Barbara Corcoran gets frustrated when she sees people making a common mental mistake: underestimating themselves.
That's what happened on Friday's episode of ABC's "Shark Tank," when the star investor told off a pair of entrepreneurs for underpricing their products — before ultimately investing $200,000 in their start-up. The Oakland, California-based business, Ade + Ayo, designs and sells African-inspired clothing for babies and toddlers at an affordable price. For the Sharks, the affordability was a snag: The company's sales, they felt, were lackluster.
"The biggest danger [to your success] is underestimating how successful you could be, and what you're going to need to get there," Corcoran told Abisola and Temidayo Adedokun, the couple who founded the business.
At the time of filming, Ade + Ayo had been in business for 11 months and sold $160,000 worth of clothes through a direct-to-consumer business model. The couple, both Nigerian immigrants, had priced their 100% organic cotton products — approximately $6 apiece to manufacture — around $19. The Sharks thought the price was too low to turn a major profit.
The Adedokuns started the company when they realized their son wouldn't have much access to African culture growing up in the U.S. So, they created onesies, overalls, dresses and pants that both celebrated their heritage and were durable enough for kids to play in. They asked the Sharks for $175,000, in exchange for 10% of Ade + Ayo.
The Sharks were collectively impressed by the quality, softness and vibrancy of the clothes. "We've seen so many collections for children over the years on Shark Tank, but never anything like this," Kevin O'Leary said.
But O'Leary and Mark Cuban were the first investors to go out, each saying clothing wasn't the right fit for their portfolio. Lori Greiner also dropped out, when the co-founders said they wanted to use the $175,000 grow their team. Greiner advised the duo to outsource their marketing when needed, instead.
Yet Corcoran saw potential, saying she liked both the product and the company's mission. "I have not seen baby clothing with these cool designs, the fabric," she said. "When you said they sell for under $20, I was blown away. Target should be carrying a line immediately."
But while she said the business could "grow like gangbusters" with her guidance, the co-founders were making a critical mistake. "You underestimate yourself," Corcoran said. "I don't think you realize the potential you have here."
Corcoran offered the Adedokuns $175,000 for 33.3% of their company, with a $500,000 line of credit. The couple, uncomfortable with giving up that much equity, countered with $200,000 for 30% and the $500,000 credit line.
Some of the Sharks scoffed at the counteroffer, but Corcoran stayed focused. She said she'd pay the $200,000, but she needed the additional 3.3% because she "wanted to feel equal" to the founders.
The Adedokuns relented, agreeing to a deal. Since filming, it seems they took Corcoran's advice: Most clothing items on Ade + Ayo's website now cost about $25 each.
"We are absolutely living our parents' and our grandparents' dreams," Temidayo said during the episode, in tears.
Disclosure: CNBC owns the exclusive off-network cable rights to "Shark Tank."
Sign up now: Get smarter about your money and career with our weekly newsletter