Securing the expertise of external investors has proven more valuable than retaining maximum equity for NSW entrepreneur Katie Rawal, who guided her festive startup Holiday Celebration Trees to a three-party handshake deal on Shark Tank Australia.
Rawal was one of several success stories on Shark Tank Australia, Season 5, Episode 5, which exposed her brand to a national audience — and potentially an even larger global market through Shark Tank Australia investor Robert Herjavec.
Holiday Celebration Trees offers ornamental shelves in the style of a Christmas tree, capable of holding five layers of gifts and reducing festive clutter.
The enterprise began some around 18 months before filming as the brainchild of Rawal, whose industry background is in architecture and design.
Claiming $360,00 in revenue in her first year of operation, and projecting revenue into the millions after the addition of a new green design to match the original snow-flecked version, Rawal asked the panel for a $300,000 capital injection in exchange for 15% equity in the business.
Speaking to SmartCompany after her appearance on the show, Rawal said securing the capital to carry out her seasonally-variable business was a secondary concern compared to obtaining deep business knowledge from the Sharks.
“I saw the opportunity to go on the show as an incredible platform, to not only secure the investment for the business, but more importantly, for me, it was about gaining valuable exposure to and mentorship from successful entrepreneurs,” Rawal said.
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Her attempt to win over the Sharks did not capture every would-be investor.
Holiday Celebration Trees are no throw-away decoration, with the sturdy structure, assembled from metal and recycled plastic, costing consumers around $750.
Despite what Rawal claimed as healthy profit margins on each sale, that high price tag appeared to weigh on much of the panel.
Yet the size of the global Christmas decoration market — which Statista estimates at over US$7 billion — caught the attention of investor Davie Fogarty.
He proposed an investment of $300,000 for 30% equity, split between himself and investor Herjavec.
For his part, Herjavec — whose prior Shark Tank successes include an investment in sweater company Tipsy Elves — viewed Holiday Celebration Trees as a potential success in the retail store decoration market.
The second investor agreed to Fogarty’s deal, on the proviso the company pay the pair a $25 royalty on each sale until they recoup 30% of their investment.
Rawal retorted by suggesting those terms with a 20% equity stake instead.
Herjavec persisted with his offer, eventually leading to the trio confirming a handshake deal on the Shark’s terms.
Securing their advice and expertise was worth giving up that extra equity on the Shark Tank Australia stage, Rawal told SmartCompany.
“I was genuinely just thrilled to have secured those two business partners,” she said, viewing their input as a ticket to even greater growth.
“I’m a big believer that owning 100% of 1 million, versus 70% of 100 million, is not the right way to do it.
“I would rather partner with those experienced people who can help expose the brand, because I passionately believe in the potential of the product and the brand.”
“I was happy to negotiate a bit on my initial request, because I could see the benefits of being mentored by those two Sharks and the networks and introductions they could make for me would far outweigh that extra percentage of equity to them.”
Rawal confirmed the deal has changed since filming through the due diligence period.
Keeping the precise terms of the deal under wraps, she pointed to the guidance offered by Fogarty so far.
“Davie probably has the closest synergies to my business, being such a prominent e-commerce expert,” she said.
“It’s been fabulous in terms of understanding the unique challenges to my business and also the opportunities to help me scale.”
Other successful deals featured in the episode included Canberra entrepreneur Aami Mills’s cloth nappy business Mimi & Co., which locked in a handshake deal with Fogarty and Jane Lu for a $100,000 investment in exchange for 30% equity.
Amadou Doumbia, the founder of the unisex hair styling brand Wuli Grooming, also walked out of the Shark Tank with a provisional deal for the curly-hair specific products.
He agreed with Sabri Suby for a deal injecting $150,000 into the business, in exchange for 40% equity, and a $2 royalty until the investment is paid back.
Read more about Shark Tank Australia here.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
