Friday, November 9, 2018

The Applesauce Queen gets her American Dream

Authored by: Quinn Donaldson

shark tank sanaia apple sauce
There are many of us who believe they don’t have enough time to pursue their ideas and create their own American Dream. These people usually cite work, family, school, bills, and/or a host of other obligations as reasons for never investing in themselves. If you are one of those people, I’d like you to meet Keisha Jeremie.

As the Global Head of PR at News Corp. (at the time of taping), Jeremie invested a great deal of free time and sleepless weekends into Sanaía – a new approach to applesauce designed to give adults a more suitable option outside of brands that target children or the elderly. Jeremie created this organic, vegan-friendly product to attack the applesauce market the same way Chobani took on yogurt; find an underrepresented consumer segment in an existing market and tailor your entire product & marketing campaign around that group.

With poise and confidence, Jeremie initially attracts the Sharks with her plan to attack hot food trends, a tasty and well-branded product, and healthy top-line margins. Being the only player in a potentially large niche market is like blood in the water to these Sharks. Furthermore, having a tasty product that can accommodate various diets helps make Sanaía attractive to many adult consumers.

mark cuban sanaiaHowever, Jeremie runs into trouble when discussing her distribution strategy and future sales. The Sharks are turned off by her idea to sell glass jars of applesauce on Amazon Prime, citing increased shipping costs that could be avoided by her lighter weight grab-n-go style product. Furthermore, she states that she has $35 million in potential sales from many popular companies such as Starbucks, Whole Foods, and Kroger. However, in realty, she only has one Whole Foods store in Harlem, NY that’s committed to testing the grab-n-go product.

Her inability to accurately define real sales interest in her product combined with risk associated with her distribution strategy and a lack of predictable market size causes Herjavec, Greiner, and O'Leary to pass on Sanaía. Also, O’Leary, Corcoran, and Cuban all have questions about her commitment given that she has a full-time job on top of running Sanaía. With all of that in mind, Barbara counters Jeremie’s initial $150k for 15% equity offer with an offer of $150k for a 75% equity stake in the company. Jeremie quickly denies, so Barbara quickly passes.

Jeremie initially cited valid reasons and remained poised when questioned about her decision to not go full-time with Sanaía. However, she becomes emotional when O’Leary and Cuban continue to question and debate over her commitment to the company. When asked about her tears, she whole-heartedly explains how she financially supports multiple family members and that Sanaía is “the first thing she’s done for herself.” That, and the fact that she has invested half of the $500k she set aside to get Sanaía off the ground was enough proof for Cuban to offer $150k for a 25% equity stake. Jeremie immediately accepts, leaving us with a satisfying storybook ending.

Analysis & Performance Score Total: 79/100

Presentation: 45/50 
To gain the Sharks’ attention in the Tank, you need a focused, well-organized, and engaging presentation to draw them in. Jeremie did just that; she staged a problem, open market opportunity, and solution that gave the Sharks and viewers a vivid image of what the future could look like with Sanaía. Her poise and natural energy captured the Sharks’ attention and respect. However, I don’t believe anyone was truly bought the multi-billion dollar/next Chobani picture that Jeremie drew of Sanaía. And worse, she didn’t include the arguably better variation of her product in the grab-n-go cup until later. Nonetheless, her initial presentation was nothing short of excellent.

Product: 22/25 
The product itself had everything the Sharks were looking for; a tangible market, proven sales, and virtually no direct competitors. From a food perspective, Sanaía is one-of-a-kind (apple wedges inside applesauce), accommodates multiple dietary restrictions, and comes in various tasty flavors. She touts impressive gross margins on both the glass jars and grab-n-go cups of ~75% and ~50% respectively. My only criticism – the grab-n-go cups were not the focal point (see Strategy).

Strategy: 12/25
Jeremie’s direct-to-consumer strategy is decent at best. Her initial plan is to sell 4-packs of glass jars on Amazon Prime, which Cuban and O’Leary immediately hate. The shipping costs from shipping heavy glass jars would cut into her margins tremendously. Also, even after hearing from potential buyers that they like grab-n-go cups over the glass jars, her initial strategy of glass jars on Amazon Prime remained unchanged. Key point – listen to your customer.

