Shark Tank Nightmare, Roy Scott, H3TV

Startup Hustle Ep 8, Roy Scott H3TV
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Have you ever wondered about HOW Shark Tank really works?  Most entrepreneurs or entrepreneur hopefuls have watched the show.  With that, you see people come on the show and give a pitch, some get deals, some don’t.  Well, what happens when you thought you had a deal, then months later find out that you DON’T!?  Roy Scott of H3TV is going to tell you all about that!  This is one of the craziest entrepreneurial stories that you will ever hear.  Whether you watch or even like Shark Tank, you will want to hear this crazy story!

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Matt DeCoursey: Hello and welcome to Start Up Hustle with Matt DeCoursey and Matt Watson. How are you, Matt?
Matt Watson: Doing pretty good.
Matt DeCoursey: You pretty excited about today's guest?
Matt Watson: I'm very excited, I'm ready for a little hip hop.
Matt DeCoursey: Well let's introduce everyone to Roy Scott. How you doing, Roy?
Roy Scott: I am outstanding. Appreciate you guys having me today.
Matt DeCoursey: Well, there's a couple reasons I'm pretty excited about today, Roy's got a history in music, and for those of you that are just getting to know me, I did work in the music industry for a while, so I have a lot of passion for the subject, but Roy's got it all covered. He's been on Shark Tank. He's got a tech start up. And he's a musician. He's also found the right time in life to re-invent himself and done an amazing job of it and I'm really looking forward to hearing that story today. You ready to do some talking here?
Roy Scott: I'm ready to do it, let's rock.
Matt DeCoursey: Well let's actually go ahead and start with where you started in music and what brought you up to your current venture H3 TV?
Roy Scott: Gotcha. Well, as a kid I always had a passion for music, I just loved it. As I mentioned, my Dad, he was in a band, so little bit of time I did spend with him, I was around music. It was him performing at the clubs, or wherever he was at, I was with him, watching him. So I just had a passion for music and I wanted to create my own music.
And so fast-forward, he had a home studio and he had a couple keyboards in the basement. Had a roll of XB80, XB60 and I just started producing on it. Then I just started writing to the music. I always loved to write. I mean back then it was like you know, when I was a kid I was listening to Kris Kross, from that it was kind of like Bone Thugs 'n Harmony, Tu Pac, and so I just started writing kind of more, kind of like gangster-ish type music as a kid and put out my first project when I was 17, 18-years-old in the streets of Kansas City. And that's really how I kind of got started doing hip-hop kind of underground Kansas City hip hop.
Matt DeCoursey: Now with that you carried on with that for a while, but brought it up to a certain point where you realized, maybe this isn't what I want to do.
Roy Scott: Yeah, so we got quite a bit of traction with it, started actually with a record label, Mid West Sign, which is the same record label that Technon and I started on. So I was with Technon for a while, we recorded quite a bit of music, had some big opportunities, but kind of had my light bulb moment when my son was born. But he was probably about three or four years old at the time. I was picking him up from the school one day, because my son, I really wanted to be a better structure, and better Dad for my kids then what I had growing up. And so my son was a major influence on my life.
So I was picking him up from school one day. We were headed home and I was playing my music, and he was repeating the music word-for-word you know. This music promoted drugs, violence, you know, degraded women. So this was like my light bulb moment that you know what, I can't do this anymore. Even more, just as a musician, but as a Dad. You know, I can't be this type of influence on my son.
I reflected on my journey coming up and how influential the music was on me and I was like you know what, I'm not going to be this for my son and that's when I pretty much gave up that day. I'm done with this form of music. But it inspired me to create a positive alternative, which is H3, which is healthy hip hop where we take that same urban hip hop beat, but just put a positive message behind it. And we found success with that, because lot of the times we think about kid's music, it's watered down, right? It's like that Yo Gabba Gabba. Not knocking them, they had their own success in their own right, but it's watered down, like Kid's Bop, it's a watered down version of the original.
Healthy hip hop is like the same beat that you know their favorite artist, you know, Drake, Two Chains, whoever their favorite artist is, it's that same energy about it, but the message is all positive. And so we found success with that, started doing a lot of live events, then also, you know the parents were loving the music because it was actually music they could listen to their kids without going nuts. You know, a lot of time, you're like "Oh my God if I got to listen to this freakin' ABC song again I'm a go crazy." But this is like, the beat was so hard it was like, "Man, I love the ABCs, I love wheels on the bus. I can actually rock to this." So we found some success in that.
Matt DeCoursey: Matt, you know quite a few children's songs, don't you?
Matt Watson: My kid's favorite is the apples and bananas song.
Matt DeCoursey: I don't know that one.
Roy Scott: The apples and they change it to the vowels, apples and bononos.
Matt Watson: Yeah, that song, that one.
Matt DeCoursey: You're not willing to perform a small piece of it?
Matt Watson: I don't know, we can go for it.
Matt DeCoursey: Did you want to? Here we go the rashambo, you ready? DeCoursey wins. And Watson will be performing. Let's just get like five to ten seconds.
Matt Watson: So it's just the, "I like to eat, eat, eat apples and bananas." And then it changes it.
Roy Scott: No, no, They say, "Eat, eat, apples and benenes."
Matt Watson: Well no, no, the second verse, it changes and it goes like, "Apples and banenes and applos and bononos." Yeah, that song. [crosstalk 00:05:21].
Matt DeCoursey: Is someone going to sing that song or not?
Roy Scott: To eat, eat, eat apples and bananas.
Matt DeCoursey: That's it.
Matt Watson: I like to oat, oat, oat.
Matt DeCoursey: There we go.
Matt Watson: Apples and bononos.
