tv The Profit CNBC November 3, 2015 11:00pm-12:01am EST
welcome to the shark tank. where entrepreneurs seeking an investment, to start, grow, or save their business. we've raised $200 million. wow. what?! narrator: if the sharks hear a great idea... if that's true, bring it over. narrator: ...they'll invest their own money... i love this one. whoo! whoo! narrator: ...and fight each other for a deal. i'd like to offer you $400,000. you'll partner with a bunch of different labels. excuse me. excuse me. i wasn't finished talking. i think i'm worth twice as much as barbara. he's right. narrator: but the entrepreneurs must get the full amount they're asking for, or they'll walk away with nothing. this tastes like [bleep]. are you going to take me out behind the barn now and shoot me? narrator: who are the sharks? they're self-made business experts worth billions.
kevin o'leary is a shrewd venture capitalist who made his fortune selling a children's educational company for over $4 billion. barbara corcoran went from waiting tables in manhattan to building the city's premier $2 billion real-estate empire. robert herjavec, son of an immigrant factory worker, founded one of the world's preeminent cyber-security firms. lori greiner, the queen of qvc, holds over 100 patents and has launched over 400 products, grossing over a half a billion dollars in sales. and mark cuban, renowned billionaire tech mogul and the outspoken owner of the dallas mavericks. [ birds chirping ] my name is curt campbell, and i live in beautiful egg harbor, wisconsin, with my fabulous wife, amy joe, and i'm the owner of oilerie usa. amy joe is the love of my life.
we were high-school sweethearts. we've been married 38 amazing years. she's my best friend, my rock, my light. in 2003, we were in poland. we came across a small shop that was bottling olive oil right in front of you. we looked at each other and said, "why isn't anyone doing this in america?" we knew right then we were onto something. hey, sausage guy! amy joe and i have taken many risks throughout the years, but we're people that never give up. we've gone paycheck to paycheck, and we suffered through some pretty hard years, but we always look on the bright side of life. super. thanks for your business. really appreciate it. i know that the oilerie can become a huge nationwide business, but i've taken it as far as i can by myself. an investment and a partnership with any of the sharks means that we can have stores in every major city in america and become a national brand.
hi, my name is curt campbell, and i'm from beautiful egg harbor, wisconsin. my company is oilerie usa. i'm here today asking for $500,000 in exchange for 35% of my company. kevin, you've mentioned that you collect olive oil, so you know the nuances of fresh oil. but many americans -- a lot of americans -- have never tasted fresh olive oil. now, before the oilerie came along, the only way to buy olive oil was to stare at a shelf full of pretty labels and basically poke and hope. you have no idea how it's going to taste or if it's even fresh. the oilerie olive-oil-bar system is full of many flavors of fresh oils and aged balsamic vinegar that are stored in these exclusive, stainless steel tanks called "fustis." now, our customers in an oilerie store taste the product, and only after they've made their selections
do we bottle it, and we bottle it in front of them. and they go crazy over the fact that they can try it before they buy it. curt, can we try it? you may absolutely try it. and there's a plate for each of you. do we just drink it? is there bread or something? well, you're tasting an ingredient, so we don't call it "drinking." but if you'll just tip it, a small drop will roll off and onto your tongue. this white truffle -- oh, my gosh. isn't that beautiful? it's really good. do you know what we sell that bottle of truffle olive oil for? $16.50. that bottle of truffle oil is going to cost me about $3.60. bringing oils over from italy in bulk, i'm actually paying about 21 cents an ounce for my olive oil. cuban: where do you sell this? how do you sell it? what are your sales? et cetera. our sales last year were $3.1 million. oh. wow. greiner: wow. barbara: unbelievable. who are you selling to?
