‘Why I walked away from $250,000’: Travis Osborne on the Shark Tank deal that fell through

Mobile Tyre Shop founder Travis Osborne on Sunday night’s Shark Tank. Source: Supplied

VIEWERS of Network Ten’s Shark Tank on Sunday night watched Travis Osborne walk away with a $250,000 investment for his mobile tyre-changing business. But that all happened months ago. Here’s why the deal fell through after the cameras stopped rolling.

If you were following the media in the lead-up to the last episode, you would have been told to watch out for the amazing shark-repellent surfboard, or the 14-year-old tech whiz set to be the next Steve Jobs.

You wouldn’t have heard a peep about Mr Osborne’s Mobile Tyre Shop (MTS), a business idea so obvious most people would be surprised to hear it’s the only one of its kind currently in Australia.

The reason? After the show was filmed in December, the $250,000 offer from Sharks Steve Baxter and John McGrath quietly fell through. And with no deal to talk up, Ten didn’t want Mr Osborne put forward for interviews.

The parties differ on the actual reason.

According to Ten, the offer was dropped because MTS didn’t come through with its required due diligence in time. Mr McGrath, founder of McGrath Estate Agents, said “for a variety of reasons”, MTS did not pass due diligence.

According to Mr Osborne, however, it’s simple: he got a better offer. Mr Osborne, a former business development manager with Gloria Jean’s, said the proposal on the show “brought to a head” other discussions, with another investor coming forward to more than quadruple the $250,000.

Steve Baxter and fellow Shark John McGrath went in for $250,000. Source: Supplied

Mr Osborne can’t disclose who the investor is or the precise amount as the paperwork is still being finalised, but he is confident the seven-figure funding deal will go through. “I haven’t walked away from $250,000 for nothing,” he said.

“We went in with the best intentions to do a deal, but at the same time we’re a business that’s been growing very quickly and have been looking for investment for some time. Everything came to a head a couple of days before Christmas, and all of a sudden we had a live offer on the table.”

Mr McGrath said in a statement: “We really liked Travis, his presentation and the sector he’s in. However as with every offer, the investment was dependent on due diligence following the show.

“Due diligence is a standard procedure when investing in any business to ensure there are no structural or legal issues. For a variety of reasons, MTS did not pass due diligence. We wish Travis the best of luck with his business.”

A Network Ten spokesperson said: “Deals in the program are solely between the Shark and the entrepreneur. Following the program, each Shark then carries out their own due diligence, as well as finalising any agreement that was reached with an entrepreneur during the program. If after this, no full agreement can be reached, then neither party is legally obliged to complete the deal.”

THE BUSINESS

A Shark Tank junkie, Mr Osborne said he’s been watching the US version of the show on YouTube for years. His biggest piece of advice? Know your numbers. “These Sharks are very smart people. They know the questions to ask to drill down pretty quickly to find out whether you know your stuff,” he said.

While the segment on the show lasts only a few minutes, contestants are actually grilled by the Sharks for over an hour. “It’s a three-minute pitch, but people don’t realise we were actually in front of the cameras for an hour and 20 minutes.”

The Sharks don’t know anything about the contestants before they walk in the door — but they make up their minds pretty quickly. “I was definitely nervous, not only because you’re up against $1 billion worth of value between those five, but there are a lot of people behind the scenes,” he said. “There seem to be people everywhere.”

The Australian tyre market is worth around $5 billion annually. Eighteen million tyres are sold each year, with the top five brands — Goodyear, Bridgestone, Tyrepower, Bob Jane and Kmart — controlling 49 per cent of the market.

For time-poor consumers, taking half a day off work to get the car’s tyres changed is a tyre-some chore. Mr Osborne explains how the idea first came to him. “I was working six days a week, I had a young family,” he said.

“The car needed tyres, but price wasn’t the issue — it was the time, having to go down to the store with two young children. I assumed there was a business like that in Melbourne, but when I Googled it, European businesses started popping up.”

In Europe, as he discovered, 8 per cent of all tyres are sold online; in the US, $2 billion worth of tyres were sold online last year. A German company which MTS is closely modelled after, DeltaCom, did 500 million euro in turnover last year.

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Mr Osborne, who had no automotive experience, immediately realised the untapped opportunity in Australia. The MTS model strips out all the major costs associated with the big retailers, with the higher labour costs offset by the lower fixed overheads.

He says currently MTS offers the same price as the majors, with the aim to be able to undercut on price once the business begins to scale nationally.

“Unlike a traditional store that can only afford to hold stock for two or three major brands, we work as a broker,” he said. “The customer makes their order and we get the best deal. We get two deliveries a day from the major companies, so if you order today, we can fit them tomorrow.”

The past two years have been spent forging relationships with the manufacturers and refining the business model. MTS has just two vans and five employees at the moment, but Mr Osborne dreams of 4 per cent market share.

“There are 2200 places in Australia you can buy your tyres. You only need a couple of percentage points in market share because it is so significant. There’s no reason why this couldn’t be a $200 million business.”

The business will work on a franchise model. Franchisees will be able to lease the vans from MTS, which will also operate a central warehouse in each major city where the tyres are collected.

“Essentially that’s the model,” Mr Osborne said. “We drop off the tyres in the morning and the drivers have their iPad telling them the jobs for the day. We’ve benchmarked this business against a number of other mobile van-based businesses, and because our average sale is quite high there’s good margin to be made.”

frank.chung@news.com.au

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