Ghazal Alagh, the co-founder of MamaEarth, entered into a negotiation with a couple of entrepreneurs who pitched their idea for a steel tiffin manufacturing company in a recent episode of Shark Tank India, But they weren’t satisfied with the terms of her offer. The entire negotiation was shared by Sony Entertainment Television in a video posted on its Instagram account.
Ghazal is one of the ‘sharks’ or investors featured on Shark Tank India, a spinoff of the original American reality show, which has been running for 13 seasons since 2009.
Vineeta Singh, co-founder of Sugar cosmetics, bowed out citing marketing issues for the brand, so did Anupam Mittal, the founder of Shaadi.com, who said that the ‘new generation’ won’t be attracted to steel products such as the ones the entrepreneurs were selling. Lenskart co-founder Peyush Bansal said that the brand needs a ‘coolness factor’.
But Ghazal spotted potential, so she offered the entrepreneurs Rs 30 lakh, in exchange for 10% equity, with Rs 45 lakh as loan, for which she asked for 12% interest. The original ask was Rs 75 lakh, for 3% equity. One of the entrepreneurs immediately turned down the offer, saying, “That’s too high, ma’am.”
The entrepreneurs asked for some time alone to consult with each other, and returned with a counter offer. They said that the loan component is a complete ‘no’ from their side, and asked for Rs 75 lakh against 6% equity, because they don’t want to liquidate the company to such a degree. But they introduced a new angle to the negotiations: If they aren’t able to raise Rs 12.5 crore valuation, they would return all of Ghazal’s money back to her the next year, with interest.
“I’ll give you Rs 75 lakh, and remove the debt, for 11% equity. But this has to be mentioned as a clause in the contract, that if you fail, you have to return the entire amount, with interest,” she said, and the entrepreneurs readily agreed. But they refused to liquidate over 6%. So, after arriving at a stalemate, they left empty-handed, but Ghazal wished them all the best.
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