicapped” On Stage
Having said that, I did believe that people would Google, ‘technology-enabled clothing and Shark Tank,’ and we would redirect them. They would get technology-enabled clothing, and we would sell. Unfortunately, my web developer, who was a major web developer in the business, assured me we would not crash. Lo and behold, we crashed.
You crashed anyway, even though you couldn’t say SCOTTeVEST.
Yes. The traffic came, but it came more as a curiosity because they didn’t get the benefit of the understanding of the product benefits. What they saw and what you’re about to see is a very contentious discussion. Not about the product, but about a patent.
We’re going to play it, but that’s why I said fasten your seatbelts. This is a bumpy, crazy ride. Let’s go.
“That’s not part of it?” “No.” “The idea now is we’re not going to sell this retail. We’re simply going to step back, take the intellectual property, the IP, and license it to others?” “That’s exactly right. In terms of the offer I’m presenting here, it’s for the intellectual property and the brand name. The bigger idea, the billion-dollar idea.”
Let me ask you something. If you could have gone on there and said SCOTTeVEST without having to pay 5% to the producers. Would you have offered the percentage in SCOTTeVEST and not just the IP TEC company?
That’s what I wanted to do. It would have been much more expensive because SCOTTeVEST was worth a great deal more. One thing that’s interesting. None of the Sharks have any idea of who’s about to walk on the stage. I thought, as a viewer, they must have had some dossier. They have no idea. Also, another thing a lot of people don’t know is that if you ask for $500,000, you cannot lower that amount. I wanted to ask for a small enough amount. You can lower the percentage. Once you say $500,000, that is a floor of how much you can raise.
Even when you come back and counter? If they come back and say, “I’ll give you $300,000?”
You can’t.
You can accept $300,000, right or am I wrong?
I don’t think so. It’s been a long time, but I believe that the number you asked for, you’ll have to fact check me and do all the stuff you do but that was my recollection. That you can change the percentage, but you can’t change the amount.
They might have changed that now because I see people accepting less but back then, you’re probably 1,000% accurate here. You want an investor for SCOTTeVEST. Not in a TEC company.
When I started, until I got the contract and had gone through all the rehearsals and all the effort, then they told me about this provision. I had to pivot having gone through that but I did want an investment in TEC because I believed then and I do believe now, even though I haven’t pursued it. That the bigger opportunity is to license this technology to other clothing brands, much like you see Velcro.
If they didn’t have that 5% provision, you probably would have asked for more percentage in both companies.
Yes, 100%.
This is the mistake the business owners make, especially short-term guests. Number one, read the fine print. He’s an attorney. His wife, you’re about to find out, is an attorney. Read the fine print and get you a good attorney. Number two, most people fall short when they come in and ask for a new startup, percentage of the new startup. Versus asking for a percentage, offering a percentage in the main company.
“The sharks have discovered Scott only wants to sell a stake in licensing the patent and not in his lucrative retail clothing business.” “Scott, you’re saying that the proprietary patent, which you say you have now.” “Yes, I do.” “That’s what you’re selling me, right?” “Right.” “Why aren’t you bundling it all together? Why are you being so greedy and savage?” “It’s because I’m like you.”
I don’t know if anybody’s talked to Mr. Unwonderful before, but I love that answer. You know why? You’re not greedy. They tied your hands.
“What my other company has been doing has been building the brand of technology-enabled clothing for years.” “What is the technology we are buying?” “I see that you can put the speakers through the hood.” “Not through the hood, but through the pocketing system.” “I know Burton has done this for years. What exactly do you have that’s different from all the other ones that I know exist?” “They infringed on our patent.” “Have you ever protected it?” “Yes.” “You’ve collected it?” “Did you win?” “Yes.”
“I’ve settled with eleven of the largest companies, including VF Corporation, North Face, Ralph Lauren, Calvin Klein, Under Armour, and Spyder.” “You’re getting an ongoing royalty?” “It’s subject to confidentiality agreements.” “Wait a second, though. Is it getting a royalty stream from the settlements? You don’t have to tell me how much.” “Yes.” “Is that part of your bottom line?” “Stop. You need me very badly. I know how to sue people.”
The number one reason you’d get a patent in the first place is to protect yourself against copycats and big companies. As he mentioned, Calvin Klein and some big ones that can come in and do that. Any thoughts right here for entrepreneurs?
