'Shark Tank': Why Mark Cuban invested in a vegan company with pay-what-you-can pricing that the other Sharks hated

Sony Pictures Television

Even though he doesn't win them all, billionaire investor Mark Cuban has an eye for vegan companies on ABC's "Shark Tank."

But when Cuban invested in a vegan, non-GMO soap and body care company during Friday's episode, his fellow Sharks thought he was crazy to do so.

Three best friends – Anthony Duncan, with brothers Mohammed A. and Mohammed M. Mahdi – entered the Tank to pitch their vegan soap company, The Mad Optimist.

"As Muslims, who happen to be vegan, we don't eat meat and hated the idea of cleaning ourselves with animal fat," which is found in some traditional soaps, Duncan said. 

"So, that's why we created our company, The Mad Optimist – a totally unique, customizable soap and body care company," Mohammed A. said.

Each of The Mad Optimist products are vegan, non-GMO, halal, gluten- and cruelty-free, the founders said.

But that wasn't all.

"We have a sliding price scale where customers can choose how much they want to pay for their products," Mohammed A. said. "So for customers that can afford to pay a little bit more, it offsets the price for customers who need to pay a little bit less."

For example, a customer could choose to pay between $6 and $16 for a 4-ounce bar of soap, according to the company's website.

"We are crazy about doing good in this world," Mohammed M. said. "Everything that we do is rooted in transparency, integrity and kindness."

Although the Sharks respected the company's message, they were very worried about the sliding price scale.

"I can choose how much I pay you for? Please help me understand this madness," Shark Kevin O'Leary said, asking for the company's sales numbers and profit margin.

"The profit margin in the middle is about 50% In the last 11 months with The Mad Optimist brand, it's been about $21,000 [in sales] in soap," Duncan said on the episode.

To top it off, the three founders quit their jobs to focus solely on their business, and to get by, they've received loans from family members.

O'Leary was not impressed.

"Do you ever go home at night, and ask, 'What is the meaning of life?' Why are you optimistic? You have no reason to be optimistic," he told the founders. "I tried to be optimistic. There is nothing here for an investor. Your parents must be asking when you're going to wake up and get jobs."

Most of the other Sharks agreed with O'Leary.

"There is so much beautiful, vibrant energy [coming from the founders], but you have a long way to go," guest Shark and Kind snacks CEO Daniel Lubetzky said. "You're way too obsessed about your mission, and you're not letting the product shine through."

"I really love your energy, but I could not hate your business more. The open market does not reward good intention, it rewards results," Shark Robert Herjavec said and Lori Greiner agreed.

As four of the five Sharks opted out, Mohammed M. tried to change their minds.

"You have to understand how different we are. We have our revenue numbers live on our website," he said. "No one is doing custom bar soaps like we are." 

Despite the other Sharks' opinions, Cuban was still interested in making a deal. He liked the vegan product and their transparency with customers.

But most of all, Cuban felt connected to the three best friends, as they started the company in Bloomington, Indiana, where Cuban went to college.

"Would you be willing to have multiple businesses? In other words, verticalizing," Cuban asked. "When you first came in, you started talking about being Muslim and you have a different orientation towards products, right? Why not have a website that focuses just on that market?"

Duncan and the Mahdi brothers said they would be open to this, but O'Leary still tried to get Cuban to opt out.

"You're cursing them," O'Leary said. "They're gonna stay doing this [if Cuban invests]. This is horrible."

But Cuban ultimately told O'Leary to "shut up."

"What really caught my attention, that I think has not been done anywhere, is showing your revenues, having the slider on price so people could pick your pricing," he said.

"Now, typically, these guys are all right. The mission can't lead the way. But sometimes, when a mission discloses something unique, that is worth the effort, then OK, particularly when it's [only a] $60,000 [investment]." The founders were seeking a $60,000 in return for a 10% stake in the company.

"I like the idea of being totally transparent. I like the idea of having a slider pay. So, I'll make you the offer. I'll give you the $60,000, but I want 25%."

After some negotiating, Cuban agreed to a $60,000 offer for 20%, along with an agreement to donate 100% of sales from their "Shark Tank" episode debut to charity.

O'Leary thought this was a "horrible" deal.

"When they give away 100% of sales on 'Shark Tank' night, their biggest night ever, it will guarantee that this business will never, ever, ever make any money. I think you've done a horrible thing here. You've left them in a curse. They're trapped in a business that will never profit," O'Leary said.

"I am right and you are wrong. I am on the side of light and you are on the side of darkness. You've put them into hell. Not only hell, but the third level of hell, where you make soap, one bar at a time," he said.

Cuban responded: "And that's the difference between you and I, Kevin. I have the ability to make them successful. You don't have that ability."

"I am so not worried," Cuban added.

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

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