Table of contents
Talbott Tees in front of Shark Tank
Steve Nakisher and Shane Talbott are longtime business and life partners from Chicago. The two have different professional backgrounds. Steve is a psychologist and Shane is a hair dyer, but despite their different career paths, they have developed a product that they both believe in. Talbott Teas is a designer brand of tea and tea accessories that bring relaxation and indulgence to people's daily tea routine.
The idea was born in the couple's salon and spa. As part of the pampering experience, Shane served his own blends from a tea bar in the salon. Customer demand grew along with its repertoire of flavors to the point that Steve and Shane decided to package and sell the tea. Shane's relationship with a big celebrity led to Talbott Teas' big break, but they still needed the sharks' help to take the business to the next level.
Talbott Tees during Shark Tank
Steve and Shane entered the tank and experienced that intense first moment in the spotlight. They held up better than most. After a while, Steve offered the Sharks a twenty percent stake in Talbott Teas for two hundred and fifty thousand dollars, a million, two hundred and fifty thousand dollars' worth. While they both had good chemistry and presentation skills, Shane clearly had a knack for the art of pitching. For him, brand identity was everything. Talbott Teas is a cup of couture. It's glamorous, elegant, and most importantly, indulgent. Your product line is "stylish". As a businessman, Steve decided to enter the market size. According to him, the industry was big but with few exciting options. Talbott Teas' niche was a unique combination of luxury and affordability.
After each judge was given a unique sample of tea, they inquired about the sale. Were these entrepreneurs serious or was Talbott Teas just gossip? Kevin was impressed when he heard about high and growing sales of $100,000, $350,000 and well over $500,000 in the company's first three years. An appearance on Oprah's Favorite Things of 2010 list led to a surge in sales and interest from retail stores. A regular at her salon, Oprah discovered the brand through Shane, her personal hair colorist. This surge of opportunity led to the Talbott Teas' first appearance on QVC. The shopping network placed an initial order for twenty thousand dollars. After a successful first performance, this increased tenfold to two hundred thousand dollars!
Talbott Teas was off to a great start. Not only did they convince the sharks of their professional image and high product quality, but they also proved that the business worked. When Mark asked where the investment would go, Shane was a bit vague, citing the need to capitalize on growth and business connections, but the Sharks seemed to let that happen. Instead, they focused on more detail. Steve estimated their profit margin at fifty percent (before they paid for themselves), and Shane put their retail prices at between $10 and $15 a can. Kevin was interested in exploring alternative price points, which revealed the inner workings of Steve and Shane's business relationship. For Shane, a fan of luxury, marketing his tea as a worthwhile spend was the right move, but Steve believed more in the affordability model.
The sharks were about to learn more. Steve and Shane had invested three hundred thousand dollars of their own money in the business. "You believe," Mark remarked. In addition, as fifty-fifty partners, they joked that there was a special system for settling disputes. "I win!" Shane said proudly when Steve agreed. More seriously, Steve laid down the division of labour, claiming the business side for himself and the creative side for Shane. Now that Shane was the idea generator, Kevin asked him about his five-year plan for the future. Talbott Teas eventually grew into a full lifestyle brand, encompassing more tea accessories and licensing opportunities. When Kevin, as he is known, asked where his money would come from, Steve immediately responded with a liquidity event that would see the company sold for four to five times earnings. Kevin and Steve were on the same page. He was impressed by her business acumen.
Everyone could see the regret on Daymond's face as he reluctantly left the negotiations. Although very interested in Talbott teas, he spent his time elsewhere with another similar business, one where he "lost his shirt". Mark also respectfully backed off, saying tea just wasn't his area of passion or expertise. Kevin wanted to come back to Daymond's comment. Concerned about his own potential investment, he wondered if the tea business was harder than he thought. On the contrary, Daymond called it a great place, saying that "caffeine is the number one drug in the world," but the owner at his other store was "a jerk."
After that assurance, Kevin came back with some measured praise for Talbott Teas. He admired their growing business and the fact that tea is recession-proof. On the other hand, he did not agree with the assessment. To him, Talbott Teas' growth trajectory was promising, but not certain. With sales of $500,000 this year, he claimed the deal was worth half what they were asking. His offer was two hundred and fifty thousand dollars at forty percent. Although Robert obviously didn't enjoy it, he agreed with Kevin. For him, Kevin's current assessment was correct, although several years of growth could change things. He also cited the fact that once Steve and Shane paid themselves, the gains would seem less impressive, especially given their large initial investment. Robert said goodbye.