Roy Scott: So they just change it up.
Matt DeCoursey: And this is all brought you live in the Start Up Hustle Studio in Leewood Kansas.
Roy Scott: Hey, we want to do the healthy hip hop version of that, I was just think of that, that's how it's going down.
Matt DeCoursey: Thanks Matt. I'll tell you, Roy, I don't know if you're aware of this, but Matt is like the Cleveland Browns of roshambo, it is really bad.
Roy Scott: Well I seen the Championship T-shirt, so I knew it'd be bad.
Matt DeCoursey: I think I'll post a picture of that on the StartUpHustle.xyz website because Matt actually has admitted defeat and bought me a t-shirt that said "I'm the Rush Roshambo champion." It's pretty-
Matt Watson: It's pretty sad.
Matt DeCoursey: I tried to figure out the mathematical chances of losing or tying in that many times in a row, and I don't have enough processing power. It was pretty wild.
Well congratulations on your pivot, now you started the Healthy Hip Hop movement, but tell us more about the start-up nature of it, and the things that you did outside of live performing, and some of the things that you're doing.
Roy Scott: So when we first started Healthy Hip Hop. So basically the year I started, I met my business partner, Reggie Reg, the magic man. So at that time, Mayor Funkhouser was the mayor. He was doing an event called "School's First." I set up a book fair, he was hosting it and I was just saying he had something special with the kids, like he just had this, he's like the Eddie Murphy for kids. Big smile, you know, big personality, he has this magnetic aura, that when he's around you, you want to be around him. And so I seen that, so I knew that I needed something special like that because my transition was, I'm coming from gangsta rap to now doing kids music. So it's like a whole 180. So I can't be, you know, grabbing my nuts and getting for the kids and stuff it's a different game, right?
So I knew that, so I was like "I got to learn how to perform, it's a different performance." So I met Reggie, and I was like man, this [inaudible 00:07:38], I was like on fire. I'm still on fire when I started. I emailed him the next week, or text him the next week, took him to lunch, got him in the studio the week after that.
We recorded a song called "Happy you know it, clap your hands," but the Healthy Hip Hop version. And he had already been a professional entertainer, you know for the last 10, 15 years and in another market. He's originally from Baltimore, he went to college in Charlotte. So he performed it, he was a professional magician, so he would do a magic in Charlotte and that's how he was making a living on top of some of his other hustles he was doing.
So in Kansas City, he was brought to Kansas City for real estate ... And a little quick background on Reggie. His uncle is a real estate mogul in LA on the West Coast. You know, a $20 million portfolio and he got duked and bought some properties here in Kansas City, some commercial real estate properties and he was LA suckered, basically he got duked.
Basically Reggie came, renovated the properties, made a profit of about $600k on the properties and then he stayed here, he's like "I'm going to let you manage these other things," but long story short, Reggie probably got up to about a million and a half. He was working for about a million and a half on paper, probably about $400k that was liquid, the rest was assets. And then the market was coming up to crash in 2007, 2008, and his uncle told him, "Hey, you need to pull out whatever you can, you need to back out because it's happening here, it's going to happen. It was coming."
So Reggie, long story short, Reggie didn't listen, ended up losing absolutely everything. And so when he lost everything, that brought them back to magic, because that's how he was making money before. So when he started performing his market locally doing the magic, you know, he was still doing 50, 60k a year just on performing. That's pretty much unheard of and this dude's work ethic is crazy.
So when I connected with him, he was like "I'm doing these shows," So I just started doing a couple of shows with him here and there. And then it started organically growing to where we were doing together about 30 performances a month, which is still, that's a lot of shows over the last five years. We've done over 1500 events together, and so we've traveled the country doing that. We found success doing that, and we knew we had something special, but we were talking to investors, mentors, and advisors, etc. They're like "Oh yeah, that's great what you're doing, but that's not scalable," You know, "We can't scale you and Reggie." And the shows we were doing, were on like a grand scale.
We did some bigger ones like, we partnered with the LeBron James Family Foundation in Akron. We worked with Oklahoma University for their divisional basketball games. We did their half-time show. So we did some bigger ones, but they weren't as consistent. We were doing more of the kinda smaller shows, you know 300 to 500 kids and maybe get paid you know, a $1000 a pop, which isn't bad, but it's not scalable.
Matt Watson: You can't clone yourself?
Roy Scott: Not yet.
Matt Watson: You said you had a kid, right?
Roy Scott: Yeah, yeah, well yeah. He's kind of a clone, but that's why I need, I'm trying to partner with you. I know you get the tech thing going. I need you to clone me and Reggie, so we can be everywhere.
Matt Watson: I've got my own clone, he's eight and it's kind of scary.
Roy Scott: True.
Matt Watson: Having a clone of yourself.
Roy Scott: Exactly. So I'm hoping my clones turn out better than me.
So, but anyway. During that process, we were like "Man, we've got to do more." So we did a kid's television show. And the problem was, hindsight 20/20, we kind of did it the wrong way.
So we went and did a television pilot, a 30 minute pilot episode, had a sizzle reel, we pitched to someone on the West Coast. We're thinking we're going to be just like a temporary Sesame Street. And so the game had changed and the production company we were working with were kind of old school. We really, realistically should have been putting out one piece of content at least, or two on YouTube, and building it on YouTube. That's the way it was going, because we started doing that probably 2011 with them. But instead, we did a 30 minutes pilot, pitched it, and networks liked us, but they were like for example Amazon, we got a bite with them, they were like, "Yeah, we'll play you, but you need 24 episodes." We were like ...
Matt DeCoursey: Yeah, we talked about that when I met you earlier this year and we were chatting about that, that they wanted, you know, 25 completed episodes and I think the next question I asked was "How much does it cost to film an episode?"
