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Mark Cuban Senses An Alarm On Terrashrom: ‘Full Of Uncertainty And Terror!’ – What Went Wrong?

Learn about the reasons that made Mark Cuban sense ‘uncertainty’ and ‘terror’ during the Terrashroom pitch on Shark Tank Season 16.

TerrashroomMark Cuban On Shark Tank Season 16

Highlights

  • Terrashroom, a fungiculture model to grow mushrooms.
  • Jared Steele approached the Shark investors seeking $175K for 2.5% equity.
  • Although initially impressed, Mark Cuban raised serious concerns regarding the future of Terrashroom.

Over the years, numerous Shark Tank episodes have shown that a tiny point of concern is enough for investors to refrain from making a deal. No matter how inventive the product is, discrepancies while stating the business numbers can make a pitch go downhill. The same was seen in the latest Shark Tank episode.

Terrashroom, an innovative fungiculture-based product, caught the interest of the Shark investors in the first half of the pitch. But things took a U-turn when the investors learned it had not delivered a single piece before its appearance on Shark Tank Season 16.

Below are complete details of the Terrashroom pitch, concerns raised by the Shark investors, especially Mark Cuban, and its deal status, as seen in the sixteenth season.

Terrashroom Shark Tank Season 16: Pitch Recap

Mycologist cum entrepreneur, Jared Steele, made his way to the panelists with Terrashroom. Seeking $175K for 2.5% equity, he presented his product, which was a mushroom-grow computer/chamber. Jared started the pitch by emphasizing the popularity alongside the health and cognitive benefits of mushrooms.

Adding to it, he further stated that mushrooms are not easily found in grocery stores, and growing them on our own can be even harder. This is why the Austin-based entrepreneur created Terrashroom, a fully automated mushroom-grow computer/chamber that helps anyone, anywhere, grow lab-quality mushrooms.

Going ahead in the pitch, Jared claimed that the process does not require any prior experience and can be done from the comfort and safety of our home. To explain better, he gave a live demo and said that it could be used easily by turning on the chamber, filling up the water tank, and placing the ready-to-grow mushroom block inside the Terrashroom.

Additionally, the company has an app that allows users to choose from the many varieties of mushrooms.

Through the pitch, Jared revealed that the idea came to him seven years ago while he was in college and was growing mushrooms in his dorm. With a natural inclination toward the field, he made up his mind to take up product building.

To do so, he bought 3D printers, learned CAD modeling and basic microelectronics, and started the venture as a hackathon project. After this, Terrashroom was finally started in August 2022.

The Sharks’ initial reaction was a unanimous state of amazement. Lori Greiner thought the idea was ‘cool.’ After her, intrigued by Terrashroom’s unique nature, the investors put forward their questions one after the other. Daniel Lubetzky wanted to know if they offered the grow chamber/computer along with the mushrooms.

Explaining the business model, Jared answered that Terrashroom follows a ‘print and ink cartridge’ model. It sells the grow chamber for $399. On the back end, there is a subscription through which it sells ready-to-grow mushroom cakes for $30 per unit.

Lori was curious to find out the charges for making the units. Jared stated that the price per unit is $158, and the pricing of the mushroom block is $3.51. Through his two-year experience, the entrepreneur has garnered about 6500 customers. Plus, 22,500 of them are on the email waitlist.

Robert Herjavec wanted to know the duration of a mushroom block’s transformation into a fruiting body. The entrepreneur replied that it depends on the variety. Some, like oysters, take seven days, whereas reishi takes six weeks.

Jared added that some people view the product as a ‘functional piece’ due to the mood lighting and the embedded time-lapse camera.

 

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Why Did Mark Cuban Sense An Alarm On Terrashroom?

While answering about his source of revenue, Jared said that he began the venture in 2022 by running ads on Facebook. Since then, the company has generated $780K in revenue without shipping. This statement shocked Mark Cuban as it contradicted his earlier claims of selling 6500 units.

Mark stopped the entrepreneur midway through the pitch and asked him to clarify the sale of 6,500 units. He wanted to know why he said so when none of the items were shipped. Jared replied, saying it was ‘presales.’

Robert felt the answer was dubious and was shocked to know that the entrepreneur took 708,000 preorders in two years and did not ship a single product.

Till this time in the pitch, Mark did not think there was much problem with Terrashroom. So, he reacted to Robert’s comments and said that it was ‘horrible’ only if they did not deliver.

However, Robert felt the issue could not be overlooked as it had already been two years since the company had been in business. Mark responded again by saying that the company had not been collecting money for two years, but Robert believed that Jared had been getting the money.

In response to Robert’s questions, he said that as the company had ‘overengineered’ the product, it was likely that they might face refund issues on shipping bulk orders.

Kevin O’Leary wants to know when he will ship the first thousand units. The founder said they were targeting to ship about 1,140 units to their warehouse in Austin by July next year.

This meant that the company would be far behind in meeting its earlier stated preorder value. Learning about this made Mark sense an alarm on Terrashroom.

So, while Jared was talking, Mark again interrupted and said that the idea seemed ‘cool,’ and if it turned out to work, it could be ‘nice.’ But he felt he would be overselling in the future. He came to this conclusion because of Jared’s previous answers, where he stated to be taking preorders for two years straight without shipping any of them.

Based on this, Mark felt that the entrepreneur was not fully prepared to deliver yet, which means there was a whole new level of ‘uncertainty and terror’ waiting for Terrashroom in the coming times. So, his analysis of the business prompted him to stay away from making a deal with Jared.

Final Deal For Terrashroom On Shark Tank Season 16

After Mark’s exit from the deal, Robert Herjavec, too, opted out for the same reason. Next in line was Daniel, who chose not to invest, citing the high valuation of $7 million. Lori Greiner also did not make a deal as she felt that the product was ‘overengineered.’ Jared received his only offer from Kevin O’Leary.

Kevin offered $175K for 15% equity, which the entrepreneur did not agree to. He countered with 5% equity, but Kevin rejected it. As a result, Terrashroom failed to get a deal on Shark Tank.

Conclusion

The Terrashroom pitch on Shark Tank showed that a promising business idea could face serious challenges in getting a deal if there are concerns regarding handling customer expectations. While the innovative product captivated the Shark investors, its failure to complete preorders raised concerns.

Of all the judges, Mark Cuban particularly felt Terrashroom’s future was filled with ‘uncertainty and terror.’ This is why aspiring pitchers should take up the area of managing customer expectations quite seriously.

About Rob Merlino

Entrepreneur, auteur, raconteur. Rob Merlino is a blogger and writer who enjoys the Shark Tank TV show and Hot Dogs. A father of five who freelances in a variety of publications, Rob has a stable of websites including Shark Tank Blog, Hot Dog Stories, Rob Merlino.com and more.

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