I know nothing about incubators, except the Investopedia definition, and the fact that the word’s been bandied about a lot the past few years since startup culture has become trendy. But the Shark Tank grilling of the proprietors of Cave Shake tonight got me curious as to what, exactly, are the normal parameters of such an arrangement. Judging from the sharks’ questions, one could assume that, just like there’s the possibility of getting a bad deal on an early investment, there’s the chance an incubator may offer less-than-ideal terms on the partnership as well.
According to Bloomberg, Cave Shake has operated as a subsidiary of L.A. Libations LLC since August 31, 2018. That would have likely been after the Shark Tank segment was taped, and therefore after the company got a handshake deal with Charles Barkley. (Who, by the way, warmed my heart with his sincerity when he said he invests in people, and “I like you guys.”) So, did the deal with Barkley go through? Can we have a Beyond the Tank update, please?
— Shark Tank (@ABCSharkTank) October 29, 2018
On the website of L.A. Libations LLC, Cave Shake is prominently displayed. Not surprising given the name, Libations is a beverage brand incubator. It turns out Coca-Cola owns a minority stake in that entity, at least according to this article from Daily Coffee News — my source for all answers to random investment queries — so, if Cave Shake was actually getting the development assistance and marketing push that is the promise of an incubator, maybe they weren’t in such bad shape after all. But then again, the Cave Shake proprietors mentioned the L.A. Libations/Coca-Cola link on the show and the sharks weren’t particularly impressed; more “what did you give up?”
On this point, I wish I understood more about how it works. Any deal where you have deferred royalty payments means you’re in debt to a previous investor, which, although it might not make you toxic to a new investor, it might indeed cause them to think twice.
To me, it is not what I envision of an incubator, although it may meet the definition. It feels more like a marketing strategy, but then, maybe it’s all the same at the end of the day.
As for Shark Tank, let’s give further props to Charles Barkley for that casual statement that he’s struggled with his weight since he stopped playing. What a nice guy. Even if he didn’t invest in Cave Shake, I’ll give him props for being a good addition to the Shark Tank panel.