Roy Scott: Exactly.
Matt DeCoursey: How much was that?
Roy Scott: I mean, we, on the low end, it was going to be around 10 to 15 grand.
Matt Watson: Per episode.
Roy Scott: Per episode. So that's already a quarter a million dollars.
Matt DeCoursey: They had to come to the game with a half a million dollars of pre-recorded two seasons or at least one season worth of material.
Roy Scott: Exactly and then, so, I said hindsight's 20/20, we just did it wrong.
Matt Watson: Could you sell your clone and get that money?
Roy Scott: Possibly. So we just did it wrong, we should have been on YouTube, because that's where kids are at. So anyway, long story short, we knew we had, with that in mind, we needed that money, we knew we had to raise some capital to basically scale up and put some operations in place and increase some more of this content. So we started putting our business plans together, you know, pitch decks, financial documents. Like, okay, we've got to start operating like a business and thinking like this versus just two entertainers, two performers. Because that's how people looked at it, like "Oh, you're great, but you're just two performers." And especially in this market, they're like, "We don't know what to do with you, you're great, but you're performers, we don't know what to do with that in Kansas City."
So, during that process, of getting all of our stuff in order to raise some money, we had got selected to pitch on Season Seven of Shark Tank. And so for this, this was like about to be the game changer for us, like "Man, we about to get national exposure." I think they did the analogy that us airing would have been the equivalent to a five million dollars, you know, advertisement, because they were averaging seven to ten million viewers on their show. You get so much exposure, so we were like "Man, this is our tipping point, this about to change the game for us."
Matt DeCoursey: I've got a couple of questions before we get into that, because the experience in what you went through with Shark Tank ... And stick around, if you're not captivated yet, you need to stick around because it's a pretty amazing story. Now how did you even get exposed to Shark Tank, like how did they even know who you were, how did that whole thing gone down?
Roy Scott: So what happened, so we were doing stuff here locally and everybody is like you know they love us, they're like, "You should go see Oprah, or you should get on Shark Tank," I'm like "Yeah, there's layers to that[inaudible 00:13:49]."
Matt DeCoursey: Sure, no problem.
Roy Scott: Yeah, exactly.
Matt DeCoursey: I'm right on it. That's like when people are like, you should just find a couple enterprise customers.
Matt Watson: Yeah, no problem.
Matt DeCoursey: I'll do that, exactly. I'll put that on my calendar for tomorrow.
Roy Scott: But what I did look at, I was like, well, how can I get on Shark Tank, right? So I basically just a quick Google search and there was two ways. One was you could submit email submission, and the other was there was an upcoming casting call that was going to be in Houston, Texas. Me and my business partner Reggie, we had already been traveling the country performing, doing education conferences. We were like "Listen," I told him, "I'm gonna submit this email, if they don't respond, we're driving to Houston." And so I was getting prepared to send the email, Reggie was like "Man, don't even waste your time with that, bro. They're not going to respond to an email." I'm like, "Well listen, I'm just going to send it. Like I said, we're driving to Houston if they don't respond."
So I sent the email to someone on Monday, we had two performances the next day in Lawrence, Kansas on a Tuesday.
As soon as we got done with the second performance, my phone rings and my caller ID says, "Sony Pictures." I'm like, "Okay." I'm like, "This is Roy." And they're like, "Yeah, this is Shark Tank, can you tell us about Healthy Hip Hop and your business model?" So I was like "Of course," so I just tell them our business model, how we're generating revenue. Because we also had a curriculum, so we had exercise curriculum and we were dong after school programs because we were trying to find ways to diversify what we're doing and we can start making more money than just performing. So we had a curriculum, we had the television show, so the syndication of a TV show with the publishing, the writer/producer of our music. So kind of broke down everything.
And he was like, "Okay, well, we'll get this to our producers. If you make the next round, you'll get an email and you'll have to do a video submission." We were cool. So I tell Reggie, and he's like, "Man are you serious?" I was like," Yeah bro, they called us up."
Basically like hitting the lottery, because you know on the email thing, it says, you know, only send one email, we get a million of these and we probably not going to respond to you, so.
Matt DeCoursey: This sounds a lot like getting funded. Yeah, we've talked about that a lot on our show lately, that you know, why is it so difficult to raise money for your start up and the different things. And it says because, well, these people get a million emails and what can you do to stick out?
Before we get into the story, was there something that you did to really stick out in the email? Was there something that ... You know, because here you have a bunch of talented people with good ideas and even more with that. But you have to make yourself stand out.
Roy Scott: So actually it was a book I was reading at that time called Pitching Hacks. I don't know if you guys heard of Pitching Hacks or not, but it's a real easy read, maybe 50 pages maybe. But Pitching Hacks kind of talks about that. It talks about your elevator pitch, what your high concept pitch, which is like your business in one sentence and then it also addressed sending cold emails and how you can put them together to get their attention. So I was just reading Pitching Hacks and I was like "Man, we just took a look at that," And so it kind of addressed how to send a cold email. So Pitching Hacks, you can probably find it online.
Matt DeCoursey: So reading books works?
Roy Scott: Reading books works, man.
Matt Watson: I don't read a lot of books, but.
Matt DeCoursey: I was going to say.
Roy Scott: I don't read a lot either, but I'm about to start more, but reading books works.
Matt DeCoursey: All right, so here you are, you're coming on Shark Tank, what did you have to do to prepare for that?
Roy Scott: Okay, so after we did the video submission, which me and Reggie, we got the energy, we got the charisma. Performing is our thing. So we knew once they see the video submission, we're pretty much gonna get to the next round. We're confident in that.
