Continuing on yesterday’s post, I just had to share this. Check out CoatChex.
I don’t have a vendetta against professors, I promise.
With that said, I think this young man from the video made a mistake—he listened to his professor.
Look at the facts:
- He’s straight out of college, which means he has limited (if any) real world experience.
- He has $0 in sales, yet he has given his company a $2 million valuation.
- He hasn’t tested his product in any stores, yet he thinks he’s ready to start a franchise.
- He doesn’t know his market; he thinks he has no competition.
- The business is seasonal (it can’t make any money most of the year).
Despite everything listed above, Mark Cuban gives him a counter offer of $200,000 for a 33% stake in the company! That’s roughly a $600,000 valuation…did I mention this has $0 in sales and hasn’t even tested his product?!
And what happens?
The college professor says to pass…that 33% is too much equity to “give away”.
I think it’s important to be picky when choosing a mentor. Choosing an entrepreneurial mentor who isn’t an entrepreneur would be like hiring me as a basketball coach…If you combine the NBA and college basketball, I can’t even name five active players.
Professors can be wonderful teachers but I’m just not convinced that academia is where entrepreneurship is cultivated.
Did you notice that a $600,000 valuation was Mark Cuban’s counter offer and it’s my estimated budget for my first house? It’s easy to throw that number around when it’s just a theory (and theories thrive in academia) but it takes on a whole new meaning when it’s your hard earned money.