Mark Cuban typically only invests in companies if he can see himself — or his NBA team, the Dallas Mavericks — using their products.
On Friday’s episode of ABC’s “Shark Tank,” he made an exception on behalf of his two daughters and his wife, making a $400,000 investment deal with San Francisco-based makeup company Youthforia.
Youthforia is a viral success story: Since launching in April 2021, the company had brought in $2 million in about a year in the time of filming, which CEO Fiona Co Chan credited to her aggressive social media tactics.
The brand posts frequently TikToks showing how its color-changing oil blush reacts and blends into their customers’ skin, and currently has more than 123,000 followers on the platform.
The Sharks loved the strategy and seemed sold on Co Chan, a Dartmouth University graduate who left the tech field to create makeup people could sleep in — but they were less sold on the product.
Robert Herjavec said he didn’t understand what made the product unique, and Lori Greiner said she didn’t use oil-based makeup. In stepped Kevin O’Leary, who said he didn’t need to invest in the product: He only needed to invest in Co Chan.
“It’s a bet on the jockey on this deal,” O’Leary said. “You’re really impressive.”
O’Leary said Co Chan would need capital for inventory. He offered her $100,000 with a $300,000 loan for 20% of Youthforia, and said he wanted a cut of distribution pay.
Co Chan wasn’t sold on working with O’Leary, so she mentioned to the other investors that she was getting ready to launch individual shades of blush, similar to more traditional products on the market, at the request of her customers.
It didn’t have the intended effect. Both Cuban and Barbara Corcoran — the only other remaining investors — said they were confused why she needed more shades when her viral product already adjusted to any consumer’s skin tone.
“When you have something that’s completely differentiated, you ride that, and you don’t do anything else, because that just dilutes your efforts,” Cuban said. “Sometimes, you shouldn’t listen to your customers.”
With no other option, Co Chan negotiated with O’Leary. She asked him for $400,000 in exchange 5% of Youthforia, with a 50 cent royalty on every unit sold until he made back $500,000.
O’Leary countered with 10% and a $1 royalty until he made back $800,000, double his initial investment.
That’s when Cuban came back in, saying he’d offer $400,000 for 10% without a royalty deal, because his daughters and wife would “understand” the product. He even offered to do “demos” wearing the color-changing blush.
O’Leary, growing frustrated, said he’d give $400,000 for 7.5%, but wanted a 75-cent royalty until he made $1 million. Cuban he’d do it for 8% and no royalties, “just to prove a point.”
Co Chan accepted, leaving the show both surprised and satisfied. She wasn’t the only one: As she exited, both Herjavec and Corcoran said they were impressed by her negotiation skills.
“Kevin, you have to get up and leave the ‘Shark Tank,'” Herjavec teased. “Fiona’s taking your chair.”
Disclosure: CNBC owns the exclusive off-network cable rights to “Shark Tank.”
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