Rethinking The Patent Strategy: Why Protecting Your IP Can Be A Trap
Tons. I made a huge mistake pursuing the patent strategy from the beginning of this business.
He made a huge mistake. Listen up because most people don’t say that. Go ahead.
Most entrepreneurs feel that they need to protect their technology and their idea and God forbid, someone’s going to compete with you. It was your idea and they stole your idea. For the first ten years of my business, maybe more, every second word on my website was patented or patent pending and fine print. Anyone who dares to knock me off, I’m going to sue you. I spent time, money and aggravation with lawyers suing people.
Most entrepreneurs feel that they need to protect their technology and idea because, God forbid, someone's going to compete with you. Just do the best you can and welcome the competition and do it better than them. Share on XIf I had invested that time and money in the product and in the customer service experience instead. I was already doing it, but instead I would have been much further along. I would encourage every single entrepreneur out there to do as little as necessary to have the window dressing of a patent pending document but it’s worth nothing.
As I ultimately discovered, even if you do get it, you’re not willing to spend millions of dollars and tons of time defending it and protecting it. As a result, you would do much better just doing the best you can and welcome the competition. Do it better than them. It’s a huge thing. I want all your entrepreneurs who are reading to remember this because this is not what they think. This is not a natural thought.
That’s not what IP attorneys tell you. Other ones are making all the money.
The honest ones will tell you that. The honest ones will tell you, “This is the first step.” It’s up to the business person to have this common sense to know. You have to weigh the cost and the time of pursuing and protecting a patent against the value that time could be spent in building your business and just owning it.
Don’t you think, though, in hindsight, it was a good idea for you because you were able to stop all those competitors?
I didn’t stop them. They were doing it. I sued them under a contingency agreement with my attorney. My attorney, frankly, got into it and he realized, “This is going to be a lot more expensive to pursue than I thought.” My attorney quit. In the middle of litigation, I took on the litigation on my own and I pursued each one of these with the understanding that it would be valuable to get a simple licensing deal for $5,000, or $10,000.
The FUBU guy, Damon was right. He said, “I paid you this just to go away?” That’s exactly what happened. They paid me a small amount of money. The Sharks aren’t wrong in their response. The value of TEC would have been building the brand behind it, licensing it and getting them behind me to get other apparel makers to take this seriously. It wasn’t the patent that was the most valuable even to this day. It was the engineering of the pockets and the brand name, Technology Enabled Clothing®. Look at this. Velcro is no longer a patent. It was for many years but it is not. There’s hook and loop fasteners, but you want Velcro.
The GORE-TEX® is not a patent. There’s tons of waterproof material out there, but everyone wants GORE-TEX®. When you hear GORE-TEX®, you think of quality material and because they’ve imposed this regime of all these other requirements. That was the premise for me as a designing artist and bringing the brand. If you went to a clothing store and you saw TEC on the brand. You would know that the pockets and the wiring systems altogether were taken into account.
You have to weigh the cost and the time of pursuing and protecting a patent against the value. That time could be spent in building your business and just owning it. Share on XThank you for clearing that up because there’s so much confusion in the marketplace with everybody saying, “I got to get a patent.” You were probably one of the first ones that I’ve ever heard say, “If I had to do it over again, I probably wouldn’t have done it,” because it does cost so much money.
I would not have done it.
You guys listen to that. He’s been through it. He’s an attorney.
“This is going to be wonderful. I want it all, though. Why are you just giving me a taste when I want to eat the whole pie?” “Kevin, I don’t need you for the other company.” “Yes, you do.” “I just don’t.” “The problem is there’s leakage in the deal. I don’t get any of the good stuff. Only the risky stuff.” “It’s not risky.”
Let me ask you a question real quick, Scott. Did they know the issue?
No, I felt sorry for them. They did not know that I couldn’t sell the other company. They’re blind. They think I’m difficult. They had no idea. They’re fighting me. They think I’m being a jerk if I can speak freely.
They do. You can speak whatever word you want here. It’s all adults.
I want to be sure. There we go.
That’s amazing. As you said, they didn’t have a dossier on you. They had nothing on you but they had no idea. They just thought you were being a lawyer.