Also, the grab-n-go cups may be a better option as far as visibility is concerned. Having these cups at every Starbucks register or at eye-level in every refrigerator unit in Whole Foods would grab millions of eyes per day. I believe the dietary accommodations combined with the $2/cup price tag would be enough for many adults to try Sanaía at least once. If consumers like the $2 cup, they may be more inclined to buy a 4-pack later. That versus buying a 4-pack of something no one has ever tasted on Amazon is a much better sell to an investor.

sanaia shark tankFinally, she confused interest from big buyers for potential sales/orders for her product, which turned off some Sharks. Also, she mentioned that those big buyers referred her to other buyers, which she took as “wow I’m getting Whole Foods AND their friends!”. Personally, I viewed it as “Your product has promise, but try it with these buyers first before Whole Foods gets involved.” If you’re going to mention that you have $35 million in potential sales, it is imperative that you have the orders to back it up. By throwing that number out, she dug herself a deep hole that she almost didn’t recover from.

Friday, November 2, 2018

Shed Defender Is The New Fix to Your Dog’s Old Tricks

Authored by: Ian Gyan

Dogs are called “man’s best friend” because of their undying loyalty. But the Sharks roaming these waters are loyal to one thing only: a profitable deal.

On Episode 2 of Season 10, Tyson and Miles Walters, brothers from Orange County, CA, learned that very quickly. They came seeking an investment for their product, Shed Defender, and as the Sharks gauged their composure, you could almost hear the message their collective gaze sent out. “Impress me.”

shed defender shark tankThe entrepreneurs heard that loud and clear and their product certainly met the standard. Shed Defender is a onesie made of lightweight, breathable, and eco-friendly fabric. It eliminates the hassle of cleaning up your dog’s shed fur by containing it within the suit. So, that means no more lint rollers, brooms, or vacuums. It’s made for both male or female dogs and its open-bottom design allows them to easily use the bathroom without soiling the suit. This dog owner’s dream product is the absolute best way to press “paws” on your dog's shedding problem!

The Walters’ jovial opening presentation pulled a few chuckles out of the Sharks and making sure not to waste the moment, they carefully made an ask of $250,000 for 10% of their company. Normally, a percentage that low would raise more than a few eyebrows, but the entrepreneurs’ charismatic puns managed to keep the Sharks at bay. Eventually, the tension left the room when Tyson and Miles brought out Harley, the adorable St. Bernard modeling their product. The instant she trotted out in her sleek red onesie, the room filled with laughter and the Sharks fell in love with her. Robert rushed up to pet her, stern expressions became wide grins, and some Sharks couldn’t help but go “aww” at Harley’s fashionable entrance.

Tyson and Miles should be commended for such a clever pitch, as they were able to disarm the Sharks while simultaneously displaying their product’s worth. It was clear, dog lovers would come waving their wallets to pay for such an aesthetic product. Shed Defender wore its value as easily as Harley wore the product. Her tail wagged non-stop, as she just seemed so comfortable in her stylish outfit. Lori aptly compared it to “long johns” but for dogs. Despite all of this, Harley couldn’t distract the Sharks for long. After inspecting the equally adorable dog plushie samples handed to them, Mark started asking about their numbers.

They had been selling Shed Defender for about 18 months and in that short amount of time, they managed to make an astounding $1.2 million in sales! It’s rare for the Sharks to see a product already so well received by the market, and their reactions reflected that. They practically lost their minds. Seemingly in disbelief, “Mr. Wonderful” even asked Tyson and Miles if they were serious about those figures.

 They were, and you read that number correctly… $1.2 Million. Miles and Tyson made their sales via purchases through their website and Amazon. They’ve recently begun wholesaling their product as well. Shed Defender came in 9 sizes ranging from “mini” ($39.99) to “giant” ($62.99), and came in several colors. The source of their success was undoubtedly their ideal landing costs. It costs them only $6.23 to make a “mini” suit and $13.20 to make a “giant” suit. By now, the Sharks were salivating, and for good reason. These two were operating slightly over an 80% profit margin!

