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Lori Greiner: The Queen of QVC

A few weeks ago, I wrote a post about the popular reality show “Shark Tank” in which I discussed two entrepreneurs who decided not to participate because the producers insisted on taking a 5-percent stake in their company in exchange for the appearance.

As a follow-up, I recently had the chance to sit down with Lori Greiner, a k a the Queen of QVC, who recently made her debut as a full-time shark. We enjoyed a wide-ranging conversation — which has been condensed and edited below — about her hits and misses, the pros and cons of how entrepreneurs raise capital, and the lessons of  “Shark Tank.”

Every Friday night, millions of Americans of all ages sit down and watch the show, which encourages the belief that when a smart entrepreneur connects with a wealthy investor, the potential is unlimited. And sometimes it is. But when entrepreneurs and the investors enter into a contract, all parties need to think carefully about what the relationship means today — and what it will mean in the future. For example, did you realize that if you take on an investor, you might not be able to get a bank loan unless your investor guarantees the loan personally? I think that’s an important consideration for both investors and entrepreneurs.

Why do you think “Shark Tank” is so successful?

In a down economy, a time where people are feeling that things are difficult, hopeless, they’re worried they might lose their job, they tune in to Shark Tank, and they learn about how to possibly become their own boss.

Do you think the show could do a better job of teaching about entrepreneurship?

Well, I think the show is what it is, and I think it has a great formula that people enjoy. And I do hear all the time from students in colleges across the country that “Shark Tank” is shown in their business classes.

Can you share some of your “Shark Tank” lessons?

Yes, well, my Reader Rest was wildly successful. I think it’s the most successful product ever in “Shark Tank’s” history. It’s the magnetic glasses holder. We’ve gone well over 3 million in sales to date in less than a year.

Are there deals that you’ve made on the show that haven’t actually materialized into an investment?

Yes, there were a few. I was very disappointed about one of them, the Wine Balloon. I thought it was a great product, but he just wasn’t interested in moving forward.

So sometimes the deals break down in negotiations, or something changes in the product or in due diligence?

Well, sometimes in due diligence you find out things they didn’t say in those minutes in front of you, so you can be disappointed or surprised by things. But so far for me I haven’t had that issue beyond the Wine Balloon.

If you were starting a company, would you give away 5 percent of it in exchange for being on “Shark Tank?”

Yes, I would.

You think its worth it?

I do. To be able to get on “Shark Tank” is a tremendous opportunity, and if that means the difference between jump-starting your career and your idea or going nowhere, 5 percent is definitely worth it.

Do you think it’s a good idea for the entrepreneurs on the show to give away equity — or should some consider debt?

Well, I think the formulation on the show is that you are giving away an equity stake for X amount of dollars. And that’s how the show operates, really.

If you invest in a company and later the company needs a loan for working capital, would you be willing to personally guarantee that loan?

If I’ve invested in a company and they’re doing well, I would be happy to keep investing more money into it.

In exchange for more equity?

It depends on the situation, right? Each different situation with each different deal is different.

We see so many loans today that where any investor who owns 20 percent or more of the company has to  guarantee the loan personally.

Well, I think on “Shark Tank” we always joke that we’re the bank and the tank. People aren’t going to the banks for traditional loans. They’re coming to us. So it’s a different model. Do you follow me?

A lot of entrepreneurs give away equity, and I think there’s a trade off. We always tell them, if you’re going to give away equity and you’re going to give away more than 20 percent of your company, you better make sure that if you’re going to need a loan in the future that your investor will be willing to personally guarantee it. Otherwise, you’re going to have a problem.

I think a lot of people don’t like to personally guarantee loans.

Right, so does that inhibit the company’s ability to grow?

No.

What can the company do?

Well, I can only put this situation for myself where, if I’ve invested and it’s doing well and they need more money, I would put up more money for them.

In exchange for more equity, though, right?

Probably. Its hard for me to answer this because it’s a big hypothetical to me.

Have you ever taken equity or debt for a company that you started?

Honestly, this is a new way for me to operate. For the last 16 years, I’ve created my own products and I’ve helped other budding inventors with their products, and I have not chosen to go the path in taking an equity stake in their company.

Right. This equity stuff gets complicated. But did you ever take investors for your own companies?

No, never.

And did you ever need debt or loans?

I took out a loan with my first product, and that was it. That worked for me.

And you stayed in control, right?

Yes.

What do you think? If you had the opportunity to take an investment from Ms. Greiner or another Shark, would you consider it?

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

Article source: http://boss.blogs.nytimes.com/2012/10/12/the-queen-of-qvc-talks-about-the-risks-of-dealing-with-sharks/?partner=rss&emc=rss