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Why billionaire Mark Cuban invested in an Afghan saffron start-up run by veterans on 'Shark Tank'

Rumi Spice pitching on "Shark Tank."
Photo byMichael Desmond
Rumi Spice pitching on "Shark Tank."

Mark Cuban is a Dallas-based tech entrepreneur who is obsessed with basketball, so a Chicago-based start-up selling saffron produced in Afghanistan may seem outside his investment sweet spot.

Yet the billionaire made a deal with precisely that on a "Shark Tank" episode that aired Friday. And, he did so despite some pretty aggressive criticism of from other Shark investors.

Rumi Spice appeared on "Shark Tank" seeking a $250,000 investment for five percent equity. The three co-founders — Emily Miller, Kim Jung and Keith Alaniz — all served in the military in Afghanistan. They learned that the war-torn country is covered with the purple flowers that make saffron, one of the most expensive spices in the world. They also learned that Afghani saffron is some of the best quality saffron in the world.

To bring more business and more money to the farmers in Afghanistan, Rumi Spice built an infrastructure to sell saffron harvested in Afghanistan to consumers in the United States.

Rumi Spice sells one gram of saffron for $18, one ounce for $140. "It's so expensive because there is no automation, it all has to be hand processed," says Jung, who, along with Miller, is both a West Point and Harvard Business School graduate. Small bottles of the spice retail for $35 and cost $8.30 to make.

At the time the show was taped, Rumi Space had $400,000 in sales and projected $750,000 for the year.

Daymond John, however, objected to the price. He argued the products are too expensive to be appealing to a wide consumer market.

The market for saffron in the United States is $60 million, which Jung admitted is "not big" but as she explained, selling saffron as a spice is only one piece of the business plan.

"We are not really in the spice industry here. We are talking about building a brand around saffron and doing other saffon related products," Jung said, and Cuban nodded in approval. The plan is to launch and sell other saffron products, like saffron butter and saffron tea.

A peek inside the Rumi Spice processing facility. Everyone is hard at work, hand picking the stigma from the flower!

A post shared by RUMI | Afghan Saffron (@rumi_spice) on

Cuban also wanted to know what the geopolitical risk is in building a company based on product from Afghanistan.

"I don't think there is a political risk because we are operating with the farmers, we are giving them incentive to produce and we are giving them an incentive to protect their investment," said Alaniz. Again, Cuban nodded in approval.

Kevin O'Leary then drilled into the Rumi Spice team, looking for gross margin numbers. The team faltered answering the question, fumbled to produce exact margin projections, and "Mr. Wonderful" appeared unapologetic in his disapproval.

Jung owned up to the mistake. "Yes we are Harvard grads, but we are not perfect. I was just a Harvard grad last year. Most of my education has been what we have been doing this past year," she said. Cuban chuckles approvingly at her mea culpa.

Congrats to our co-founders graduating @HarvardHBS today! #hbs

A post shared by RUMI | Afghan Saffron (@rumi_spice) on

Then, Cuban offered the entrepreneurs a $250,000 investment for 15 percent equity, more than three times what the founders were hoping to give away of their company for the cash. However, he insisted there is no room for negotiation.

Cuban gave two reasons for making the deal, despite the problems other sharks see in the young company: He respects their work to empower Afghani farmers and he likes to work with veterans.

"Okay guys. I think your mission is good. I think it is going to be impactful beyond just your product. I have invested in a lot of military companies. Combat flip-flops does a lot in Afghanistan," he said.

The entrepreneurs accepted the deal. "Congratulations guys, you are doing great stuff," Cuban said.

"Striking a deal with Mark Cuban is a game changer, for the women in Afghanistan who work for us, for the farmers in Afghanistan," Miller said. "Now we are going to have the ability to scale and bring our brand to all the consumers in America. This is huge. This is huge for us."