Dogs of Shark TankLori and Kevin were slack-jawed, Robert did a double take, Barbara attentively took notes, and Mark exclaimed his approval. They were “killing it,” but it didn’t stop there. Tyson continued listing the product’s other perks. Shed Defender was created to tackle bad fur days, but customer feedback revealed that the onesie also naturally lowered anxiety in dogs and kept them calm. It makes sense why Harley looked so happy wearing it! Additionally, Shed Defender could even replace the dreaded medical “cone of shame” that all dogs know and hate. With such a beneficial product on display, the Sharks seemed like they were basically sold.

However, Lori cut the moment short by asking if the product was patented. Tyson’s smile faded as he explained how he had to forego a previous patent application due to a lack of capital. Sadly, this company now ran the risk of a larger competitor knocking them out of business once they started gaining traction. This didn’t bode well with Kevin or Barbara, but Mark reminded them of the incredible benefit of operating at such an outrageous margin. Still, Barbara needed convincing and pressed the brothers further about what their step-by-step plan was to make their revenue goal of $2.5 million in 2019.

 Their solution was to move into retail through wholesaling, which wasn’t good enough for Mark. It didn’t change the fact that their many SKUs (Products) made them a risky investment. Because of their healthy margin, Tyson and Miles had better potential in the online space they were already growing in, especially if they made use of Amazon’s SEO ability. If applied correctly, they’d make “more money, selling half as many units, with a third as much cash.” But since he wasn’t invested in the pet industry, Mark didn’t think he could offer them any real accelerant for their business, so he backed out.

Barbara thought the business was great but couldn’t relate to it, so she backed out as well. She expanded on Mark’s idea by cautioning the entrepreneurs not to make the number one mistake young businesses can make: having too many products (SKUs) too soon. She also recommended that they focus on developing what was already working instead of jumping into the “Neverland” world of retail. Good advice, especially considering their lack of a patent.

With three Sharks remaining, Kevin decided to bite first. He loved Shed Defender and offered to provide $250K for 33% equity. This cringe-worthy deal had both brothers glancing to the side, but they still thanked Kevin for the offer. Seeing the uneasy expressions of two potential victims, Robert repeated the sentiment, saying that he too thought their product was great and matched Kevin’s offer, his differentiator being that he was the better Shark to partner with. The room’s water level had risen and Tyson and Miles soon found themselves being circled by two equally predatory deals.

The choice was theirs to make, but before they were neck-deep and out of time to choose, Lori tossed them a life-line. She tempted them with a better deal of $250K for 28%, disagreeing with the earlier opinions about Shed Defender staying out of retail. If Tyson and Miles had a retail giant like QVC backing them, their demonstrably valuable product would easily build a TV presence strong enough to scare away any competition, even without a patent. Much to their annoyance, Lori’s shrewd tactic of letting the other Sharks fight it out first worked perfectly. Tyson turned his attention right to her and made a reasonable counteroffer of $250K for 25%. With an intrigued smile, Lori tried catching Tyson off guard by asking him to identify three traits that made him a fantastic business partner. Not missing a beat, he highlighted his non-stop work ethic, his unyielding determination, and his sense of humor, which the other Sharks confirmed as a major perk. Seemingly satisfied, Lori then asked Miles if he understood the word “no,” to which he confidently replied: “it doesn’t exist.”

The counteroffer to Lori was still a win-win, so she threw her hand up and accepted their deal. Tyson and Miles held their ground, negotiated well, and ultimately came out on top. With Lori’s QVC advantage in their pocket, there’s no doubt that Shed Defender will soon be worn by dogs everywhere!

Friday, October 26, 2018

Boxlock: A Swiss Cheese Solution to Package Theft

Authored by: Quinn Donaldson

Season 10 kicked off with what seemed to be a home-run of an idea, but quickly turned into one riddled with more questions than answers that ultimately left CEO & Founder, Brad Ruffkess, without a deal.

Ruffkess describes Boxlock as a smart padlock that secures packages delivered to your home. It allows mail carriers to use a scanner at the bottom of the lock to match a recipient’s tracking number to the recipient’s order. When Boxlock records a match, it unlocks and allows the carrier to place the package inside a storage container. The carrier then secures the package with Boxlock to complete the delivery.