“What exactly is the property that you own that you can defend and have defended?” “A garment with no wires in it, but the capacity to wire things in it.” “Is it a design patent?” “Design and utility patent.” “It’s been issued.” “Not only issued. Not only tested in litigation, but reexamined and passed reexamination.” “Basically, the patent is attributable to the wires.” “That’s right. Only the wires.” “For example, this pocket here has a hole in it that leads up to here.” “That’s ridiculous. That’s just common sense, wires in, wires out. That’s what’s killing this country that we get dumb ass patents that people then turn around and sue when this is common sense.”
Do you agree with his philosophy?
I do, as it relates solely to the patent. Again, the bigger picture is, look at whatever article clothing you’re wearing. That sport jacket that Cuban’s wearing. The pockets are hideous. They’re not big enough even then or today to accommodate the things that you want to carry. I failed in conveying to them the larger picture. The patent was otherwise not protected. My mindset at that time was, “You must have a patent.”
I went on and led with the patent because that’s what most people respect. You watch every other Shark Tank episode. What is the third question they ask? Do you have a patent? The first question is, has it been protected? No other investor or business people take you seriously unless you have it. My premise is that’s incorrect, at least in my case.
You’re making a great point. I think all entrepreneurs need to listen up. What I love is your transparency, because you’re not saying, “They’re all at fault.”
No.
You’re agreeing with them, so I like your transparency.
“I understand as a businessman exactly what you’re saying. Especially as an ex-lawyer who hated dealing with lawyers so much. I stopped practicing law.” “Running a wire through a piece of clothing?” “I’m telling you, Mark.” “That’s a patent. Are you kidding me?” “Mark, who cares?” “No, you’re crazy.” “No, you’re so full of crap.”
Facing The Sharks: The Legendary Battle With Mark Cuban
“Scott, the cases you have defended have been when argument’s sake, let’s say one of my designers, and I have 30 of them, decided to wire something like a hood or something else like that. It goes out. We don’t even know you exist and have that patent. You hit us. We say, ‘Instead of paying the attorney bills, give them $50,000 to go away because we don’t have time for this.’ That’s it. That’s the reason why you got to defend all those bills packages.” “Horrible, horrible, horrible.” “How do you say that? That is what this country was formed on.” “You’re a lawyer. You’re going to say that.” “Coming up with a unique idea and defending it.” No one has ever talked to a Cuban like that in his life. I’m the only person that stood up to Cuban ever, I believe.
The value of tech would have been building the brand behind it, licensing it, and getting them to get other apparel makers to take this seriously. Share on XYou’re on the show. You can’t promote SCOTTeVEST. They don’t know anything about it. You can’t talk freely, but why be so contentious?
That’s who I am.
Transparency. That’s who he is.
I went there. I believed in the pitch I was making. I did. I couldn’t go up there. I wasn’t just there presenting for TV. I had to believe.
You wanted an investor. You did want to do that.
I 100% did. Once I got that investor, I would have opened them up to SCOTTeVEST, and we would have worked together but my hands were tied. Imagine how difficult that would be for anyone. Much less, again, I’m standing on a stage. They are four feet higher and the lights are on me. They’re all yelling at me. Cuban’s telling me I’m ridiculous and I’m horrible. If I had wilted, I knew 6 million or 7 million people were watching this. I had to present myself. Fifty percent of the people that watched the show thereafter thought I was a hero.
People told me that they were watching the show, and at this moment, they stood up and started clapping. They’d never seen anyone stand up to the Sharks. He was beating me up on a legitimate business idea. Most people don’t hear this side of the story. Most people never hear this side of the story. I’m giving you inside information several years later. This is upon reflection.
I love it because it’s so authentic. There’s so much transparency here. The problem is you just couldn’t sell the way you needed to sell because of the producers. Talk about greed. Some greedy producers.
Keep in mind, they got 5% whether a deal was done or not.
I didn’t know that part.
Only for appearing on the show, whether a deal is done on the show or closed. Everyone prior to me for the first 3 or 4 seasons had an ongoing option that they later relinquished that would have followed them throughout the entirety of their company career. You buy and sell businesses. That’s how I understand, Michelle.
I buy and sell businesses.
