Once founders impress audiences and investors with innovative products on "Shark Tank," the intensity goes up during negotiations. It's very rare for entrepreneurs to bag $1 million in funding on the show, and the co-founders of BottleKeeper are among the few who managed to convince not one but two Sharks to give them a million dollars.
The co-founders and cousins, Matt Campbell and Adam Callinan learned from experience that warm beers have become an issue with the rising temperatures across the world. To address this, they created a stainless steel bottle insulated with neoprene to keep a glass bottle of beer cold. The bottom of the holder comes off and the beer bottle can be inserted into it.
Handing out samples to the Sharks, they explained that the bottle cover was also padded to keep the beer safe if dropped. They called on guest Shark and former New York Yankee Alex Rodriguez to test it out by throwing a hard ball at a lineup of BottleKeepers. Even though Rodriguez hit the bull's eye, the beer bottle inside the container was safe.
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Since the cousins asked for $1 million for a 5% stake implying that their company was worth a whopping $20 million, Kevin O'Leary said that it's “very aggressive, even on ‘Shark Tank, so I am excited to hear about the sales."
To counter O'Leary's claim about the valuation, the two entrepreneurs explained that they have sold quite a lot of their flagship product which retails for $34.99 and offers a 90% profit margin. They further stated that they had $1 million in sales just in the past 10 days and to date, the company had sold $20 million worth of BottleKeepers. This shocked the panel and the Sharks were now curious to know why they were on the show. "Either you guys are the world's worst business people or you don't need us," Mark Cuban said.
The entrepreneurs explained that they wanted to expand their operations beyond their website and Amazon into retail stores, but they didn't have the capital to produce the required inventory. They said that the business had grossed $9 million in the past year and netted $400,000. They explained that the reason they weren't making a lot of money either is because they had to spend about $4 million on Facebook ads alone and another $500,000 on intellectual property lawyers to help them fight knockoffs, despite having multiple patents. Thus, due to the cash crunch, the two were sitting on a waiting list of 3,000 U.S. retail stores that wanted to sell BottleKeepers.
"This is what I call a schmutz deal. Even if you guys hit on all cylinders, where is the upside for us?" Cuban questioned before backing out. O’Leary was the first to make an offer, but it wasn't something that any entrepreneur would love. Mr Wonderful offered $250,000 for a 10% stake in the company and extended another $750,000 as a line of credit at 11% interest. Rodriguez then jumped in offering to partner with O’Leary but with a different offer. Rodriguez proposed that they would give $500,000 for a 20% stake and the other $500,000 as a line of credit at the same interest rate.
Naturally, the two entrepreneurs weren't willing to give up so much equity and take on a high-interest loan. This is when Greiner jumped in but before she could make an offer, Cuban tapped her on the shoulder and whispered something in her ear. She then offered $1 million for a 3% stake but demanded a royalty of $3 per unit until she recouped $2 million.
Campbell and Callinan countered with an offer of 3% equity for $1 million and a royalty of $1 per unit until $1.5 million is recouped. Then, Cuban jumped in saying, “If you stay at the 5%, I’ll do that deal.”
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After some more back and forth Cuban and Greiner teamed up to offer $1 million for a 5% stake and a $1.50 per unit royalty until $2 million is recouped. The cousins agreed to shake hands on the mega-deal.
“That’s what you get for giving beers,” Greiner said, while Cuban joked, “Why is it I always drink myself into spending a million dollars?”
