The Two Man Team from Life Lift Systems Snag a Deal with Mark Cuban
Oklahoma City natives Levi Wilson and Tim Todd entered the Tank seeking an investment for their company Life Lift Systems, which is revolutionizing home emergency shelters. Being from Oklahoma, a state positioned in “Tornado Alley,” an area frequently affected by violent weather, Wilson and Todd want to improve the ways home emergency shelters are installed and maintained. Aside from Life Lift, there are two types of emergency/tornado shelters that exist. A homeowner can either install an above-ground unit that sacrifices valuable floor space, or an underground unit that is difficult to maintain and susceptible to leakage. Life Lift is striving to make home emergency shelters easier to install and access in an emergency.
The entrepreneurs presented their focal product, the Vortex Vaults Telescoping Tornado Shelter, an emergency unit installed underneath a customer’s mattress that effectively raises into a full-size shelter at the press of a remote.
Wilson and Todd demonstrated the sturdiness and dependability of their product by showing the Sharks a video of a crane dropping a car on the structure with no resulting damage. They also mention how they are in the process of diversifying their product line by adding their technology underneath a pool table, kitchen island and a work bench. To exemplify the interior space of the emergency shelter, Wilson and Todd invited the Sharks to sit inside and they were able to fit Lori Greiner, Kevin O’Leary and the massively sized guest Shark Charles Barkley comfortably inside. The Sharks were enthusiastically impressed with the product and the entrepreneurs’ presentation, but the question still remained whether their current sales or customer base was large enough for the Sharks to sink their teeth into the business.
The heads of Life Lift Systems were seeking a $550k investment in exchange for a 15% equity stake, valuing their company at around $3.5 million. They had sold $550k worth of product in only three months through Facebook ads and other social media marketing. Wilson and Todd performed the first installations themselves but they have begun wholesaling their product to other dealers in order to get off the frontlines. However, they only have two dealers based in Oklahoma so they were seeking a strategic partner who could help them scale the business country-wide.
The Sharks, specifically Robert Herjavec, were skeptical of having dealers put in the distribution process as middle men because of inferior margins. It costs Life Lift about $3,600 to produce one unit and their retail price is $6,000 but their wholesale price drops to $4,850, resulting in only $1,000 net profit per sale. The Sharks were alarmed by thin margins for such an infrequently selling, high value product.
Cuban asked, “Why not charge more?” and Wilson confessed how they were a relatively new company —having been in business for just six months— so they still didn’t know what price they could get away with. The complexity of picking a price point becomes more complicated because Life Lift has a utility patent pending for “the telescoping system for a safe room,” which eliminates direct competitors in the market that they could analyze to find the best selling price. Therefore, a Shark would levy tremendous value by finding the most effective price to increase margins while keeping customers buying.
Nonetheless, a unique and outstanding product solving an important issue, a patent, proven sales and dedicated entrepreneurs —who had invested $250k into the business themselves— had some of the Sharks clutching their checkbooks. Herjavec went out because he wasn’t fully in love with the business model and didn’t know how he could bring value to Life Lift Systems. Mr. Wonderful went out but offered a playful application for the product as a “home prison” that parents could lock their kids in when they misbehave. Guest Shark Charles Barkley went out due to the large investment they were asking for, which made him skeptical of whether he could get his money back in a timely fashion. Then there were two, Mark and Lori, who both wanted to get involved.
Mark was the first to voice his offer, a $550k investment for a 25% stake and he promised to help them build capital and finance purchase orders for the expensive project. Lori then jumped into the ring with an identical offer because she thought she could add value by advertising the product with her TV connections, describing it as a “visual product” that needs to be demonstrated for the customer.
The two Sharks began stating their plans for Life Lift Systems. Mark wanted to instantly expand their dealers into Texas, his home state. Lori was keen on bringing value by building customers through her various marketing channels. Wilson and Todd countered by asking if either of them were willing to go down to 20% equity stake for their offers. The Sharks responded with a firm “no.” So the entrepreneurs offered royalty deals to try and wedge a Shark down to 20%. Mark offered $550k for 20% with a royalty of $100 per unit sold and Lori gave an identical offer, again! Wilson and Todd were having more fun in the tank than most contestants to face the Sharks’ wrath, but now they had to make a difficult decision.
They made a deal with Mark, who gave them the choice to pick between the royalty deal at 20% or a strictly equity deal at 25%. Wilson and Todd agreed with the increased equity stake over the royalty deal because they knew Mark was worth the extra 5%. The royalty would have also been a constant blow to their on-hand cash so Wilson made a great heads-up decision to go with the deal at 25%.
Wilson and Todd exemplified the benefits of a two-man team that specializes in both sides of the business. Wilson specializes in the technical side of the product while Todd heads marketing as a fantastic salesperson. Having a two partner system where one person focuses their expertise on the internal side of the business (product development) and the other handles the company’s external environment (sales and marketing) allows each individual to focus on their strengths.
Too often, I have seen entrepreneurs in the tank who thrive in acquiring customers for an underdeveloped product or vice-versa pitch an awesome product but haven’t sold any units, and consequently they miss out on closing a deal. Seeking a partner to specialize in either the internal or external side of the business, depending on your weakness, could be advantageous for your start-up. Life Lift Systems checked all the boxes for what a Shark wants in a pitch and they walked away with a life changing deal.