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Melissa and Rick Hinnant of Austin, Texas, gracefully stepped into the Shark Tank seeking an investment of $175,000 for a 10% stake in their sock company, Grace & Lace.
Grace & Lace took the knee-high and turned it into a fashion statement by creating beautiful socks and leg warmers with lacy details that peek out from the tops of boots. They have brought back the 80’s leg warmers with a new twist, and through using social media were able to take their company from selling just a few pairs of leg warmers on Etsy to $1.1 million in sales to date. This of course begs the question: what are they doing in the Shark Tank?!
After a brief introduction, Melissa passed out samples of their bestselling socks. Kevin’s disinterest was obvious as he tossed the socks onto the table. However, his interest was suddenly piqued when he heard the company’s figures. In 2012, Grace & Lace made $800,000 in sales, and in the last 12 months they've made $1.1 million in sales (90% online and 10% from 230 stores). The Sharks were not only super- impressed by these figures, but also of the fact that they only used social media to generate sales, and haven’t spent a dime on marketing.
Barbara’s jaw dropped when she heard the cotton sock she was holding cost $5 to make and retails for a pricey $34. Lori, with one sock on, was still in shock at the success of Grace & Lace, and admitted she couldn't relate to the product and went out. Kevin, on the other hand, was lovin’ it. Robert wanted to know (as did I) what exactly the Hinnant’s really needed. Rick explained, they could take the company to $10 million, however they wanted one of the sharks to take them to a whole new level. They wanted a Shark’s help to bring them to the $100 million mark (that’s a whole lot of socks!). In other words, they wanted a strategic partner.
Barbara took the bait and made a partial offer of $87,500 for a 5% stake in the company, providing another shark would go in with her. Kevin, not to be outdone, made a competing offer of $175,000 for a 20% stake, which drops to 10% once the investment is repaid. And yes, he was oblivious to the frustrated and annoyed look on Barbara’s face.
Then came the ever-doubtful Robert, who felt that this pitch was too good to be true. Robert made an offer for exactly what they came in asking, $175,000 for a 10% stake in the company. Rick, apparently feeling two Sharks were better than one, countered by asking if Barbara could join in on the deal. Bad move! Robert’s eyes widened in offense, and judging by the controlled way he spoke as he put Rick and Melissa on the spot to make a decision on his offer, he wasn't about to let this go. Robert was insulted that his offer wasn't good enough as is, especially because he offered them exactly what they asked for! Kevin’s’ attempt to smooth things over only made it worse, as Rick stood his ground and insisted on hearing what Mark the Shark had to say. The drama quickly escalated to a good old “Mexican Standoff” with Robert and Rick at an impasse. Unable to get a straight answer, Robert pulled out ticked off and quite upset at Rick’s decision, or lack thereof. ("Ay Chihuahua!").
Finally, Mark made the Hinnants the same offer as Robert, but was met with the same wishy-washy, indecisive answer. Barbara, fearful of losing the deal, countered with that same offer of $175,000 for a 10% stake, with a stipulation that half the money is a line of credit. The Hinnants ultimately accepted Barbara's offer, admitting that she was the one they wanted to partner with all along.
Huh?? Did I miss something? The Hinnants’ downplaying of their intelligence and business acumen didn't fool anyone. I got the impression that the whole thing was carefully crafted and I still don’t know what Barbara will be “bringing” to the proverbial table. Grace & Lace socks are very beautiful, but $34 for a pair of cotton socks? That’s a lot even for me, a closet sock addict with over 200 pairs to prove it! And now that Grace & Lace has informed their customers on national TV that it only costs them $5 to make a pair of socks, who would still be willing to pay $34 for a single pair?!
Anyway, Grace & Lace clearly took more than one leap of faith in their pitch hoping that a better deal with a better partner would surface. They got lucky, and were able to shake Barbara’s hand as they accepted the offer from the Shark they were hoping for.
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