So, after the video submission, basically you do a phone call if you get to the next round every week with one of their executive producers. And so, each week, you're kinda going over your pitch. Basically, their hot spot for pitches is 90 seconds. So, you get a minute and a half to pitch your business. Now, they gave us two and a half minutes because we actually brought our puppets. So, as I said, we're contemporary Sesame Streets, we have two puppets, Hip and Hop, kinda like Burt and Ernie.
So, Hip and Hop were there with us when we pitched and I actually contracted four kids in LA, kid dancers, so we brought a full production to Shark Tank. So, they gave us two and a half minutes. So, we're going over our pitch and we're going over the money that we're asking for.
Now originally, we were gonna ask for 1.5 million dollars, which is ridiculously high and as we looked back, it was stupid, right? And so, they were like, "You can ask for whatever you want, but we're letting you know that's kinda high. But, we can't stop you, you can ask for whatever you want." So, me and Reggie came back to the table, we're like, "Let's just ask for 500,000, bring it down." Which was still pretty high. Hindsight 20/20. But, at the time, we were like, "Let's ask for this 500,000 for 20 percent of our company, which makes it 2.5 million evaluation, which is even high evaluation for our standards based on the fact we had been generating about 150 000 annually, in revenue.
So bottom line, each week we met with the executive producers, fine tuned our pitch. We had to submit all our logos and stuff to get clearances for the trademarks because it's going to be airing obviously on ABC, so they had to get all these clearances.
Matt DeCoursey: How long was this whole process of getting prepped? Because it sounds like they're coaching and grooming you to be good on the show.
Roy Scott: Yeah. So I sent the email in April, they finally reached back in May, we started the first call in June, so we basically met from June to the end of August. And then in September was when they actually did the pitch, when we did the pitch in September. So they wanted to see your business plan, they wanted to see tax returns, I mean they wanted to see ... It was almost like going for BC, they wanted to see absolutely everything.
Matt DeCoursey: That's what it sounds like. Even the time frame of people say, "Oh well, I'll just go raise some money. I'll get an investment." I'm like, "You need six to nine months. Usually this would be told yes or no."
Roy Scott: Exactly.
Matt DeCoursey: Or at least yes.
Roy Scott: So went through that process, finally made it to the last round, when they always kept you on pins and needles. They were like, "Well listen, you got to the next round, but it's not a guarantee that you're going to pitch." And so basically they get 50 000 submissions each year, and only select 150 businesses to come and film. And then out of those 150 that film, only 120 air. So it's like, you've got all these odds you're up against, and they keep telling you, "Well you know, you made it to this round, but you haven't officially made it to pitch."
Matt Watson: So that's weird. They film some but they don't air them. Can you tell us about that?
Roy Scott: Yeah, yeah. Well I'm going to tell you a lot about that. Exactly.
So we finally got the okay, "Listen, you guys have made it to film." So we like, "Okay, we about to do this." And so-
Matt DeCoursey: Well hang on, You had to do a lot of prep. Didn't they also coach you on being prepared for what could or what happened if they aired your episode?
Roy Scott: Well really the only preparing we did was the pitch part. So we basically had to do our pitch with them every week, where we did our pitch over the phone with them, virtually, and that was really all. They were like, "We're going to prepare your pitch," Because the one part of the Shark Tank that actually is reality TV, is that the Sharks don't know anything about your business, they've never seen you. And one of those things kind of went against us too, as I'll get in that part of the story.
Because when I sent the email to Shark Tank, I also sent an email to Shark Branding. Now Shark Branding is a company that's owned by Daymond John, and so I sent the email to them saying, "Hey you know ..." Because I was just sending emails at the time, I didn't know who was going to respond. But when we were going through the vetting process, they were like, "Listen, we need to know. Have you been in contact with any of the Sharks in any form?"
We were like, "No, we haven't been in contact." The next week we were on the phone, they were like, "Listen, we're going to ask this again. Have you, even if it's an email, have you reached out to anybody." And I was like, "Yeah. I actually emailed Shark Branding. I didn't know that was separate, or that was Daymond John's company."
So that's why when we actually pitched, they pulled Daymond John off of our pitch, so the Shark's that were there when we pitched were, Mark Cuban, Mr. Wonderful, Barbara, Lori, and Richard. So basically, we were hoping Daymond John was going to be one of the guys that was there, because when Fubu was kind of going mainstream, that was when hip hop was kind of taking flight in the late 90's or 2000's, so we were hoping he would be there.
So he wasn't there. So long story short, when[inaudible 00:21:40] made it to go pitch. So when we come out and pitch, one of the things we do that is pretty unique to most pitches, is that we have a part where everybody gets up and participate, we do like a movement piece of it. Where you get up and do a 30 second Healthy Hip Hop dance with us. So we actually did that, and every Shark got up except Mark Cuban.
So Mark Cuban looked at us like, "This is a good joke. I'm not getting up bro." That's how he was looking. And so went through it, and by the time they sat down, and Mark Cuban started drilling, he was, "Well, how much money have you made in the last year?" And I was like, "Well over the last three years, we've made ..." And he was, "No, no, no, no. I asked you just about the last year."
So he was already trying to set the tone, and we were like, "Well you know, over the last year we've done $120 000." And he was like, "Okay, that's not much. You're asking for 500 000." So he was trying to see how does this justify what you're asking for, because it was more about, they were our right to the numbers. And we were telling them, well we're kind of pitching more based off a children's media brand, because usually it's very product driven. We're like, we're syndication of kids television show, the publishing of the music that we own, the curriculum merchandise from Lobby Dance, so we're pitching the whole thing. And they were like, "That still doesn't make sense."