If you were representing a business tomorrow and you said, “Give me all the copies of all agreements that impact this business.” They showed you a copy of the Shark Tank agreement and said, “I’ve got 5% sitting out here. That’s diluted. That’s craziness.” They would explain, “Deal wasn’t done.” You read the language and you’re going to say, “You’re screwed,” but there you go.
It would be interesting to go back and see how many of those people that were on the Tank that had to give 5% of the business.
They never exercised in the arena.
They never did exercise because of Mark Cuban?
It’s because of me and Mark.
There you go. A hero.
“You came up with a fantastic idea. You patented that idea. You went out and built a business on your idea that will do $12 million this year, $24 million next year, if not more. Now, you don’t want to sell us any of that business. You just want to take the idea and sell us the patent.” “Yes, I do.” “My other business only has a very insignificant part of a much larger market.” “No, because your other business could end up being the billion-dollar business that we have nothing in.”
He’s not wrong there. The other business could be a billion-dollar business.
I agree. “I’m going to grow that business.” “You’re going to have the first rights of this technology and not have to pay us.” “That’s all negotiable. I’m here to negotiate.” “Would you sell me 15% of that business for $500,000?” “You’ve got to be kidding me. That’s insane.” “Why is that insane? How much money are you going to make on that $12 million?” “$2.1.” “You just called him insane for offering you a half a million dollars.” “For a company that’s making $2 million.” “Why are you?” “Honestly, I want your connections. I want your expertise. I want your help and I want your money.”
For half a million for 15%, I do think it’s insane. I’ve been evaluating businesses for many years. It’s insane. They’re just not used to somebody like Scott calling them out. Any comments here, Scott?
No, but it was insane. If you look at multiples of any company like apparel or technology or even widgets. To offer a half a million dollars for a company on track to do $2 million in EBITDA in a year, it’s not logical. I responded appropriately. Again, in their defense, they don’t understand what the box the producers put me in. As a result, I had to make some good TV and I had to fight for what I believed in.
They just didn’t understand the product in its full capacity either.
Decoupling Retail And IP: Dissecting EBITDA Multiples And Lowball Offers
I know, and one thing’s important. I do have regrets. There was a point earlier that you played when Damon said, “Your retail company would have unfettered access to this and not have to pay any royalties.” I had hoped that conversation would have gone on. Keep in mind, this was over an hour in there that they edited down to about twenty minutes, which is one of the longest running edits in Shark Tank history.
There’s usually four entrepreneurs in each episode. I think in mine, there were only three. The point was, I wanted to be able to say, “To make up for that, SCOTTeVEST will commit to paying 20% of our revenue to TEC to compensate you for this.” I didn’t get a chance to talk that through. I did not want to give them SCOTTeVEST for these rates.
You just didn’t have a fair playground here.
No.
You didn’t.
“I have to ask you something. Do you have a business partner?” “Yes.” “They must be a saint because you strike me like you’d be one pain in the neck to live.” “He’s a lawyer. What do you expect?” “No, but beyond that. You’re tough.” “Do you know who the partner is?” “Who?” “My wife.” “Oh, God.” “Is she a lawyer, too?” “Yes.” “Scott, just to be clear, I’m out.” “I understand.”
How do you and your wife work together? I know a lot of husband and wife’s partnerships don’t go too well. You have a brilliant wife.
Yes, I do. She’s running the entire business. I just go and play all day.
That’s amazing.
“Scott, we’re talking about $1.2 million free cash? What’s a clothing company trading at these days? Let’s call it five times.” “No.” “Why?” “Since we’re direct to the consumer. We’re an internet clothing company.” “What’s it worth?” “$30 million.” “$30 million?” “Who’s insane now? It’s growing at 100% a year. It has intellectual property that’s working. It’s unique. It’s online. It’s building a brand, a lifestyle brand.” “First of all, intellectual property is built about running a wire through clothing. A rivet, a wire, Velcro.”
“It doesn’t matter what it is.” “It does matter because wireless is what’s next.” “Wires will not go away with battery power and for the time being for music. People will always prefer to listen to music with wired headsets. Sound quality is better. You don’t have to worry about pairing issues.” “I don’t agree. I’ll put low power Bluetooth into the shoulder, let it distribute to all the other devices into the headphones.”