In his pitch, Ruffkess explains how he, like “millions of Americans”, have dealt with package thieves, or “porch pirates” running off with his home orders. His personal experience inspired him to develop Boxlock. He sees this product as a win for both product buyers & shippers alike, with buyers gaining peace of mind regarding the safety of their orders and giving carriers a more package-secure delivery option.

Initially sold between $89-109 on Kickstarter, Ruffkess was able to sell 800 units in presale. Boxlock retails at $129 per lock and costs $65 per unit to make, giving him an above industry-average profit margin of 50%*. However, Ruffkess initially alarms the Sharks after mentioning that he’s already invested about half a million dollars in research & development (R&D) expense. Unfortunately, despite early consumer interest and a healthy top-line margin, things continue to go south for Ruffkess.

The Sharks point out issues related to changes to the delivery process and additional consumer expenses. Mr. Wonderful worries about carriers’ potential unwillingness to persistently try to unlock the storage container if the scanner doesn’t work immediately. Guest Shark Jamie Siminoff, Founder of Ring, is turned off by the drastic changes in consumer behavior, from delivery time to package placement. Furthermore, Mr. Wonderful & Mark Cuban point out that there will be tremendous costs & resources required to train carriers on how to interact with Boxlock.

Finally, Cuban also points out that product buyers will need to incur an additional expense of buying a storage container to place outside their home to use Boxlock. Despite those problems, what ultimately drew the Sharks away was Ruffkess’ inability to explain his valuation. He initially values his company at a staggering $20 million by requesting a $1 million investment for 5% equity stake in his company. When asked to justify his valuation, Ruffkess reiterates the size & complexity of the package theft problem, but provides no metrics behind that problem size or his expected sales trajectory. The lack of this information combined with cost concerns caused all but Lori to back out.

In typical Lori fashion, she leverages her QVC advantage, and the fact that QVC processes around 320 million shipments per year. Additionally, she mentions that she has been trying to develop her own solution in this space for years, but has been unable to produce a final product like Ruffkess. Utilizing her industry expertise, she confidently offers Ruffkess a $1 million loan at 8% interest in exchange for a royalty that lasts until $1.5 million is repaid and a 2.5% equity stake. Lori decides to let Ruffkess pick the per unit sales royalty she will receive.

Ruffkess counters by asking for a $1.5 million loan and a $3 per unit sales royalty until the loan is repaid and a 2.5% equity stake. Lori counters by asking Jamie to come in on the deal to utilize his industry expertise for Boxlock. He declines due to a lack of proven sales and projections for future sales. Lori backs out, so Ruffkess ultimately walks out of the Tank with no deal.

Analysis & Performance Score Total: 75/100 

Presentation - 45/50 
Ruffkess does a great job in his elevator pitch explaining what Boxlock is and how consumers benefit from the product. He described a real problem in package theft that he shows through video evidence. During his short pitch, he has an acting mail carrier show how Boxlock works and the delivery experience it fosters. This gives Sharks a clear visual of the product and its benefits. Ruffkess was energetic and engaging, utilizing effective hand gestures and eye contact while also using concise language.

Ruffkess came into the Tank with a rehearsed and sensibly-structured presentation. Ruffkess remained mostly cool and collected as the Sharks poked hole after hole in his product, showing some nervous gestures during his back and forth with the Sharks. Nevertheless, Ruffkess deserves high praise here.

Product - 15/25 
At first glance, Boxlock seems like a near perfect solution to package theft. It gives two sets of customers a great benefit; it gives product buyers peace of mind that their packages will be delivered safely and gives mail carriers more satisfaction in ensuring a safe & reliable delivery. The demonstration during his pitch shows a low-effort delivery process, but it’s unclear if Boxlock always works that efficiently since there are no customer testimonies to date. Additionally, the amount of resources needed to train carriers on using the product is seemingly large, but very much unknown. Product buyers must also utilize/purchase a storage container to use Boxlock, incurring an additional indirect cost to the consumer. While Boxlock seems like a great solution initially, there are many hurdles to clear before it can become the ultimate package theft product.

