I recently saw an episode of Shark Tank. One segment featured a young guy who had a great invention. It was a lid (in various sizes) that fit over a common dinner plate. It sealed in freshness and was easy to remove. He already had his business up and running and had great potential. The “sharks” also saw the great potential.
The guy came in and asked for $90,000 for a 5% share in his company. Instead, he got offers of $900,000 for 30% and $1,000,000 for 25%. Then things got really bad. Something happened to the humble guy that walked in there. He became really greedy, and not in a good way. He supposedly came up with some figure in his head on what he wanted, but then he said he wouldn’t share it. Eventually, he asked for $700,000 for a 5% share of his company. (I am writing this by memory, so hopefully my numbers are accurate.)
He had increased his asking price almost 8 fold in the matter of 5 minutes. This supposedly brilliant guy who came up with a great product was acting like a complete moron. Four out of the five sharks bowed out, just because they couldn’t stand the guy and couldn’t trust him any longer. I don’t blame them. I would not want to work with or invest with someone that arrogant. He ended up making a deal for $90,000 for an 8% stake. He was lucky to get that much, if anything. He could have had ten times that amount while still maintaining the majority stake in his company.
There are a couple of sayings that came to mind watching this:
“A bird in the hand is better than two in the bush.”
“If someone puts a million dollars in your hand, close it.”
That last saying could literally have applied to this guy.
It is good to watch things unfold like this. The guy entered the room and appeared to be humble. Then everyone was excited about his product and his company and started making strong offers. That sunk the guy. He became greedy. He became arrogant. He was out of touch with reality. He should have had a firm idea in his head of what he would accept going into the room. He was unprepared.
It almost reminds me of a real estate investor in 2006 who was on top of the world with $5 million in properties. He refused to sell and take any profit. He thought he was invincible. Then his whole world came crashing down on him.
It is important to give yourself a reality check every once in a while, particularly when things seem to be going really well. It applies in life and investing. Sometimes it is a good idea to take some profits off the table. And if someone puts a million dollars in your hand, just close it.