“Kick your ass,” he says. Here’s the bottom line. As an entrepreneur, you always have to look at those competitive threats. One of the biggest ones is AI. They did bring up a good point. What’s your thoughts on that? Are you doing well with that?
That’s a great question. A couple of things. First thing, Levi’s is what it is because they had a patent on a rivet in pants. That patent went away and Levi’s continued because they built a brand that has withstood all this time. That’s number one. Number two, everyone talked about the convergence of devices and people would only have one device.
If you give me a moment before it is over, I’m going to pull out all the other things I carry from my passport to my wallet to ChapStick, AirPods, batteries and cables. It is not about just the wires. He was caught up because I was forced to present and talk about just the patent of the wires. Not the bigger brand story and the consulting that goes into it. Again, pocket to this day, no other clothing line, 25 years later, designs clothing with as much tension to detail to pockets as we do. They don’t call it pocket science for nothing. We do pocket science.
Whatever it is you’re wearing , you personally or the people reading this. You say to yourself, “Are these pockets designed so stuff doesn’t fall out when I bend over, that feel secure, that have RFID protection in one pocket or another, that carry all the things that I want to carry?” No. Many years later, it’s not just about those things. He wasn’t entirely right because Bluetooth does not take into account charging devices. Although, there are MagSafe. For the wires, believe it or not, you are having a bit of a comeback. People still use wired headsets. I don’t, as you can tell.
I use them because I always lose my pods.
There you go.
There’s that.
“I’m out. This was the best. You were out from the moment you sat down. You’re no loss.”
Did you think that he was out from the minute he sat down?
I did. I thought he was going to be difficult. I wanted him, but he was tough.
Was he your number one pick when you were going in?
It’s because of his muscles. I told you in the pre-interview, he came after me via Twitter and offered to defend one competitor that knocked me off. Straight up an exact replica. He wrote to them in public for all the world to see after the episode, “If you need help defending this lawsuit against Scott, I’m here to help you.” I don’t think entrepreneurs should suffer through that, having a billionaire join forces with your competitors. He was a jerk. I later met him and he claimed not to remember me. I’m sure he did.
One, don't pursue the patent at all costs. Keep that into perspective. Two is make a great product and a great customer service experience. Don't compromise at all. Share on XI agree 1,000% that no entrepreneur should be subjected to that at all. That’s insane. Here’s one question I want to ask you. They didn’t know SCOTTeVEST but they knew the parent company, the TEC company.
No, they knew SCOTTeVEST. They didn’t know TEC. SCOTTeVEST was the parent company. They knew of SCOTTeVEST but they didn’t know it by name. They knew it because we were written about in pretty much every major publication.
They didn’t know it by name when they were sitting there.
I don’t think so.
Why didn’t they just Google? Can’t they pull their phone out and Google?
No.
That’s what I would have done. You can’t do that, huh? You made a phone call and asked, coming up.
“What is your problem? Why would you say a comment like that to Mark?” “You’re calling me insane?” “No, your valuations were insane.” “It’s an insult that you wouldn’t offer us part of the bigger picture. I’m out.” “Three sharks are out, and Scott has one offer on the table from Robert.” “They ask a scorpion why it would kill something it was floating across a pond on because it’s nature. You’re a lawyer. It’s your nature to be like this. I’m okay with it. Mark brings up a great point about wireless. You’ve got to admit that.” “It hasn’t happened.”
“It’s coming, and technology changes. There will be very low-cost wireless headphones that will erode your share. In the meantime, you’re doing a great job building this business. Now, Robert made you an offer. He said, ‘Bundle them together. He’ll give you $500,000 for 15%.’ I’ll go in with him on that deal. You can go 50/50, or I’ll offer you a million dollars if he wants to come in with me. We’ll double it for 30%.”
“I gave you $500,000 for 15%. I don’t need O’Leary on that.” “Fine, then I’ll make the same offer and you can choose between us.” “I’ll make you the same offer because combining them together in the clothing industry with the risk of wireless taking some share away in the next 36 months, $500,000 for 15%.” “Scott, is there a premise under which you’re going to entertain an offer in the real business?”
What were you thinking as you were standing there?
