VADE Nutrition, Mark Cuban, and A-Rod Form a Protein Dream Team

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As someone who has dabbled with his fair share of protein supplements, I can certainly relate to the issues that husband-wife combo Joe & Megan Johnson addressed in their Shark Tank pitch. Digging measuring cups out of protein containers and measuring out servings for protein use at the gym can be a hassle, and often causes a noticeable mess. VADE Nutrition aims to eliminate these hassles with their dissolvable protein scoops.

After an energetic and animated pitch, the Sharks initially ask about the product’s safety and nutrition information. Despite its plastic look, each protein serving is contained in food grade edible film that is safe to ingest. I agree with the Johnsons that at 90 calories per serving, their product is on the leaner side relative to competitors. Furthermore, they offer 20 grams of protein along with only 2 grams of carbs, 1 gram of fat, and no sugar per serving.

The main selling point for this product, or “the hammer” as Mark puts it, is the delivery system. Sold in packs of 2 or 44, this product gives supplement users convenient and consistent serving sizes that dissolve in liquid. The pending patent on their product gives the Johnsons great value, due to their role as the only player in this market that utilize this specific type of delivery system for protein.

Even though they’ve only had $80k in sales since July 2017 and were closing to shutting down in January 2018 after a fitness expo launch issue cost them $50k in inventory, Mark sees an opportunity to provide great value to the Johnsons. He offers to use his expertise to help the Johnsons avoid making costly mistakes as they grow and create new products. He counters the Johnsons’ initial $250k for 10% equity offer with an offer of $350k for 20%.

Despite having their valuation cut by 30%, the Johnsons like his initial offer, but decide to feel out the room. Lori decides to speak next, citing how much she loves the delivery system, but is hesitant since she’s not familiar with the fitness space. While she deliberates, guest Shark Alex Rodriguez jumps in.

He pitches his own expertise and sports background, informing the Johnsons that he can help VADE Nutrition access over 1000 gyms. Furthermore, he cites a past investment he went in on with Mark in Ice Shaker, which he claims is now up over 500%. Rodriguez ultimately offers $700k for 40% equity if Mark agrees to go in on the deal. Mark agrees, so now the Johnsons have a decision to make.

The Johnsons counter by asking for $700k for only 25% equity, which Mark immediately turns down. After some short deliberation, the Johnsons ultimately accept the $700k for 40% offer, giving VADE Nutrition the “dream team” Joe and Megan were looking for.

Analysis

VADE Nutrition checked off a lot of boxes for the Sharks as they probed into their business model and market strategy. While their high margin business is attractive, three things ultimately stood out.

First, they’ve been able to drive over 25% of their internet traffic at no cost through social media. That along with some early sales shows investors that the Johnsons have had success in their advertising strategy thus far.

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Second, consumers do not have to pay a significant premium for a seemingly more premium product. Joe mentions that typical cost per protein serving in the market sits around $1-$1.20. VADE Nutrition costs about $1.50 per serving. So, while it may cost a bit more per serving, consumers get a convenient delivery system along with a typical amount of protein per serving without all the sugar, which is important to many protein supplement users such as myself.

Finally, their patent opens many doors for growth. Mark seemingly didn’t care about a lot of the other details about the product. As soon as he heard they had a patent pending on the delivery system, he was quick to dismiss comments about the product’s taste and difficulty of acquiring shelf space in drug stores.

There’s an opportunity in licensing that VADE Nutrition can use to provide themselves with a consistent revenue stream once they start allowing other companies to use their proprietary delivery system. This income can in turn be used for advertising, marketing, product development, and expansion. The licensing also protects VADE Nutrition against competitors who have other advantages such as larger, loyal customer bases and more developed distribution channels & relationships.

This startup is primed to blitz the protein supplement industry. VADE Nutrition’s competitive advantages combined with Mark & Rodriguez’s resources and expertise, I wouldn’t be surprised to see VADE Nutrition grow significantly in the next year or two. I also wouldn’t be surprised to see competitors using their delivery system in their own products. In short, keep your eye on VADE Nutrition.