Strategy - 15/25
Ruffkess leverages a clear and precise pitch and demonstration for Boxlock that efficiently shows a market problem in package theft and a solution in Boxlock. He focuses on Boxlock’s mission to eradicate package theft, but never provides tangible evidence around the size of this problem or that people see/would see Boxlock as the solution. Furthermore, his counter offer to Lori was not attractive enough given Boxlock’s infancy as a market player.

A $3 per unit royalty on a $1.5 million loan means Lori would need to help Ruffkess sell 500,000 units before she received her money back…and that’s not including interest. After hearing Ruffkess’ counter offer, it’s no surprise that Lori wanted to team up with Jamie to reduce risk and workload. For a company that’s only sold 800 units on Kickstarter and no has recorded retail sales, the 2.5% equity stake was too small for Lori to take on a sales initiative of that size by herself. On the plus side, he did score some free marketing from the Tank, which could prove useful in the short term. Ultimately, his lack of market data, future sales trajectory, and a vague plan to implement Boxlock into his consumers’ existing behaviors ultimately left Ruffkess without a deal.


Made for Kids, By a Kid: Le-Glue

Authored by: Ian Gyan

Children usually seek out the guidance of a trusted adult to solve their problems. But sometimes they don’t, sometimes the adults don’t even notice the problem. So when they’ve broken their toys and made a mess, what is a child to do?

Tripp Phillips has the answer. He showed The Sharks why you should never send a man to do a boy’s job. On episode 1 of Season 10, the enthusiastic 12-year old entrepreneur, along with his sister, Ally, and father, Lee, walked into the Shark Tank looking for an investment for his product, Le-Glue.

Le-Glue is a non-permanent, non-toxic adhesive used to secure Lego and other children’s building blocks together. It dissolves in water, so kids can use it repeatedly on their toys. During his witty presentation, Tripp revealed his frustration over never being able to play with the toys he built before they fell apart. This was the reason he and his father created Le-Glue, and luckily, it solved two issues. Children could build and play with their Lego, and adults wouldn’t have to worry about accidentally stepping on their children’s toys.

The young entrepreneur confidently requested $80,000 in exchange for 15% of the company, an ask so favorable that The Sharks didn’t bother commenting on the company’s valuation. The product’s value was clear, and Tripp had the numbers, accolades and vision to back it up. Over its lifetime, Le-Glue had sold over $125,000 worth of product and was already secured by a utility patent, making Tripp one of the youngest patent holders in U.S. History! His clever goal was to partner with various toy brick manufacturers, negotiate a license agreement, and get Le-Glue included in all of their toy kits. But what truly made The Sharks perk up was the impressive margin between the 43 cents it cost to make Le-Glue and the $8.99 (now $5.99) price it was being sold for on his website.

Hearing these numbers, it’s no surprise that some of The Sharks decided to jump into the frey. Kevin wasted no time, offering to provide an $80k investment in exchange for 50% of licensing royalties until he recouped his initial investment, after which, a partnership in perpetuity would be established where Kevin had a 20% stake. Kevin further sweetened the deal by basing his shares on the condition that he could successfully negotiate a licensing agreement. Knowing a great deal when he saw one, Jamie Siminoff, the former contestant turned Shark, commended Kevin on his “wonderful” offer before backing out.

Daymond, however, stepped forward to outbid Kevin with a simpler offer of $80k in exchange for 25% of the company. At this point, Lori could see that either deal would lead Tripp and his family to success, so she decided to not get her fins wet this round and also backed out. Mark soon followed suit and backed out as well, saying that he couldn’t provide an offer better than the two that were already laid out.

Le-Glue was nicely positioned to jump to the next level, but instead of immediately giving in to either offer, Tripp made Daymond a savvy counteroffer. He set his new ask at $80k in exchange for 20%, but Daymond wasn’t impressed and stuck to his original offer, as he was already asking well below his usual 33% stake. With three Sharks out and two great offers floating in front of him, Tripp was left to make a choice. After a nervous moment of silence and quick word in his father’s ear, he announced to Mr. O’Leary that he’d like to do business.

