The Sharks Don’t Sleep on a Deal with SomniFix

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The Big Picture

Many times in the Tank, entrepreneurs have pitched their medical or therapeutic devices and boast about how their product is an optimal solution for people. As we have seen in the past, the Sharks (especially Mark Cuban) do not react well when companies come in and make claims without having conducted medical trials or studies. On Season 10, Episode 20 of Shark Tank, we got to witness how spending a lot of time and money into R&D and acquiring credibility can pay off in the long-run.

The Ask

Nicholas Michalak from Virginia entered the Tank seeking $500,000 for 10% of his company, Somnifix, a non-invasive solution geared towards stopping mouth-breathing during sleep.

The Pitch

Michalak began by pointing out that there are many people that have a hard time sleeping in general along with people that snore. He illustrates that those that have issues with sleep have a common similarity, mouth breathing. He stated that while most products on the market claim to be an aid in sleep quality, they have yet to efficiently solve for mouth breathing.

Daymond so generously demonstrated how mouth-breathing sounds without an added solution and then attempts to with Somnifix’s mouth strips. The sharks were able to see the difference but asked why this product was relevant. Michalak illustrated that mouth breathing during sleep can cause a poor sleep experience and could lead to discomforts including sore throat, dry mouth, and nasal congestion. Michalak also pointed out that current products on the market, like CPAP machines, focus only on the nose and don't solve the entire problem by disregard the mouth.

Michalak indicates that quality of sleep is at its highest when breathing is directed towards the nose and that his hypoallergenic strips are the optimal solution for a discrete and improved sleep experience for the user and whoever they sleep next to.

How it Works

To use the strips, users start by removing any balms or lubricants on or around the mouth. They then bring their lips together and have the curved part of the strip facing down and have the small breathing vent in the middle placed on where the lips meet. After pressing the strips into place, the user is able to see that their breathing is directed towards the nose with the option of breathing with their mouth if the nose is clogged at all.

Through Somnifix, the consumer no longer has to splurge for a solution to their snoring or sleep apnea as a box of 28 strips costs $15. The strips remove the need for bulky sleep machines or invasive products that are supposed to provide comfort but actually cause discomfort.

Diving Deeper

The impending question regarding sales came and Michalak was happy to share the company’s $350,000 in sales over 9 months with the expectation of adding an additional $350-400,000 by end of the year. While this is a great fact to mention, the focus was then shifted to the amount of money that has been invested in the business and where the expenses have derived from. Through himself and his family, Somnifix has received $1.4 million in funding with majority of expenses going towards clinical trials and intellectual property (IP) in patents and regulatory clearance.

The Response

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After this, it seems as if a domino effect was created in sharks ‘going out’ from this deal for different reasons. Daymond exited because he didn't like how the product felt and can't see the company sustaining over time. Lori thought the marketing was going to be a challenge and Kevin didn’t see the value that he could add besides giving cash. Barbara actually didn’t like how much money went into the expenditures Michalak mentioned.

Mark Cuban is now the only shark left who famously has not invested in any medical devices that have come into the tank. After asking if the product could be knocked off at all, Michalak referred to the patents and how it can actually be complementary to its main competitor, Breathe Right nasal strips. Cuban then candidly states that Somnifix’s marketing has sucked and askes if Michalak would be open to a more proactive approach. After confirming this, Cuban makes a non-negotiable offer of $500,000 for 20%, cutting Somnifix’s valuation in half.

Going Forward

Somnifix can look forward to the sales that they will receive due to the exposure that Shark Tank causes. From there, as Cuban mentioned, a great amount of focus has to be placed on marketing and educated the consumer that this kind of product exists. The company could face a plateau if they don't change their marketing strategies. Somnifix has to illustrate that it is the optimal solution for sleep due to its low price point along with the comfort and discreteness it has compared to traditional sleep therapy devices.

One of the problems that Somnifix faces is the gentle adhesive that Michalak boasts about. While this is an important feature for a seamless overall experience, many who have reviewed the strips mentioned that they can very easily open their mouth during sleep causing the strip to fall off at some point during the night. With this in mind, Michalak mentions during Mark Cuban’s questioning that they are in the process of developing a product, “with adhesive properties that will not dislodge when meeting liquid.” This could be troublesome for Somnifix as perfecting the product takes time and is crucial for the user experience which companies in this market depend on. If the company takes too long to develop this feature, Somnifix could potentially lose a significant amount of consumers.

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Nonetheless, Somnifix offers a solution to a common problem and has illustrated its relevance through honesty and obtaining credibility. Mark Cuban is known for his distaste of medical solutions that come into the tank that omit conducting trials to prove that it’s a viable solution. Through spending most of its resources on intellectual property (IP) and clinical trials at Harvard Medical, Somnifix was able to verify that their product actually reduces snoring by 72-100% of the time and that consumers can be confident in the product’s integrity. Especially since the strips are a Class 1 medical device, which presents minimal harm for the user, focusing on proving that the product works is a viable strategy that can lead to a successful partnership in the Tank and a prosperous future.