well, my wife, amy joe, and i -- high-school sweethearts. we've been married 38 years. we made a trip to krakow, poland. and in krakow, i was seeing these little boutique shops that were selling bulk oils, and they would bottle it in front of you. and i'm thinking, "that's the coolest thing i've ever seen. why isn't anyone doing this in america?" we came back from that trip, and we opened a little, tiny retail shop in fish creek, wisconsin -- the first olive oil store in america. so, curt, today the store is a retail location, and you did $3.1 million last year? in our franchise system! oh, you have a franchise system? oh. i'm sorry. i am -- i am sorry. okay. what happened was, since this was the first time a shop like this existed in america, there was an extreme amount of interest. customers were demanding a franchise. how do we do this on our own? so we spent a considerable amount of money on lawyers and consultants and developed the oilerie usa franchise system. how many franchises do you have? we ended up with seven.
hilton head island, two in ohio, milwaukee, fish creek, two in the twin cities of minneapolis-saint paul, and then one on the west coast -- lake oswego, portland. and how do they pay the franchise fee? the franchise fee, which is $37,500 -- to start, but what's the ongoing? 8% royalties. i think i've distilled out of this what is going on here, because i do collect olive oils. i'm a buyer of it. i'm pretty familiar with the industry, and i'll make a comment on your olive oil. there's nothing wrong with it. it is a mid- to low-market offering, okay? he's an olive oil snob. in cities like chicago and new york and dallas and san francisco, there are many, many options in terms of where someone like i can go to buy and invest in olive oil. right. yes. in the places you have located, there's no other option to taste it or even to buy it, in some cases. and the reason you're successful is you've defaulted to those locations. that's what i believe. this would not work in new york city. i'm banking on the fact that our trademark, oilerie -- i mean, if you wanted to buy wine,
you're going to maybe go to a winery, but... now, look. i-i don't think oilerie is a big enough brand yet. "yet." this is the next starbucks. oh, i don't think so. don't go there. i don't think. in fish creek, wisconsin, apple does $6,000 a square foot retail space, tiffany does $3,000. oilerie fish creek is number three at $2,100. but, curt, is that because you're there? no, i-i do not work in the store. i had to get out of the store three years ago because the stress was killing me. i'm just trying to understand -- is your business ready today to scale? it is. 'cause there's got to be somebody doing the sales. there's got to be somebody doing the negotiations. yes. you're a great relationship guy. who's doing the other part? the only answer i have for you, robert, is that's why i'm here -- to work with a person like you for finance and cash management. you're an impressive guy. i think the product is great. but you also said that the stress bothered you. you had to take yourself out of it.
and my concern is, when i partner with my entrepreneurs, i'm there with them, i help them, but i need somebody who is going to really be running the business and the leader in it while they get my support. and because i'm concerned that you're not gonna be up to having to deal with all the stress of that, for that reason, i'm out. may i address that? of course. all right. when we were doing the retail store, this was our baby. the rent was $2,000 -- scared us to death because we didn't have $2,000. in our married life, we've had the phone disconnected, we've had the power disconnected, we've had cable disconnected. i've been there. we would close on wednesdays, and i would take the truck to green bay to the warehouse and bring back six more pallets so that we could work another week. this was the 8-day-a-week job and the 90 hours. now, i don't mind doing that. you know what? what you're saying is what every entrepreneur who watches this show needs to hear. yeah. that, in order to get to this point, there are trade-offs, there's stress.
yes. there's ups, and there's downs. you're explaining more to people that want to be entrepreneurs than we ever could. curt, i get it. what i see in front of me is a lovely, patient, hardworking gentleman. thank you. but if you're gonna be in the franchise business, it is one royal pain in the neck, and it's a run to the finish line before the next guy gets there. yes. i think you're not cut out for that. and so i reluctantly say i'm out. okay. thank you. herjavec: curt, it's a great business. you've done something very few people ever do. you created something from nothing. trying to find a way to work with you, but the olive oil isn't talking my language. i'm out. o'leary: this is a great business for you. i don't personally think it's ready to jump to the franchise model yet. are you going to take me out behind the barn now and shoot me? no, i won't -- i won't shoot you, cur
he'll just wound you. he'll just wound you. you're a masterful -- [ laughs ] look, you -- you really hustled to create something that adds value to certain retail locations. nothing wrong with that. yes. but for me, it's not investable. i'm out. thank you, sir. mark? do you know what a "shark tank" gold digger is? what we call a gold digger is someone who comes in here looking to take advantage of the exposure of "shark tank" with no intention of ever getting a deal. you are the exact opposite. thank you. you are somebody who is going to get enormous exposure, and i'm glad. you really have a need for one of us, and i was hoping one of us would be able to help you. as much as it pains me, 'cause i love you... ...just don't see my being a partner for your kind of business. so i'm out. okay. i understand, and i appreciate everything that you've said today, and i thank you very much for that. thank you.