Tuesday, October 9, 2018

Welcome to Season 10

shark tank season 10Welcome back to a brand new season of Shark Tank, the number one business reality show on TV!

After 9 seasons of Shark Tank, you can be certain that the pitches will get better and better and that there will be more record-shattering deals made in the Tank than ever before! Shark Tank continues to prove that the American Dream is alive and well, and that there are no limits to what you can achieve if you work hard to succeed.

At Blog Shark Tank, our goal is to critique the entrepreneurs that enter the Shark Tank, and evaluate their performance in terms of pitch, product, and overall performance. It is not easy to stand up and face the Sharks, let alone to walk out with a deal, and we applaud every entrepreneur that lives to tell the story of how they made it out alive!

So join Blog Shark Tank this season and read our critiques on the brave (and sometimes wild) entrepreneurs. Participate in our discussions on social media, and share your thoughts with us and Shark Tank fans all over the world!

Tuesday, October 24, 2017

Flashback: Bombas

Socks are hard to sell. 

For one, they are usually being covered up by shoes and pants legs, making it difficult to show them off. But even more so, there aren't really too many ways to make your brand of socks better than others. You can add a design like stripes, but there are thousands of socks out there with stripes (and of course many other patterns).

But what if you can make them unique in other ways. What if you spent two full years on researching ways to re-engineer socks to improve everything from the material to the stitching? And what if every time you sold a pair of socks, you gave away a pair to a homeless person?

Well this is exactly what Bombas did.

In Season 6, Bombas entered the Shark Tank asking for a $200,000 investment in exchange for 5% equity in their new sock company, placing a $4 million valuation on it. After spending two years on research and development, Bombas created a sock that is truly the top of the line in terms of quality, comfort, and design. And not surprisingly, their numbers showed it, as they did $450,000 in sales in their first year with spending no money on advertising. The quality, along with the goodwill of the company's mission generated these sales organically. 

Now although these sales were impressive, the Sharks gave the founders a hard time with this valuation, and all but one dropped out. Daymond John, the fashion guru in the Tank, was the only Shark who believed in both the product and the entrepreneurs enough to invest, and they ultimately agreed on a deal for $200,000 plus uncapped inventory financing in exchange for 17.5% of the company.

Since then, it has been one success after another.

In the two months after airing on Shark Tank, Bombas did over $1.2 million in sales. And to date, they have reached the $50 million sales mark. But what's even more impressive is the amount of socks the company has given away. In less than five years Bombas has donated over four million socks to people who need them, and have been a supportive force for other non-profits as well.

$50 million in sales. 4 million socks donated to the homeless. 

That is entrepreneurship.

Click here to read more about socks!

Thursday, October 19, 2017

The Seventy2 Survival Kit

If disaster strikes, what would you need in order to survive for 72 hours?

Christian Schauf and Mike Escamilla have that all figured out.

The two entrepreneurs walked into the Shark Tank on the second episode of Season 9, to seek an investment for their product, the Seventy2, otherwise known as the world's first fully-integrated survival system. The Seventy2 is a bag packed with survival essentials including food, lights, gloves, a blanket, an air filtration mask, a water filter, and a shovel that converts into a pick-axe. The idea is for people to keep these bags in their homes (and wherever they go) so they are prepared in case of an emergency situation. And in times where hurricanes and other severe weather patterns are forcing people out of their homes, this product can literally be a life-saver.

The entrepreneurs came in seeking $100,000 in exchange for 5% of their company, which imputes a $2 million evaluation on their company. While this evaluation seems high at first glance, Christian and Mike did have numbers to show for it. After six months of business, the product has already sold $700,000 of product in 64 countries. And to get the business off the ground, they raised $400,000 through a crowdfunding campaign in just one month!

Very quickly it became obvious to the Sharks that these entrepreneurs have the tools needed to survive. But for this very reason, Mark went out because he doesn't like being "dumb money" for businesses that don't really need more than just cash. Barbara didn't seem very interested in the business from an investment standpoint, and she dropped out as well. Robert though offered a proportionate $200,000 for 10%, and gave them just a brief window of time to make a decision. And before Lori could even get her offer out on the table, the entrepreneurs used their survival instincts to act quickly and take Robert's deal.