And so part of that, they were asking kind of how I got started. And so that's when I kind of told the story about my son, and I was like, "It all started with my son. I used to do hardcore core gangsta rap, but my son Justice, aka the Jizzleman, that's his nickname, the Jizzleman-"
Matt DeCoursey: That's Matt's nickname too.
Roy Scott: You're the Jizzleman?
Matt Watson: Yeah, yeah, yeah.
Roy Scott: Oh man. We've got a couple Jizzle's running around here.
Matt Watson: I'm not sure what a Jizzle is.
Matt DeCoursey: We'll post that on the resources page of the website later.
Roy Scott: But when I said that, Mark Cuban was like, "Hold on, hold on. You nicknamed your son the Jizzleman?" Like he was kind of trying to make a joke about it, and though I kept my cool, but I got kind of [inaudible 00:23:43] and I stood up like, "Yeah," I said, "He's the Jizzleman. That's what you call swag." And he kind of told them, like he was trying to break us. I just stood strong, like, "Bro, you're not about to talk about my son," I kept my cool, but yeah, that's my son's nickname.
Matt DeCoursey: Now one of the Shark's likes what you were doing.
Roy Scott: Right. So basically when we were pitching, everybody was beating us up, but we were still staying resilient, even cracking jokes throughout it. They were asking about Reggie's magic, and Reggie was like, "I'm the number one bro-gician," because he's a black magician, right. You don't see too many black magicians, especially in Kansas City, right. So he's like, "I'm the number one bro-gician." We were just saying little stuff to lighten them up, we still was getting beat up.
So bottom line, towards the end of it even though Mark Cuban didn't get up and dance at the beginning, towards the end he's like one of our biggest supporters. Like, "Man, I can see the passion, I like what you guys do, but you're just asking for too much money. If you were asking for 50 000, I may get it. I probably would have did it. But 500 000 is too much." So he was out.
So by this time, we had got beat up. We came into thi ... So this is what I'm going through emotionally. We had came into so confident, like we're about to smash this, we're about to walk out with a deal hands down."
Matt DeCoursey: This is all in the context of two and a half minutes.
Roy Scott: Two and a half minutes, and probably about 10, 12 minutes of question and answer, of getting drilled.
And so by that time, were seven, eight minutes in, and we were like, "Okay, let's tuck our tails and get the hell out of here, because we're not going to get a deal. Let's just hope we get this aired, and they'll see it and we'll get some exposure."
So they were kind of going out one by one, they were all kind of saying the same thing, "I like your passion, but I don't understand your business model, and how much money you're making based on what you're asking, it doesn't add up."
So we had referenced the Wiggles in our pitch. The Wiggles are like one of the few children's brands that stayed independent. They started in Australia. And so Mr. Wonderful knew the whole business model, and actually Mr. Wonderful and Mark Cuban, one of their best friends is one of the guys who started it. One of their friends is one of the guys who started the Wiggles.
So he was like, "You know, you guys started pretty similar to Wiggles. They performed a lot locally in Australia, they did a television pilot, they got picked up by Public Access Television in London, and they kind of blew up. And also he had been in children's education space. Oregon Trail, a game we played when we were kids, that's his game. Carmen San Diego was another one of his properties."
Matt DeCoursey: Did you know that Mike?
Matt Watson: Who? The Wiggles, or Who?
Matt DeCoursey: No, Mr. Wonderful.
Roy Scott: Mr. Wonderful.
Matt Watson: I didn't know that.
Roy Scott: Yeah, Oregon Trail.
Matt Watson: I knew he had done some stuff in education, but I didn't know specifically of those games.
Roy Scott: Yeah, Oregon Trail was Mr. Wonderful.
Matt Watson: Wow.
Matt DeCoursey: I remember Carmen San Diego-
Roy Scott: [crosstalk 00:26:19]
Matt DeCoursey: Makes you think about that as far as like computers and software, like I remember playing Carmen San Diego on an Apple 2E in fourth grade.
Matt Watson: Wow.
Roy Scott: So that was all Mr. Wonderful.
Matt DeCoursey: And I'm old like that, that was when-
Roy Scott: [inaudible 00:26:31]
Matt DeCoursey: -floppy disks were still floppy-
Roy Scott: Straight up.
Matt DeCoursey: And the monitor was very much attached to the keyboard.
Roy Scott: Exactly.
Matt DeCoursey: Yeah, Apple 2E.
Roy Scott: Yeah, he was the guy who was behind all that. And so he's like, "I've been in this space. You know what guys, I'm going to make you an offer." Now keep in mind, when he says this, at this point the only thing that really flashed in my head was the last time I had seen ... I used to watch a lot of Shark Tank, but ...
Matt DeCoursey: Was this going to be a really bad offer, right?
Roy Scott: Not only a bad offer, the last thing I seen him say was like, "You know, I'll squash you like a cockroach. Get out of here." He's brutal.
So for him to extend an offer, I was just all like, "Whoa." And they can't offer you less than what you ask for. So he's like, "I'll give you 500 000 dollars for 50% of just the kid's television show. I don't want anything else."
And so me and Reggie had already made up in our mind, like if anybody offers us a deal, we're going to go huddle with Hip and Hop to make it good for TV, right.
Matt DeCoursey: We need puppets Matt.
Matt Watson: We do need puppets.
Matt DeCoursey: Start up a hustle.
Matt Watson: That would be perfect for a podcast. Everybody would be able to see them.
Roy Scott: Yeah exactly.
So we go and huddle with Hip and Hop, and I told Reggie, I said, "Listen, here's what we're going to do. I'm just going to counter for 51%, just so we can stay in majority." So I come back out, and I say, "Would you do that for 49%, and leave us with for the 51?" And then Mark Cuban was like, "Yeah, Mr. Wonderful, give it to them." And he was like, "No, I want 50%."
