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Why this falafel business founder turned down $300,000 from Mark Cuban on 'Shark Tank'

Mark Cuban, Robert Herjavec, Daniel Lubetzky, Lori Greiner, Kevin O'Leary
Eric McCandless | Walt Disney Television | Getty Images

To be a startup founder in a make-or-break moment and turn down $300,000 from billionaire Mark Cuban means you are either deluded — or you have another, better offer.

John Sorial found himself on the latter on Sunday's episode of "Shark Tank." In the first episode of the show's 11th season, the 43-year-old founder of TaDah Foods received investment offers from both Cuban and Daniel Lubetzky, founder the snack company Kind and a guest "shark" on the show.

Sorial turned down Cuban and took Lubetzky's offer instead.

"Choosing between Daniel and Mark was one of the most difficult decisions I've ever made, but Daniel is an icon in our industry," Sorial said. "To have him in our corner — supporting us, not just financially, but working with us and helping us to grow TaDah — we hope to be a national brand. It's just the best outcome I could have hoped for."

TaDah makes and sells frozen falafel street wraps in four flavors — fresh lemon garlic hummus, sweet-spicy harissa and lebni, feta green pepper salsa and spicy brown sugar harissa hummus — and bite-size falafel poppers filled with either cucumber dill yogurt, lemony roasted garlic hummus or harissa hummus. The wraps retail for $3.99, and the poppers retail for $4.99.

Sorial, the son of Egyptian immigrants, was inspired by the food of his heritage. "The problem is my grandmother doesn't ship nationwide," he said on the show, which was taped in June.

With TaDah Foods, Sorial also hopes to help people around the world. According to the company website, more than 25% of profits go to organizations that are "actively engaged in social change." One of those organizations is Meant 2 Live Foundation, which aims to fight poverty and homelessness.

Sorial graduated from Johns Hopkins University with a degree in chemical engineering in 1998, according to his LinkedIn profile. From there, he worked as a chemical engineer, and then as a marketing executive. 

As of June, TaDah had done $8.2 million in sales. Annual sales had been as high as $2.3 million, but were down to $1 million in the 12 months prior to the June taping. That was because a partner in the production process "became financially insolvent," Sorial explained to the judges.

During that time, they only had four people on the production floor; usually, the process requires "dozens of people," according to Sorial. "I would stay all night with the staff. I would suit up and shovel the chickpeas myself," he said.

At the same time, Sorial was "flying all over the country trying to source new co-packers." The staff shortage problem has since been fixed, he said.

Lubetzky related to Sorial's story. In his early years of building Kind, he also faced a production problem, and it almost forced the business to shut down.

"I lost about $1 million in sales because one of my manufacturers had changed the ingredient and we were this far away from closing," Lubetzky said, using his finger and thumb to indicate how close Kind was to shutting down.

"It's fascinating to me, when I think back — that we, Kind, grew out of one of the toughest years of my life, and out of that darkness came incredible light," he continued. "Kind today sells in 300,000 stores, over $1 billion a year at retail."

Sorial said he was deeply motivated by Lubetsky's story. So much, in fact, that when describing his reason for working through trying times to keep the business alive, he began to cry.

"When you go to other parts of the world and see how people live, you realize that people are fighting for their lives," Sorial said. "[Building TaDah] has been difficult, but I think about my family and the people who are struggling, and I want this to be a success because it will impact their lives."

When Sorial entered the "tank," he was looking for $300,000 in exchange for 10% ownership of his company. Lubetzky, inspired both by Sorial's passion and product, said he was interested in investing, but didn't think Sorial understood how much money he would need to get TaDah back on track.

Lubetzky offered Sorial $300,000 for a 20% stake, or $500,000 for 25%, and indicated that he would be open to extending Sorial a line of credit. Cuban jumped in and offered Sorial $300,000 for 20%, with another $500,000 line of credit.

In an effort to take both up on their offers, Sorial asked if "there is any way" to structure a deal with both Cuban and Lubetzky. But that wasn't an option.

So Sorial, who said he felt "extremely blessed," decided to take Lubetzky's offer of $500,000 for 25% of the business.

In the months since the show was taped, Sorial said the partnership with Lubetzky has been beneficial for TaDah Foods.

"Daniel has been extremely hands-on in the best possible way, and the momentum has been building by leaps and bounds," Sorial told CNBC Make It, through a Kind spokesperson.

"While I have a great deal of respect for Mark and think he would be a great partner, Daniel is a natural food icon, and he shares my passion for using business as an agent for change to improve people's lives," he added. "The fact that he's also walked in my shoes and already experienced many similar challenges made it the right choice for me."

Disclosure: CNBC owns the exclusive off-network cable rights to "Shark Tank."

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