For Shaan Patel, the grilling became so intense that he began to visibly perspire. But the MBA student from Yale University’s School of Management ultimately left his Shark Tank episode with a $250,000 investment from entrepreneur Mark Cuban for 20% of his SAT prep company.
It took a lot of fast talk on TV to get that money and ultimately Patel, also a medical student at the University of Southern California, had to give up twice as much of his company as he originally wanted. But he left with an endorsement and cash from Shark Tank’s highest profile entrepreneur.
2400 Expert Sat Prep, Patel’s startup, has racked up $1.2 million in revenues in the past four years. Patel claims that his in-person and online courses, which respectively retail for $999 and $599, boast an average SAT improvement of 370 points.
But most of the investors at Shark Tank were unimpressed. Every other investor, with the sole exception of Cuban, would turn Patel down. The toughest questions came from Kevin O’Leary, a ruthless serial entrepreneur who made his initial fortune in the consumer software space.
After Patel made his pitch, O’Leary was quick to jump into the fray.
“Here is the good news,” he proclaimed. :i know everything about the test prep market. i was a shareholder in Kaplan and Princeton Review. What does it cost you to acquire a student?”
The MBA student stumbled, not having an answer.
“if you want to scale and compete with the big goys,” admonished O’Leary, “you need to figure out the answer to that question. The whole strategy of the SAT market is customer acquistion. That is the whole deal.”
When another investor questioned his commitment as an entrepreneur because he is also going to medical school, O’Leary didn’t hesitate to go in for the kill.
“You are digging yourself a hole,” he told Patel. “A shark investor wants to hear you are totally committed to dominating the test prep space. It has to be oozing from every pore. We have to believe you. i don’t believe you.
“The great thing about this market is that it is recession proof and huge. Your biggest problem is that you are not 110% committed. i give my money to people who will die for their business. They will give up their lives for their business. That is the kind of general i want to back. You are not that general.”
Flustered and sweating, Patel looked as if he just about had it. But then Cuban came to his rescue with the quarter of a million-dollar investment in exchange for a 20% ownership in Patel’s 2400 Expert SAT Prep company.