Lori was the final domino and also challenged Talbott Tea's valuation. The two were forced to return to Kevin along with his demand for double equity they had offered. "Come to Daddy," he grinned, enjoying being Talbott Tea's last chance at a deal. Steve reinforced the work he and Shane had already done in building a product line, brand and business relationships. The way was laid. Steve, Shane and Kevin all found themselves in a tight spot where the business partners were unwilling to give up forty percent equity but Kevin wouldn't budge.
Or would he? In almost a career start, Kevin doubted the final forty percent offer. "I rarely change my mind once I've made an offer...because I'm a disciplined investor." The room was dead silent as Kevin made sure he had fully considered his options and no one in the room could believe what they heard. Eventually he relented and offered to complete the deal at thirty-five percent. Knowing this was the best they could get, Steve and Shane accepted without further argument.
Mark did his best to drive home that this was a groundbreaking event. He dubbed the men behind Talbott Teas "safecrackers" for cracking the safe where Kevin carefully guarded his riches. Steve and Shane couldn't believe it either. Admiring his business acumen and past accomplishments, Steve named Kevin the best partner Talbott Teas could hope for. "I didn't see that coming," Shane admitted.
Despite the glee in the room, this deal may not be as amazing as it seems. When it comes to investing, a company's value is often based on a multiple of its annual sales. In the current year, Talbott Teas was ready to earn at least five hundred thousand dollars. Even that number ignores the company's traditionally strong fourth-quarter results. The sharks were trying to drive home the company's meager net income, but with profit margins at fifty percent and rising, that seemed like a weak argument. Also, Talbott Teas had no real flaws in its presentation. The professionalism, the design, the product quality and the low volatility of the tea business spoke for him. So why, after several long minutes of nerve-wracking negotiations, did Steve and Shane give up almost twice as much as they had hoped?
Maybe Kevin influenced the tone of the room. The situation is reminiscent of the Esso pitch, in which Ryan Naylor attempted to sell shares in a watch line using "negative ion" technology. Despite the apparent pseudoscience, the business had big sales, which is usually the only thing that matters to Kevin O'Leary. However, Mark Cuban immediately backed down, calling the deal a scam. During the Esso pitch, Mark was pivotal enough to dissuade Kevin from investing in a profitable company. In the case of Talbott Tea, Kevin was instrumental in discussions and negotiations. He was also the first to make a counter offer, and since Daymond was the only other Shark keenly interested in the deal, there wasn't much competition to bring that number down. What we saw was a monopsony, a single buyer economy, and Talbott Teas was at his mercy whether he liked it or not.
After Shark Tank - Talbott Tees now in 2018
A lot has happened since filming Talbott Teas' original appearance on Shark Tank. Obviously Kevin brought some sharks on board. Daymond was excited about Talbott Teas' prospects from the start, but his hands were tied due to a difficult relationship with a similar company. It looks like he's finally escaped those headaches, and along with Barbara, who didn't appear in the original episode, he's now happily doing business with Steve and Shane.
Using the power of three sharks, Talbott Teas quickly caught the eye of Jamba Juice, a major chain of smoothies, fruit juices and natural foods. Jamba Juice, particularly its CEO James White, liked Talbott Teas enough to seek an outright takeover. He even allowed Shane to stay on as vice president of innovation so he can channel his creative energy into new product development. Though the amount of the sale hasn't been disclosed, Kevin's insistence that Shark Tank made the couple rich speaks for itself. Steve and Shane seem delighted to see their small idea grow into a successful product that is sold worldwide.
Since the acquisition, prospects for Talbott Teas appear bright. It can now be found in traditional retail outlets like Whole Foods and Wegman's, as well as in Jamba Juice restaurants. Since the acquisition, Jamba Juice seems to have continued the brand's image of zen relaxation, judging from the company's social media posts and blog. Recent updates include a personality test to match the test taker to their perfect cup of tea and a list of tea rituals from around the world. For any other entrepreneur, a total buyout could be bittersweet. Some business owners are so attached to the success of their businesses that they cannot let go. For Shane, however, Talbott Teas always seemed more about expression than building a business. Talbott was simply his vehicle for creation. Only time will tell if the takeover will mean a return to salon life for Steve and Shane, or if they will try their hand at another venture.