We were like, "You got a deal." Because we knew more important than even this deal, that once this episode airs, this is going to be our tipping point, this is going to give us national exposure, and the right people are going to see us.
Matt DeCoursey: So here you are, you get your deal, and now they're going to shoo you out the door, and you're the guys walking down the hallway, "Wooooo. We got the deal."
Roy Scott: Got the deal. After we got the deal, Mr. Wonderful comes up and shakes our hand, shakes Hip and Hop's hand-
Matt DeCoursey: Nice.
Roy Scott: Shakes Hip and Hop's hand, so we go back to another part of the studio where you kind of see where they ask questions afterwards, like, "Well how do you feel, you got a deal with Mr. Wonderful." And we're like, "This is unbelievable, we're just os thankful." You know, the B-roll stuff, or the after footage that they show.
So we film that, we go back to the trailer, and his CEO of his company was there, it's a young gentleman named Alex Kenji, he was there. He comes back to the trailer like, "Hey guys, we've lot of good ideas for you. We're excited about this, we're going to make some stuff happen."
And basically, we had these jumpsuits, right. So I had bought a black H3 TV jumpsuit, just an additional, just in case, and I left it with him. "Hey man give this to Mr. Wonderful." He was like, "Cool." So when we were back there we were kind of talking about everything, and they're out of Canada. So we were talking about our mission, he was like, "Yeah," because he was talking about Drake, and he's like, "Yeah, I even like Drake, but some of the messages ..." And then he's like, "So that's why we're so excited about what you're doing."
Reggie is always like, "Yeah!" Kind of like Little John, he does a little more hype than that. And so by the end of the conversation, Alex was like, "Yeah!", you know, he was excited. So we were like, "Man, we got this. We'll start the due diligence process, we're going to get this thing rolling."
So me and Reggie were on such an adrenaline high, we literally ... We had drove down there. We drove 24 hours straight back to Kansas City. Drove back, got on the document, started the due diligence process, and that was September of 2015. And so we were just waiting on the phone call of, all right, when this episodes going to air.
Here in Kansas City we had done one [inaudible 00:29:48] cups before, so I worked with the Kaufman Foundation, had already kind of contacted them privately saying, "Hey listen, we're just waiting on this phone call, when it comes we want to do a watch party here. We want to do something really big and positive for Kansas City." And they were like "Of course, just at least give us a weeks notice and we'll make sure we get this done for you."
So again, that was September '15. So started the due diligence process, got all the documents they needed. Three months go by, January comes around, we haven't got the call yet. So I'm like, "Okay. We're going to get it soon. The call's coming soon." Three more months go by, so six months, and finally March of 2016, we get a call. That this time my wife was actually home oddly at this time, because it was during her work time during the day, like early in the day. She wasn't at work. And it was a 310 area code, and my wife was like, "This is the call. This is it." I was like, "This is it."
So I'm so happy, and I pick up the phone, and I'm like, "Yeah, this is Roy." And he was like, "Yeah this is ..." I forget the guys name. But he was Shark Tank Bill, new Bill ... something like that. "This is Bill with Shark Tank. Just wanted to know, you guys did an amazing job, but unfortunately your episode is not going to air." And I went from being 6'3, to like 2'6. I was like, "What do you mean?" I just couldn't put words. I was like, "What do you mean it's not going to air?"
He was like, "Well, the slot's kind of full." Gave me some BS, and like, "You know, it just didn't work out. But you guys are great man. Great job."
Matt DeCoursey: So at this point, did you wonder if you still had a deal outside of the actual show?
Roy Scott: So that was my next step. Let me give you another part of the back story, which also sucked about this.
So not only did he call me and tell me that our episode is not going to air, but I also had taken $25 000 loan out, because they were like, "When this airs on Shark Tank, you're going to want to make sure your website is beefed up, we want to make sure your warehouse is in stock, because your website could crash. You want to make sure you're prepared." So not only did my episode not air, I'm $25 000 in the hole. I'm like, "Okay, excellent."
So the next morning, I get up and I email Alex Kenji. He's the CEO of [inaudible 00:32:08] Ventures, and I'm like, "Hey, can we talk? I want to make sure that whatever we have is still on the table." And he was like, "Yeah Roy, let's get on the phone tomorrow." So we're on the phone the next day, and I was like, "Listen, I just want to be as creative as possible," and he was like, "Listen Roy, before you go any further. Can I talk to you off the record?" I'm like, "Of course."
Excuse my French, but was like, "Well, you guys got fucked," and I was like, "Well what do you mean?" Says, "ABC, the network that Shark Tank comes on is owned by Disney. Disney looked at your children's program as competition. So they pulled the plug on your episode. Welcome to Hollywood." And he was actually ordered to cut all communication with us. He wasn't even suppose to give us that closure.
So I was fortunate enough to at least get some closure, because I knew something funny behind the scenes happened. So at least he gave us some closure, but he was so cut throat. He was actually ordered to cut all communications with us, and it was going to be over. Don't give these guys anything. So at that point, it's kind of the best and worst validation. Like wow, H3 is a threat to Disney, but also our life changing moment has just got thrown in the toilet.
And also we got this 30 days before my business partner was getting married. So all his family and everybody was expecting this great news. So of course we didn't tell him, and anybody, we didn't want to ruin the vibes of his wedding. We're like, "Man, we can't say nothing until this is over bro. We got to just let the vibes kind of ride. We're not telling nobody this until this is over dawg."