I was standing there realizing I was not going to get a deal without SCOTTeVEST involved. At that point, I’m just making some good TV but I am scripting television. Imagine this. I’m one person and there’s an incredible amount of pressure. They get to edit me in any way they want. I did not want to give them any material that would make me look like an idiot. That’s what they do to these entrepreneurs. They want them to look stupid and their Sharks to look super smart and make all the entrepreneurs feel pathetic. I wasn’t willing to feel pathetic.
Phoning A Friend: Steve Wozniak And Knowing When To Walk Away
I didn’t want to beat them up but at that point, there was no point in continuing to stay on that stage. That was the pivotal point where I said, “Make good TV and get off that stage before there’s too much material for those editors to do whatever they want.” That was about 50 minutes in at this moment. I did, back in the day, very rarely, they let you call a friend or phone a friend. As you will see, I phoned a friend and I did so spectacularly on that.
I am a little surprised that they did not edit out when you were being so contentious sometimes.
I was contentious the entire time, so there would have been nothing left.
There were more in certain spots like, “Mark, you were out before you I went in.”
I was, too. I think they liked it. It made good TV.
It does make good TV. It’s a reality show. Everybody wants to see a train wreck.
“I have a call that I need to make. It was on my advisory board, Steve Wozniak, the Co-founder of Apple. I need to talk with Steve Wozniak.”
Great guy, by the way. I spoke with him on stage. A wonderful person. I love what’s going to happen next.
Amazing guy. “Tell Woz I said hi, too.” “I will.” “Would you like to say hi, Kevin?” “Sure. I sold him a ton of software. I was their education business for years.” “I have a crap-eating grin throughout the entire day.”
You have what?
I have a crap-eating grin the entire time. She said, “Make sure you look happy.” I had this smile the whole time. It’s the first time I’ve watched this in over a decade, so it’s funny. “Nonsense like that and turn it into a patent, then fill up the legal system, and create unlimited uncertainty for companies. It’s wrong.” “I agree with you, Mark.”
He’s still going on and on.
They considered me a patent troll. This is offensive because a patent troll is someone who files for a patent for an idea that they have no intention of pursuing themselves and then suing, going out and suing people. That is not what I was, am, or ever thought of being, but that’s how they treated me. I had a legitimate business that I was protecting.
I don’t think you did anything wrong there. I really don’t. You came up with an idea. You went out, you got a patent. You got the patent. What did you do wrong?
“I love them.”
Mr. Wonderful agrees.
“It’s very good to hear from you.” “Here’s the deal. I got two offers on the table, both from Kevin and Robert. They’re the same amount, $500,000 for 15%, which is what I asked for, but they’re insisting that I include my other retail company.” “I’m sorry. That’s just too much for this offer. I don’t think this offer is good enough for giving up what you’ve got going already.” “What he’s doing is he’s trying to figure out, is he serious about selling the real business or not? If I believe he will, maybe I’ll make him a real offer.” He acknowledged it wasn’t a real offer.
Is that what you were doing?
No. Honestly, I was hoping that Steve understood the position and he didn’t argue with me. I was a little nervous because he could have said, “You should take the offer.” I had no idea what Steve was going to say. It took about an hour to get Steve on the line, by the way. There was like an hour break in between this.
That’s why they don’t do it anymore.
They made an accommodation for Steve, obviously.
I love what you say when you get back. You didn’t want to consider it a million for 30%. That was way too much equity to give up for a million.
The numbers didn’t make sense.
I agree.
“We were just talking bad about you, but it’s okay.” “Steve says hi.” “He doesn’t know you. I’m sorry. No, I’m kidding.”
You’re right. You just came back on, playing as a boy.
I was certain they were going to cut that out. That’s classic. Come on, to pull that out. I am completely controlling the room at this point. They had never seen anything like this before in their lives.
I hope all the entrepreneurs understand what’s happening here. He couldn’t talk about his company. He wasn’t going to give 5% to the producers. At that point, he knew he wasn’t going to get a deal he could live with so he just made for good TV. Sometimes that’s what you have to do.
“First, before I relay Steve’s comments. Would anyone else like to reconsider?” “Why don’t you tell us what Woz said?” “Woz just thought that it was an awfully low offer for such a well-established business.” “Did Woz agree, though, that the only logical play was that it’s one business. Not two businesses?” “We didn’t talk about that specifically. Although, Woz knew what I was pitching because I’ve discussed this with him.” “Your answer to $500,000 for 15%, I’m taking it, is no.” “I wanted to give you another opportunity.” “To bid against himself?” “To rethink the logic of $1 million.” “Scott, the way it works in the Tank is we make an offer, you counter.” “Kevin, you’re out. I don’t need you.” “Wow.”
