BRUW: Mark Cuban Throws Cash on DIY Cold Brew Coffee Trend

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Shark Tank’s 200th episode had multiple entrepreneurs score deals in the consumer space. One of those deals was with Mark Cuban and Max Feber’s company BRUW, a coffee filter that makes DIY cold brew coffee easy and spotless.

The 18-year old Babson College student from Detroit, MI came into the Tank with high energy and enthusiasm, seeking $50k for 25% equity in BRUW. Feber came up with the idea after trying to make cold brew coffee at home with methods currently on the market. He quickly found that these methods were either too messy or too pricey to satisfy his desire to do it himself.

Using screen door material and a hot glue gun, he made his first prototype for a double-sided coffee filter. His refined product can fit two wide mouth mason jars to both sides of the filter. One mason jar holds coffee grounds combined with cold water that’s left in the fridge overnight, while the other is empty and receives the filtered coffee in seconds once flipped onto its bottom.

Max does an excellent job telling a story that makes his patented product investible. His demonstration goes off without a hitch and impresses the Sharks instantly. He points out the increasing demand for cold brew coffee by describing increased usage by large retailers such as Starbucks and Pete’s Coffee. Feber also flaunts his 80% gross margins and proven sales success; BRUW did $50k in sales last year and is on track to double that this year.

While the Sharks love that BRUW’s development came with 10-year love for Shark Tank behind it, his college commitment causes Lori and Robert to drop out, and O’Leary to offer Feber $50k for 50% equity. Daymond’s connection to Babson as an Entrepreneur in Residence Emeritus gave him an instant connection to Feber. While he didn’t like Feber’s idea of wanting to go into retail stores given Feber’s inexperience, he sees an opportunity in licensing to coffee retailers and offers Feber $25k for 30% equity.

After Daymond’s offer, Mark Cuban questions Feber’s desire to use seed money to cut costs versus capitalizing on his high margins. Feber explains that he wants to get the price down to make his product more of an impulse buy at registers. However, Cuban would rather see $50k go to advertising and keeping high margins. After agreeing to consider Cuban’s strategy, Cuban offers Feber $50k for 30% equity and demands an immediate answer. After a brief pause, Feber agrees and leaves the Tank with his seed money and a vision for a brighter BRUW future.

Analysis

Feber checks off a lot of boxes for the Sharks. He has passion for the business, proven sales, a competitive advantage in the DIY coffee space, and an effective top line cost structure. However, being a full-time student is a turn off to some investors, no matter how successful the business is. If you’re not all in, how can an investor or Shark be all in on you or your idea? But that wasn’t his biggest problem. What nearly killed any chance of a deal was his seed money strategy.

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Cuban’s facial expressions throughout Feber’s presentation said it all. Mark was all smiles right from the start…until he heard “cost cutting”. When Feber told Robert about his plan to cut production costs and eat into his own margins, Mark Cuban’s face was filled with disgust. And rightfully so – in a market like coffee where consumer tastes and preferences change rapidly, if you find a sweet spot that is profitable and fits consumer demand, your best bet may be to sales blitz it as hard and as fast as possible.

Feber has a business that’s growing, and favorable margins that consumers are willing to support. When Cuban asked Feber to consider using the investment for advertising instead of production efficiencies, what he was really saying was “Hey, if it ain’t broke, don’t fix it…let’s get this in front of as many eyes as possible.”

If Feber and Cuban can increase sales through an effective advertising campaign, the increase in unit volume should allow Feber to achieve the production efficiencies to scale he is so desperate to address. Once Feber and Cuban got on the same page, Cuban was back to all smiles when he secured 30% of a promising young product and its coffee crazed CEO.