"Horrible story" - When Shark Tank investors reacted to Monti Kids founder's money spending habits

During Shark Tank season 10 episode 12, MontiKids founder Zahra Kassam presented her Montessori toy subscription business seeking $200,000 for 2.5% equity. The $8 million valuation immediately drew attention from all five sharks. The financial records showed $200,000 remaining in the bank from the initial $2.8 million funding.

Daymond John left first, followed by Mark Cuban and Lori Greiner who rejected the high valuation. As negotiations continued, Robert Herjavec focused on the company's financial status. He addressed Kassam directly:

"Anybody else besides you standing up there with your 2.8 million raised, 2.6 million gone, ninety thousand dollar burn rate per month would not be smiling anymore. It's a horrible story, but for some reason you have this incredibly captivating character that we're still listening to you."

In the end, the entrepreneur left the Shark Tank with Kevin’s offer.

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Robert Herjavec called out Monti Kids founder's spending on Shark Tank

Monti Kids' detailed financial examination exposed specific spending patterns that concerned all five Shark Tank investors. The company maintained $200,000 in reserves after deploying most of its initial funding. Monthly operational expenses reached $90,000, creating pressure on the limited remaining capital. The subscription service generated $500,000 in first-year revenue through its quarterly payment model.

The spending breakdown revealed significant investments in product creation and marketing. The company allocated substantial resources to design specialized toys to meet educational requirements.

The subscription model targeted specific age groups with appropriate materials. Level one started at birth, providing foundational sensory items. Each subsequent level introduced more complex learning tools aligned with developmental milestones.

Daymond John started the financial questioning, focusing on the rapid capital use. Mark Cuban followed by analyzing the gap between spending and revenue. The Shark Tank investors’ examination showed that while Monti Kids had built a structured educational product line, its financial model needed significant adjustments.

The company spent heavily on product development while revenue growth lagged behind operational costs.

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Robert Herjavec's assessment

Robert Herjavec's detailed analysis focused on the management of funding. He pointed to the $2.6 million spent from the initial funding round. His main concern centered on the remaining $200,000 in the bank against a $90,000 monthly burn rate.

Herjavec made a direct offer. Shark Tank investor proposed $200,000 for 10% equity plus a board position. This offer came with a commitment to guide financial decisions. However, the deal fell apart when Kassam attempted to merge his offer with Kevin O'Leary's proposal. Herjavec withdrew immediately, stating Kassam treated money like a Harvard project rather than a real-world business.

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Kevin O'Leary's deal structure and after math

O'Leary structured a different arrangement that protected his investment while maintaining Kassam's requested equity percentage. His final offer provided $200,000 for 2.5% equity with additional royalty terms.

The deal required $2.50 per unit until O'Leary received $600,000, representing three times his initial investment. Kassam accepted these terms after losing Herjavec's offer.

As per Shark Tank Blog, by 2023, Monti Kids reached $7 million in annual revenue. The total funding increased to $6 million through various investment rounds. The company expanded its product lines while maintaining the original subscription model.

Shark Tank investor Kevin O'Leary Visits (Image via Getty)

However, August 2023 marked a significant shift. Monti Kids announced a pause in toy sales through their online platforms. The company retained its educational content, providing access to instructional videos through its website. This strategic change reflected evolving market conditions and operational requirements.

The deal with O'Leary remained active through these changes. The company maintained its position in Kevin's investment portfolio while adapting its business model. This transition demonstrated the ongoing evolution of the company's strategy while preserving its educational mission.

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Fans can watch new episodes of Shark Tank on ABC network.