At this point, you didn’t even want to counter.
It couldn’t be countered. I wasn’t allowed to counter. What could I counter?
That’s right. You weren’t allowed to counter because then you owe 5%.
I couldn’t go down to $200,000. At that point, I had nothing to do.
You were trying to rock and a hard place.
Truly. I did plan this. In my mind, I scripted. I said, “If all goes to hell in a handbasket, point at them and tell them they’re out.” Now, imagine how hard that is to do and pull it off in one take while appearing somewhat sincere. That could have seemed phony, but I watched it again, and it seemed pretty authentic. “You’re out. You’re out. I’m out of here,” and they were shocked. The producers were shocked. Everyone was shocked. They were speechless. They didn’t know what to do.
“A million dollars sitting here.” “Will your wife represent me in suing you for wasting my time? That’s what you’re doing. You didn’t come to make a deal. I didn’t waste your time. Don’t waste hours.” “You know what? Seriously. What the hell? You point at me and you tell me I’m out?” “Bye-bye.” “Show a little more respect.”
After this moment, I started walking off because I’m making good TV and I thought to myself, “My mother did raise me to be a better human being than just walking off.” I went and I shook everyone’s hand one at a time. They all laughed and they thought they’d been played, but they appreciated the amount of work that went into what they had witnessed. They did.
It was a masterful performance. It was if I do say so much. Damon, I’ll never forget what he said. He said, “This is why I don’t want people working for me that are smarter than I am,” because he felt played. Conversely, I’m like, “I want smarter people working for me.” When I went to Robert and I went to shake his hand, now keep in mind, I’ve just shook every one of those hands.
They did not show that part.
No, they didn’t. I go to shake his hand. I put my hand out and he’s like, “I’m not shaking your hand. After what you did to me.” No one’s ever not shook a hand. That’s the stupidest thing ever. There you go. “That was painful.” “As my mother always said, ‘The fish stinks from the head.’” “Why are we still talking about it?” “I went in looking for a deal. I truly did but unfortunately, the valuation that they put on my other company to combine was just insulting. I had no other choice. I had to.”
Processing The Reality: Post-Pitch Psychiatrists And Handshake Rejections
After you’re out, you go in, and right at that moment, they bring you into a room with a psychiatrist. They’re there to help you process what you’ve lived. It’s a major experience, and most people don’t know how to process it. They sit down, and she says to me, the first words are, “I have to tell you, before you even say anything, there’s a chance it might not even air. We don’t know.” I turned to her and I said, “Were you in the room?” She says, “Of course, I was in the room.” I said, “If you saw that, what are the chances that’s not going to air?”
She says, “If you repeat this, I’ll deny it, but there is no chance in hell there could be a war and they will find a way to air that show. It was that entertaining.” There you go. All the Sharks contacted me in some effort to reach out to do some business. Except for Mark, who tried to deal with my competitor at the time.
They all reached out to you, including Robert?
I think so. I remember multiple ones, but now watching this, I find it difficult to believe that Robert did. He got his feelings hurt.
That was an entertaining show. We don’t have too much time left, but talk about life after the Tank. I know SCOTTeVEST is doing great. You don’t have to share anything proprietary, but let’s talk about life after the Tank. Did you learn anything valuable that you used in your business?
No. I didn’t get the promotional expense.
Were they right about wireless technology?
Not really as we discussed. For many years thereafter, wires are still meaningful. They’re even meaningful to this day. As indicated, the premise is not just the wireless. It’s the whole design ideas, concepts and the pocket science to this day. We now have over 40 different items in our line. You asked me to bring an item.
Take them out real quick. We’ve got time. Let’s make that happen.
The first thing, there’s the Tropiformer. It’s my favorite article of clothing. I have two iPhones in each pocket. I have my ear pods, and these are all things I typically would carry. I carry one cable. I’ve got my key. You’ll notice the brand. There you go. I’ve got a cable for international travel, an adapter. I got another cable. I got a camera here because why not? I’ve got a toenail clipper, my ChapStick, a pen, and another pen.
