Spare Mobile ATM
DEAL
EPISODE SUMMARY
🕓 Air Date: April 21, 2019
Asking For:
$500,000 for 3,50%
Investor:
Mark Cuban
Deal:
$500,000 for 12% + 2% advisory shares
PRODUCT SUMMARY
SPARE is a virtual ATM network that offers a more affordable and secure way to access cash through a mobile app. Users connect their bank accounts or digital wallets, select the desired amount of cash, and find nearby merchants willing to dispense cash at a cheaper rate than traditional ATMs.
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Background Story
D’ontra Hughes, the founder of SPARE, hails from Los Angeles, California, and brings a background rooted in the financial sector. Before diving into entrepreneurship, Hughes worked at J.P. Morgan, gaining valuable experience in the intricacies of the financial industry. In 2010, fueled by a visionary spirit, he decided to chart a new course as an entrepreneur. The inception of SPARE stems from the ubiquitous challenge of finding a convenient and cost-effective way to access cash. Hughes, like many others, experienced the frustration of searching for ATMs, only to be faced with exorbitant third-party fees when in need of cash.
Recognizing this common struggle, he envisioned a solution that would provide a more convenient, secure, and affordable means of obtaining cash. The concept of SPARE was born out of a desire to eliminate the hassle associated with traditional ATMs and empower users to access cash more efficiently. The vision extended beyond mere convenience to address broader societal challenges, particularly focusing on the underbanked and unbanked populations. This commitment to financial inclusion became a driving force behind SPARE’s mission.
Having faced the hurdles of early entrepreneurship, including sleeping on couches and in cars, Hughes demonstrated unwavering dedication to realizing his vision. The company’s journey involved raising $500,000 from friends and family, along with a convertible-note round at a $9 million valuation. This financial support laid the foundation for SPARE’s growth and its subsequent appearance on “Shark Tank.” Through his experiences, Hughes brought a unique blend of financial expertise, tenacity, and a commitment to social impact to the SPARE venture. The background story of SPARE reflects not only the challenges and triumphs of an entrepreneur but also the aspirations to revolutionize the way individuals access and use cash.
The Product
SPARE revolutionizes the way users access cash by offering a virtual ATM network through a user-friendly mobile app. The process is simple and efficient, providing a convenient alternative to traditional ATMs. To utilize SPARE, users start by connecting their bank accounts or digital wallets to the app. Once linked, they can select the desired amount of cash they need. The app then generates a map displaying nearby merchants willing to dispense the requested cash.
This innovative approach eliminates the need to search for ATMs and allows users to withdraw money securely from local businesses. Upon selecting a merchant, users receive a one-time use code for verification. By scanning this code at the chosen location, they can easily obtain the desired cash amount. The entire process is designed for ease of use and accessibility, making it an attractive solution for individuals seeking a more cost-effective and convenient way to access cash.
SPARE’s benefits extend beyond user convenience. It promotes support for local businesses by driving increased foot traffic and revenue to participating merchants. Additionally, users enjoy cost savings, as SPARE offers a more affordable alternative to traditional third-party ATMs. The strategic partnership with BVPOS, a major POS-hardware manufacturing company, further enhances the potential for widespread adoption and accessibility.
As a mobile app, SPARE can be downloaded and used by consumers at their convenience. While specific pricing details are not mentioned in the pitch, the emphasis is on providing a cheaper and more secure option compared to standard ATM transactions, aligning with the company’s commitment to making cash access more inclusive and affordable.
How It Went
The company’s position before Shark Tank
SPARE has exhibited promising performance, gaining traction in a relatively short period. As of the pitch, the company boasts over 2,700 participating merchants within a span of 2.5 years. These merchants consist of regular small businesses, particularly mom-and-pop shops, indicating SPARE’s successful engagement with local communities. A significant milestone in SPARE’s journey is its strategic partnership with BVPOS, a major POS-hardware manufacturing company. BVPOS provides the infrastructure for SPARE’s service, integrating the virtual ATM network into its 933,000 units across various stores.
This partnership positions SPARE for widespread adoption, leveraging BVPOS’s extensive network and presence in the retail landscape. SPARE’s customer base encompasses a diverse range of individuals, including tourists, video-game players seeking to cash out virtual tokens, prepaid card users, and a broader global marketplace catering to the unbanked or underbanked populations. The company’s commitment to financial inclusion is evident in its focus on providing accessible cash solutions to those who may not have the same access to traditional financial tools.
Funding for SPARE has primarily come from a combination of sources, including $500,000 raised from friends and family. Additionally, the company conducted a small convertible-note round at a $9 million valuation. The strategic hardware partnership with BVPOS also indicates a collaborative approach to scaling the business. While specific details about profits and losses, available capital, and the company’s current structure are not disclosed in the pitch, SPARE’s valuation at $14 million is met with skepticism by the Sharks. D’ontra Hughes, the founder, justifies the valuation by emphasizing the potential for widespread adoption through the partnership with BVPOS and the integration of SPARE’s software into their extensive network.
The Negotiations:
The negotiations for SPARE on “Shark Tank” unfolded with a compelling pitch from founder D’ontra Hughes seeking $500,000 for a 3.5% equity stake in the company. The valuation of $14 million raised eyebrows among the Sharks, prompting Mark Cuban to express his concerns about the seemingly high valuation. As the Sharks delved into the details of SPARE’s business model, particularly its partnership with BVPOS and the potential for widespread adoption through hardware integration, the valuation began to face scrutiny. Lori Greiner expressed skepticism about the 3.5% equity offering, stating it was a low stake for a high valuation.
Despite the valuation concerns, Mark Cuban saw potential in SPARE’s vision and proposed a deal. He offered $500,000 for a 12% equity stake, with an additional 2% for advisory services. This offer came with the condition that Cuban would play a significant role as the face of the company, leveraging his credibility and authenticity to drive SPARE’s success. Other Sharks, including Lori Greiner, Kevin O’Leary, and Daymond John, opted out, expressing reservations about the valuation or the logistics of SPARE’s model. The negotiations concluded with D’ontra Hughes accepting Mark Cuban’s offer, sealing the deal at 12% equity and an extra 2% for advisory services.
Mark Cuban’s strategic offer not only provided the desired funding but also brought valuable expertise and credibility to SPARE. While Hughes conceded more equity than initially sought, the deal was celebrated as a significant win, marking a new chapter for SPARE with the backing of a high-profile Shark. The negotiations showcased the importance of finding the right partner who could contribute not only capital but also strategic value to propel SPARE’s vision forward.