So anyways, and to be honest with you, even to this day, it's affected him. I mean as far as even his role in this business. That was a blow to him. It was blow to me too, but obviously it took me about two weeks, I was on my couch like, "Nah, I don't know what's next for us, I don't know how we're going to rebound this. We were just going to be exposed to the masses. This is going to be our break, and now we're broke."
Matt DeCoursey: From the break to broke.
Roy Scott: Break to broke.
Matt DeCoursey: It happens to a lot of people man. This is probably the most extreme story I've heard from an individual. I can't imagine the feeling. I can imagine the feeling, but no, not how it hurts.
Roy Scott: It hurt. It hurt. And then-
Matt DeCoursey: So how did you recover from that? Like what was your path back? Because you've definitely had a rebound, and you've developed some things past this that are heading in a positive direction.
Roy Scott: So basically, the next week ... So we got the call, crazy enough ... I'm a spiritual guy, and we had got the call on March '16. So the next week, we had a ... We actually have a partnership with a company called Centene Healthcare, they cover like all the Medicaid for the lower income families, and we did our exercise program at two of their states. One was Louisiana, and one was New Hampshire.
So we had to go to Louisiana the next week, I mean after we got the call, the following week. So now we were just crushed man, I couldn't believe. I was pissed. But we went, do what we did, and I came back and I was still kind of in my slump. But I was watching Netflicks, and when I was going through Netflicks at the time, they holla'ed at a movie that was called Walt, Before Mickey. And ironically enough, Walt Disney is from Kansas City, all right.
So I was watching it, and it kind of talk about some of his stories. It talked about him having these exact same moments. Like he had a moment where he was right there and kind of got, what do you call, kicked in the teeth. And one of the things he said in the movie, so what it's about, "You don't know what you're made of until you get kicked in the teeth, and how you respond to it."
And so I seen that, and again, I'm very spiritual, so I prayed about it, and I was like, you know what, I just got to keep moving forward. We're going to get there, it's just going to be a different route.
So that's when ... I knew about these entrepreneur resource but I hadn't taken advantage of them. So I've taken advantage of every entrepreneur resource that Kansas City has to offer. And it's kind of crazy how Disney ties into all this, because Walt Disney's from Kansas City. They're the ones who took a crap on me, and one of the first guys that I'd met with, is a guy named Ron Green who does digital story telling. And they're trying to rehab the original Disney building, on 31st and Truth, [inaudible 00:36:38]. And they got like two million, and they need like four million to do it, so they've got half the money. But he's like, "We're renovating the old Disney building to bring it back," but when I met with him, he was like, "You should talk to these people. You should go to the Small Business Technology Development Center, you should talk to Katie [Bootie 00:36:52] with Ling Lab, you should go to the Kaufman Fast Track."
So he told me all these things, and I'm just writing everything down, and I knocked every one of them down. So I was like, "I'm a start with the Small Business Technology Development Center," went there. From there I did Kaufman Fast Track. When I did Kaufman Fast Track, I learned about digital Soundbox.
And so, before I get too much about the direction, we had to reflect on our journey to see where our success was at. And our success was in the education space, where teachers were using Healthy Hip Hop in the classroom to get the kids focused and ready to learn. So they were doing it to start their days with morning energizers, they were doing pre and post test taking, so it was all about education. So we were like, now you know, we have a play here that we can pivot to an Ad Tech company.
And so basically, we had partnered with a group who was doing something similar, but we were just taking it to the next level. So basically we needed to create our own platform that an educator could log-in to the platform, create a unique log-in, and then stream more music and video content on their smart boards. And they were doing a learning application as well.
So I said, "This is the tech play that we're going to pivot into so we can scale this business up. And it's not based on us performing, it's not based on just entertainment, so people can understand that we have a legitimate business model." Because that's what learned, is that we have something special, but we didn't have a business model.
So anyway, we got Digital Soundbox, which is a $25 000 grant, to develop the first phase of our technology. From that, we got accepted into Pipeline Entrepreneurs, we got accepted into Ling Lab. So Ling Lab is an ad tech accelerator program. We were fortunate enough to be the number one company at the end. We got an additional $25 000 grant from them, and we also got a grant from [00:38:34] KC for $50 000, and again, it's all about building the business.
So now with the money we've got, so it's about $100 000 in grants, we've been able to develop the first phase of the technology. We're just getting ready to do some beta testing, and then getting ready to go to the market first quarter of 2018. So I mean, it was just an incredible learning process. And part of the story was with [inaudible 00:38:57] because we closed Kevin O'Leary. We pretty much closed everybody.
Matt DeCoursey: When we previously met, that was one of the things that, I don't know if you remember, but I said, "Man, I would think if Mr. Wonderful on Shark Tank is ready to give you an investment, that someone else might be ready [crosstalk 00:39:12]."
I also had the opportunity to take a look at the technology, you gave me a little demo of what the streaming thing sitting at. They have a product that, well, it kind of reminded me of ... What are those games where you dance? The ...
Roy Scott: Like the Just Dance series?
Matt DeCoursey: Yeah, with the mats. So the technology that they're building has the ability to stream to schools and different places where educators can lean on the content and everything they've created. It's interesting.
Now I know that some of that is still formative, and I think I'd like to have you back at a later date to tell us how that's developed, and some of the challenges around that.
What do you think about this whole thing, Matt?
Matt Watson: So you're going to be selling this to school districts now? Or what is the plan? Like, who is the target customer?
Roy Scott: So the chief academic officers, those are our targets. So those are either going to be your superintendents, or the actual chief academic officers who make the decisions for the districts. And so going through Ling Lab really kind of gave us a clear plan of action of how we get to that, because they specifically focus on education, ed tech, and they gave us a lot of connections and resources.