You can almost carry more than a woman’s purse.
For sure. I’ve got my eyeglass cleaner. I’ve got a 5 terabyte SanDisk. I’ve got an RFID pocket with my IDs, my passport and credit cards in there. I got something in here I can’t find. I’ve got more ChapStick.
When you go through security at the airport, do you have to take it off?
You just take it off and put it through. I’ve got my Ray-Ban glasses. I’ve got a battery. These are all critical things when I travel. This is an exaggeration. Each one of the clothing items comes with a little chamois for your eyeglasses that has a map of everywhere you put all the items, in case you forget.
That’s pretty cool. This is much cooler looking than the male purse.
Yes.
That’s more masculine looking.
Here’s the coolest thing about this particular jacket. If I’m out and about and I want it to be a vest because I don’t need a jacket. The sleeves come off with magnets.
That’s pretty cool. Especially for motorcycle enthusiasts.
Also, for undercover law enforcement. I’ve got another pocket here. I’ve got pockets in my underwear.
You have pockets in your underwear?
Yes. When you wake up in the morning and you have your iPhone. You’re walking around and you’re getting your cup of coffee and you put on your underwear.
That’s pretty cool. Do you have female products too or is it mostly for men?
We have female products. There are little change pockets in here. I keep a couple of coins there. There you go. I haven’t even filled all the pockets. I had the iPad that I’m recording on in one of the pockets too. You don’t have to fill it all up. You can just put a few items in if you want.
You can put a whole regular size iPad in a pocket?
A big iPad.
That’s amazing right there.
As I said, what I did, if I had an opportunity to do that on the show, if they didn’t edit that out. When I took this all out and they tried it on, they’re like, “Wow.” It’s an easier way to carry things because the weight’s balanced on your shoulders.
I didn’t see them sample that.
They did. They cut it out because they chose to edit in all the contentious conversation. They could have edited the product conversation and everything else.
When they got to deal with you, maybe they would have included product stuff. The contentious is what sells, perhaps. Any golden nuggets like the top three things for entrepreneurs, inventors, business people that you would recommend to do?
Pocket Science & Profitability: Golden Nuggets For Modern Entrepreneurs
One is, don’t pursue the patent at all costs. Keep that into perspective. Two is to make a great product and a great customer service experience. Don’t compromise at all.
If your idea is good enough, invest in it and turn to your friends and family. Start a business that focuses primarily on profitability. Share on XThat’s prudent right there. Design with the customer experience in mind, not with your own.
We were the very first clothing company to start online many years ago and we’re still in business. Follow your passion. Be passionate. If you believe in something, step up. Be willing to be passionate about it. What you saw there was not a show. I can talk about it ten years later in retrospect, but I believed everything I was saying. That was not a show.
I was passionate about all the things that I was talking about. Most importantly, don’t go on Shark Tank if you think it’s going to be an effective way to raise money and get business. The odds of doing that are like getting into the NBA. Not only do you have to get on the show. Not only do you have to rehearse it, but you’ve got to get a good edit. You’ve got to get a deal. You’ve got to get presented in a reasonable fashion.
All that time and effort, if your idea is good enough, invest it in the idea and turn to your friends and family. Borrow from your house, a home equity loan or borrow from your credit card. Start a business that focuses primarily on profitability. As you and I spoke earlier, we are not optimized to grow the company to be a $200 million brand or half a billion-dollar brand. We want to be profitable and we have been for many years. Every single year, we are focused like a laser on making money and delivering great products and customer service experiences.
Those were good tips. They’re very opposite of what a lot of people say. I like your transparency. I thought it was a great show. One of the best I’ve ever watched. Thank you so much. I told you it’s going to be a fascinating show. It was going to be a bumpy ride with lots of curves, but truly entertaining.
Thank you so much. Everybody go check out SCOTTeVEST.com and buy his products. He didn’t get promoted on Shark Tank but most importantly, go back and reread this episode over and over again. Share it with your fellow network. I always say your network equals your net worth. Get the message out there. If you haven’t done so already, subscribe to the show. It was great having you on the show, Scott.
Thanks. It was a lot of fun, Michelle.
Thank you. Till next time.
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