Moki Doorstep Snags the Biggest Deal in the Tank
It goes without saying that the simplest products usually speak volumes in terms of their convenience. On Episode 9 of Season 10, Zach and Alyssa Brown’s dynamite product spoke for itself by conveniently solving a problem for vehicle owners everywhere!
The entrepreneurs introduced their product, Moki Doorstep, with a quick and clever pitch, making an ask of $150k for 5% equity of their company. Despite the staggering $3 million valuation, the Sharks were still greatly impressed with the ingenuity and concept behind the product.
Moki Doorstep is a vehicle rooftop assistance device. It’s essentially a portable step ladder for your car. The sturdy metal device installs in just one second by hooking onto the striker of the vehicle. For those who don’t know, the striker is that thick metal hook that can be found near the doors of most vehicles. Once the doorstep is secured, step onto it for quick access to your car’s roof, simple.
The idea to design it around the striker of the vehicle was inspired by Zach’s firefighter background. He knew that vehicle strikers could hold a literal ton of weight, so supporting the body weight of a single person was easily doable.
During their initial Kickstarter campaign, Zach and Alyssa earned approx. $110k in sales, selling their product at about $40-$50 per unit. It cost them $10.50 to make each doorstep so, they were operating at a 79% margin plus their campaign had done so well that they had to stop selling due to them being overloaded with back orders.
Even with all this good performance, their product’s weakness revolved around the fact that it wasn’t patented. The entrepreneurs did have one pending but not already having a patent posed a big risk to the entrepreneurs. Because their product was so simple, that made it a little too easy to replicate.
This was a concern, but it wasn’t total a deal breaker because their product, if no others tried to copy it, still had immense value.
In fact, Zach and Alyssa were in the process of brokering a lucrative licensing agreement with a North American rack manufacturer which would bring them 12.5% royalties and a guaranteed minimum of $3 million from the agreement itself.
For a company whose only sales came from a Kickstarter campaign, a major deal like this was a massive leap. One that clearly proved that Moki Doorstep would sell well with or without the Sharks’ help.
But not every Shark was impressed.
Kevin O’Leary put it plainly, at $50 per unit, Moki doorstep was too expensive and would be better suited and a lower price like $19.99 or less. He suggested that they focus on finding a cheaper way to make their product because if not, they would be seeing knock-offs doorstep within months. He didn’t believe that the entrepreneurs could properly offset that risk, so he backed out.
Daymond John, on the other hand, seemed to know exactly how to address Mr. Wonderful’s concerns because he made Zach and Alyssa a huge offer of $450k for 20%. He was willing to give them three times the amount of money they asked for but at the expense of four times the amount of equity they were willing to give up.
While it was a tempting amount of capital, Daymond’s large equity grab made that deal unacceptable to anyone who had any interest in running their business the way they wanted. So, Zach and Alyssa made the right choice in rejecting that offer.
Zach further elaborated, saying that he felt that giving up that much equity wouldn’t be beneficial to them, he would rather sell the entire company than take an offer like that.
As soon as he heard those words, Daymond immediately suggested the idea of buying their entire company. Mark Cuban, sensing a new deal being made, facilitated by asking Zach and Alyssa how much they would be willing to sell the entire company for.
Zach then cited their $3 million valuation of the company as a comfortable price to sell at. Daymond wasted no time and offered them exactly that, $3 million for the entire company.
Initially, there was some slight friction between Zach and Alyssa with regards to how much they wanted sell Moki Doorstep, but the entrepreneurs didn’t take long to respond. Within a few seconds of hearing the offer Zach said, “let’s do it”, and accepted Daymond’s offer.
Even though Zach and Alyssa walked out with way more than they were asking for, I still believe that they could have gotten a better deal out of Daymond. They weren’t wrong for selling their company, considering their production cost issues and lack of a patent, they still had many hurdles to jump before they started experiencing any relative industry success.
Their mistake in this case was not recognizing the leverage they had toward the end of their negotiations. The fact that Daymond was willing to trade so much capital for so much equity should have been a big sign to them about just how valuable their company was.
They might have had trouble fine tuning their back-end costs, but for a mogul like Daymond, it was nothing. The profits he would make far outclassed what he paid for the company, which is why I think Zach and Alyssa could have raised the valuation of their company in that moment and asked for at least $4.5 million.
Daymond would have either accepted or given them a number higher than what they sold Moki Doorstep for. Regardless, as far as entrepreneurship goes, Zach and Alyssa did much better than most do in the tank. After all, it’s not everyone that leaves the tank already a millionaire.
With the way things turned out, they are free to chase new ventures and Moki Doorstep, with Daymond’s expertise behind it, is sure to establish a strong foothold (pun intended) in the market.