There's a company called [Paradeck 00:40:23], I think they started in Iowa, but they're based here in Kansas City. In Iowa I believe, or Nebraska, one of those. But basically, we have a similar sales model, so they kind of gave us all their stuff that's worked for them. They're grossing over two million annually, so they kind of gave us all that, like, "You can utilize this."
So basically what we're doing with some of the lower hanging fruit, is we have a whole bunch of customers that are booking us for live events right. And they're payig us on average $500 to $1000 for one time, 45 minute assembly. So our thing was, "Hey listen, instead of paying that 500 to 1000 for that one assembly, would you be willing to pay 1500 to 2500 for a year long sustainable program, a year long license to our content." And they're like, "Yeah," I mean, this is more valuable for them, versus a one off, they can pay for the subscription.
And so that works a lot on the school level, and we have a lot of those customers that close on those, but then what we're doing, because we're basically taking 10 champions, or 10 school teacher champions who are using us in each district, gathering some of that data, using them as our testimonials, and then taking that to a district level. Say, "Listen, we already got 10 schools in your district using us. They're vouching for us. We're able to see an improvement in test scores, decreasing behavioral incidences, a few other metrics we're capturing." And then they cut the check on a district level. It's like, "Okay, well I'll cover the 20 schools, 40 000 a year, for a three year deal."
Kansas City, obviously, we're one of the, when it comes to schools, our school district's kind of segmented. So it's like, a whole bunch. You got, Kansas City, KCK, Lee Summit, Blue Valley, you got all these schools. They've got 20 elementary schools.
For example, I went to Atlanta, the Dekalb district, 100 elementary schools in one district. So you're looking at a six figure contract alone with just some of these bigger districts. So we're setting up two spots. One is in Atlanta, the other's in Dallas, we already got reps in both those places to basically take what we're doing in the small market of Kansas City, and they're spreading it out and generating more revenue doing that.
So we've already got three letter of intents, we've already got three districts committed to us, and we're working on closing more. So now it's about how do we scale this up.
And I think there's even more at play than just education, but I think this is our entry to the market, so we can start at least generating some revenue, getting some more exposure. But with Healthy Hip Hop, we just think there's so much more. For example, the next phase would be our mobile application, which you could think of as a kid's album with hip hop. So every hip hop song that comes out ... We have original music, but we're going to basically do cover song for every one that comes out. But giving an app that lets parents stream that directly to their Bluetooth, or whatever [inaudible 00:43:09] everybody's streaming stuff now. And also allowing them to create some custom video content with their kids, kind of like a musically, but for education.
So that's the next phase of our technology, but going through these programs, I'm learning so much. Like I'm hyper focused just on this first one to get this off the ground, start generating some revenue, and then we can expand to others once we start closing off some more capital, and bringing more money in.
Matt Watson: Well that's awesome man. Huge congratulations to you guys.
Matt DeCoursey: I have a great idea though. Wait. Before we end, I have something here. Because, let's be realistic, Matt Watson and Matt DeCoursey, we need a little exercise. I think we need to end this episode of Start Up Hustle with roshambo, where the loser has to do one minute of Healthy Hip Hop.
Matt Watson: No, no, no. You're just picking on me now.
Matt DeCoursey: I'm trying to give you a chance to win.
Matt Watson: No, no, no. I knew that's where this was going too I just knew it.
Matt DeCoursey: Okay. I'm just trying ... I like people.
Matt Watson: You want me singing and dancing, and what else is there-
Matt DeCoursey: All you have to do is win once. The blind squirrel finds the acorn eventually. But if you're not willing to do it, I mean, I'll be happy to roshambo Roy for a Respect the Hustle t-shirt.
Matt Watson: That'll work.
Roy Scott: I want the t-shirt regardless.
Matt DeCoursey: I'll probably give it to you anyway. But you know.
Anyway.
Roy Scott: I want the t-shirt, I like the t-shirt.
Matt DeCoursey: How mad are you going to be when he beats me?
Matt Watson: I won't be mad.
Matt DeCoursey: He will be.
Matt Watson: It's going to come to be expected.
Matt DeCoursey: He will be.
All right, ready?
Roy Scott: 1, 2, 3.
Matt DeCoursey: Oh, I lost.
Roy Scott: Hey, chop it up.
Matt DeCoursey: Well hey Roy, thanks for taking time. I know you're a busy man. I want to keep up with your progress through some of this. I'll probably do some Healthy Hip Hop for the Start Up Hustle YouTube channel at some point.
Roy Scott: Well here's what I'm going to do too, and what I'd love to do, is ... I'm already looking at some of the information, but give me some key hot words, and I'm going to put together a Healthy Hip Hop jingle for you all, bro.
Matt Watson: Oh, that's awesome. Yeah.
Matt DeCoursey: I like that a lot. I've been trying to do the best DJ job I can for the intros and outros, but I know ... Roy sent me a couple tracks earlier, one of them is titled Hustlin'-
Matt Watson: Ah, nice.
Matt DeCoursey: And I was like, ah man, I've got to figure out some good spots.
Well thanks for listening everybody. Hopefully this is an inspiring story for all of you. If you get a chance, go to the Start Up Hustle website, at StartUpHustle.xyz, where I will post not only links to the book that you mentioned earlier, and also to some of the H3 TV stuff. Maybe a video or something like that. You've got some cool stuff.
Matt Watson: Yeah.
Matt DeCoursey: Thanks for coming in man.
Roy Scott: I appreciate you brother.
Matt Watson: Thank you.
Roy Scott: Thank you Mike.
Matt DeCoursey: See you guys next time.
Roy Scott: Peace.

Roy Scott H3TV on Startup Hustle