Toygaroo got a lot of buzz after being funded in season two of the Shark Tank. Last week, the episode featuring Toygaroo was repeated on Saturday night, so there was increased interest in the company here on the SharkTankBlog. While researching for a follow-up post, I came across some puzzling things.
I noticed Toygaroo’s Facebook, Twitter, and Linked In profiles had been removed. I also noticed the company was not accepting new customers on its website “due to the explosive growth we experienced these last few months.” I noticed some complaints online and I received some complaints in the comments of this follow up post on Toygaroo.
Upon further investigation (and thanks to one of our readers), I found the personal blog of Mr. Phil Smy, the CTO of Toygaroo. In a post titled “Choose your partners carefully,” Mr. Smy says:
“When I say choose your partners carefully I am talking about in business. I think it is maybe more important in business than in your personal life! Rarely in your personal life is there a contract to think about.”
This does not sound like a CTO that is happy with the direction the company is going. The post was written in October of 2011, so trouble has been afoot at Toygaroo for some time now. I wonder who he was talking about. Was it Mark Cuban, or Kevin O’Leary, who teamed up to invest $200,000 for 35% of the company? Was it founder Nikki Pope or her husband? Was it someone else? Clearly Mr. Smy was disturbed about someone or something. He politely declined an interview, saying “at the moment, it would be imprudent for me to say much but I’d be willing to chat in a few weeks though.”
I communicated with Mr. Smy yesterday (April 2, 2012). Today, the news of Toygaroo’s Chapter 7 Bankruptcy filing hit my inbox. Toygaroo filed for Chapter 7 Bankruptcy on April 2, 2012. The creditors listed in the case are Federal Express and Uline, a shipping and packaging products company. It would appear that Toygaroo wasn’t paying for its shipping costs; no wonder they were able to offer free shipping.
The meeting of creditors is scheduled for May 7, 2012 in Los Angeles at the California Central Bankruptcy Court.
When we watch Shark Tank, we think it will be all wine and roses for the entrepreneurs who get funded. Surely partnering with one of the Sharks should guarantee success, right? According to the Small Business Administration, 80% of businesses fail in their first three years. There are many reasons why, but surely not being able to pay the bills is on the list of causes. Partnering with the Sharks may or may not change those odds, but a precursory look at all the businesses that have appeared on the Shark Tank would appear to fly in the face of that statistic. Much more than 80% of the businesses featured on the show, funded or not, are still in business. The percentages are higher for funded entrepreneurs.
Perhaps the success of Shark Tank entrepreneurs has something to do with the drive and passion of the business people who appear on the show. After all, to risk humiliation on national TV to better a business indicates a level of dedication many entrepreneurs may not possess, so maybe the mental make up of folks who’d voluntarily swim with the Sharks makes them more likely to succeed. It is still no guarantee, even with a billionaire shark in your corner.
I am interested to see how this plays out. Mr. Smy’s cryptic blog post makes some accusations without naming names. I wonder if he’s talking about one of the Sharks. If he is, it will change the way a lot of people view them and it could make for some rather unpleasant negotiations in the future. I will continue to follow this story to see how it all plays out.
No matter what, it will make for great TV- and blogging.
About Rob Merlino
I had a similar idea (much before Toygaroo) , but when I started writing a business plan , the numbers did not add up and it would have taken in the order 5000 orders per day to make substantial profit.
I am glad I did not pursue it !! 🙂
Raj
May be a lot to ask but could you send me the business plan you did . I am a mother of one and have a small business that toys in my community .
Heather
[email protected]
Sounds like (after reading his full blog post) that the Sharks let him down, or he expected them to spend more time on it than they wanted to. Sounds like a Shark Tank failure story. It’s not the first one. Some entrepreneurs who come on the show, like the USmell soap selling lady who struck a deal with Robert, never actually see the deal go through. He wouldn’t even return her e-mails, according to her story. I think the producers push the Sharks for more deals to make the show exciting, but according to Barbara Corcoran’s book Shark Tales, only 1/4 of the deals that are televised actually go through.
What happens when a “deal” is made on air is the entrepreneur fills out a “Due diligence packet.” If the Sharks don’t like what they see in that phase, they can bail from the deal. It’s not always the Sharks either, as in the case of the Smart Baker, sometimes it’s a “mutual decision.” I think (but I can’t confirm) that’s what happened with Wild Squirrel Nut Butter too. I don’t think it’s a reflection on the Shark per se either. In the case of Robert and You Smell Soap, Robert may have mishandled the situation, but in the end, Megan did OK and publicly stated she was glad she didn’t have to give up a chunk of her business to him.
In the case of Toygaroo, what happened was the money the Sharks kicked in wasn’t enough to get the concept off the ground. The business was bleeding cash and they couldn’t make it work. While Phil alludes to “unkept promises,” there were other issues in the business that caused the bankruptcy. Toygaroo reached a point where they simply could not fulfill their mission, I am not sure you can blame the sharks for not wanting to dump more money into a sinking ship. The bottom line is Toygaroo grew too fast and needed too much cash to feed its growth. It would seem the sharks weren’t willing to feed the business the needed cash beyond the initial deal, but there were other issues too. We won’t know the whole story until the two year, producer imposed, confidentiality agreement is done. When that happens, look for more candid public commentary.
Mark Cuban was quoted recently on video promoting the 4th season of Shark Tank as saying that Nikki Pope spent more time asking Cuban to get her on national TV shows like Good Morning America rather than work on her business. “she was more interested in being a TV star.” he said. Maybe this was her downfall. Personally I think it was a neat idea, something that parents can do with other parents within their own communities but I could never see this work as a viable business. Toys break and shipping is a profit killer…not to mention the cootie factor.
its been two years, have we heard any updates?
Still bankrupt.
My husband and I have our own business and I can say if we had help I am not sure all the money could prevent the problems we have ran into at times and have had to work through. I do believe that no matter what the business it that you will have your problems. You can know a lot about business and still not know it is all. It changes all the time. The way things changes in this world and how fast it does you just can’t be so quick to blame but we do. I am in the business toy area this company and it has allot to do with the way how people are shopping these days, You need to take the time to understands a little bit. Yes everything not manage right will leader to bankrupt, but it didn’t have to get that way, We don’t know the whole story and there is always two sides but everyone choose their sides.