ABC’s Shark Tank has ignited the dreams of many budding entrepreneurs. Many viewers are familiar with the core cast of Daymond John, Barbara Corcoran, Robert Herjavec, Kevin O’Leary, Lori Greiner, and Mark Cuban. Fans of the show are accustomed to the eccentricities and personalities of the usual team of sharks.
For example, how O’Leary loves royalty deals and how Greiner calls herself the “the shark with a heart”. However, viewers are sometimes treated with a guest shark that joins the panel in order to make deals and hopefully help a few entrepreneurs realize their dream.
One remarkable guest was Tony Xu, the co-founder and CEO of DoorDash. Xu’s appearance on the show not only provided valuable insights to the entrepreneurs pitching their businesses.
It also helped those viewers on the intricacies of running a technology-driven business in the contemporary era. Xu’s ability to communicate well and empathize with the entrepreneurs gave viewers a glimpse into how he was able to grow his startup into a multi-million dollar business.
Who is Tony Xu?
Xu, a Stanford graduate, co-founded DoorDash in 2013. The company aimed to solve a simple yet common problem: helping local businesses deliver their products to customers quickly and efficiently. Fast forward to today, and DoorDash has evolved into a billion-dollar food delivery empire.
Tony Xu, along with his fellow Stanford students, Andy Fang, Stanley Tang, and Evan Moore, initially started a project called “PaloAltoDelivery.com” in the summer of 2013. The goal was to help local businesses in Palo Alto deliver their goods to consumers. Tony was inspired, in part, by his mother, who worked in a Chinese restaurant when they first came to the U.S. The stories of her struggles and those of other small business owners deeply resonated with him.
When starting, the team focused on small business owners and their needs. After talking with owners and understanding their operations the team found that delivery was a major problem for these businesses. Many local businesses struggled with the logistics and cost of delivery. However, they knew it was an important part of their businesses.
PaloAltoDelivery.com was initially a simple solution. The team manually coordinated deliveries using a simple system. It would start with customers placing an order. Then, the team would call in the order to restaurants and send someone to pick up and deliver the order. The “technology” at this stage was rudimentary. It was basically just spreadsheets and Google Maps. The team quickly realized that the demand for such a service was significant, not just in Palo Alto, but potentially everywhere.
The company now generates over $6 billion in revenue annually.
Tony Xu’s Impact on Shark Tank
Tony’s ability to communicate and his empathy for entrepreneurs can be seen in one particular deal he made on the show.
Nichole Powell entered the Shark Tank seeking a $250,000 investment for a 5% stake in her company Kinfield. The company specializes in outdoor skincare products. Kinfield’s lineup includes their flagship product, Golden Hour—a natural bug repellent, and Sunglow SPF 35. Nichole was inspired to create these products due to her childhood experiences with chemical sunscreens.
Kinfield boasts its own independent insect repellent laboratory, with test results showing Golden Hour provides up to three hours of protection. The company experienced substantial sales growth since its 2019 launch, reaching $1.5 million in 2022, and projected sales of $2.1 million by the end of the year. However, the company had yet to turn a profit.
The Sharks showed interest in the company’s financials. Nichole revealed a customer acquisition cost of $26 and impressive margins between 75%-85%. However, Mark Cuban expressed concerns about the challenges and costs of retail expansion.
Barbara Corcoran was the first to offer Powell a deal. The shark offered her the $250,000 but wanted a $2 royalty per unit. Kevin O’Leary jumped in with a similar offer, but would require $1.50 per unit recouping $750,000. Lori Greiner then offered $250,000 for 5% equity plus a $4 royalty per unit until repayment. She justified the high royalty due to one of Lori’s Shark Tank deals called Bug Bite Thing generating over $25 million in sales.
All of the sharks that made an offer felt the need to take a royalty due to the business’s future retail challenge and current position of not being profitable.
Tony Xu Changed the Entire Dynamic of the Deal
Powell had 3 offers on the table all of which included royalty payments. That is until Xu stepped in with his offer of a straight equity deal of $250,000 for 10%. He was the only shark to decide not to take a royalty because he believed in the company’s long-term value.
Xu stated, “I actually believe this company is going to be worth quite a bit in the future. I really want to be with you more for the equity and not really try to take money away from you.”
His response led Corcoran to change her deal to match Xu’s. Nichole negotiated with Tony Xu and Barbara Corcoran to partner on a deal, which they accepted, securing a $250,000 investment for 10% equity in Kinfield.
Conclusion
Tony Xu’s stint as a guest shark on Shark Tank was more than just another episode. It was a masterclass on modern entrepreneurship. He showcased the importance of adaptability, technology, and above all, empathy. His insights served as a timely reminder that business models and technologies might change. However, the core principles of understanding and serving one’s customers remain timeless.
Photo credit: Techcrunch under CC
Also read:
Here are All of the Guests that Have Appeared on Shark Tank
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