curt, say hello to amy joe for us. i will. i will. thank you. we worked extremely hard to get here, and there's going to always be setbacks. hi. and that's why we have to get up, dust ourselves off, and keep doing what we do. anything worth pursuing hard work and a plan. at baird, we approach your wealth management
brighter. bigger. it's gotten thinner. even curvier. but what's next? for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. narrator: next into the tank is a couple with a modern take on gift giving. hello. my name is josh margulis, and this is my lovely wife, sara. we are from sebastopol, california, and the beautiful sonoma wine country, and we're the founders of honeyfund, the free honeymoon gift registry. we're seeking $400,000 in exchange for 10% equity in our company. honeyfund is a unique wedding-gift registry
where couples can raise funds toward their dream honeymoon as a wedding gift, a honeymoon they might not otherwise be able to afford. and their wedding guests are free from shopping at the same old department stores for the same boring wedding gifts. instead, they get to give something way more exciting -- a once-in-a-lifetime honeymoon. would you rather give someone a blender or a night in a beach bungalow? instead of a set of china, how about a trip to china? here's how it works. couples create a honeyfund page listing all the fun aspects of their honeymoon, things like a couple's massage or scuba diving. wedding guests visit the page and make a choice from the registry, and the gift funds are paid directly to the couple's payment account. we call this process "crowd-gifting" -- crowdfunding for gifts. so, right now we'd like to get you guys in the honeymoon spirit. oh. herjavec: oh! aloha. aloha.
aloha, mr. herjavec. [ chuckles ] thank you. greiner: thank you. hi, mr. o'leary. what's in this? please, call me mr. wonderful. okay, mr. wonderful. this has been a wonderful honeymoon with you. [ laughter ] cheers, mark. so now we'd like to propose a toast and invite you to join us as we continue to pioneer the multi-billion-dollar crowd-gifting market. to cash flow. sara: cheers. cheers. cheers. how long have you been in business, and what are your sales? josh created a simple page on our own wedding website. this was 10 years ago, and our wedding guests contributed more than $5,000 to our honeymoon. wow. wow. josh and i were aspiring entrepreneurs at the time. we knew that, when we got married, we were going to start our own venture someday. and just from the reaction of our wedding guests, we knew this was our business. we've helped hundreds of thousands of couples through our site, and to date, we've raised for our couples $200 million. whoa. wow. corcoran: you've got to be kidding. that's right. how do you make money? we have a deal
with -- with paypal. the money that comes from guests goes directly to their paypal account, and we're taking a small fee because we have such large volume. what were the sales last year? it was $67 million? for the transaction volume. yes. what did you make on that? so, last year, our revenue was $900,870. so on that million, what do you make on it? after all overhead and salaries, we profited $217,000 last year. so this all about customer acquisition costs and their value. yes. so give us those numbers. every couple that signs up and publishes a registry invites, on average, 150 wedding guests to come and look at it. very clever, actually. but on average, we pay 88 cents to acquire a customer. and what's the value? and we get $9 out of every customer on average. that's the average value? yeah. guys, i get that as, you know, a personal business, putting $500,000, essentially, in the bank for yourselves as a couple is phenomenal. but there's a "but" coming. yeah, 'cause it doesn't make it investable. right. right. you've got to tell us where you're going from there
'cause, to be honest, to be in business 10 years and to do $987,000 in gross revenue is horrible. okay, yeah. it's -- it's been a lifestyle business up to this point. and of course we're here because there's more. "but wait!" but wait. there's more. so, people have used this site, honeyfund, for things other than weddings. sara: so we created plumfund. anyone can raise money for anything with this site. this woman's having a birthday. we had a woman that graduated with her master's degree. herjavec: sara, hang on. your answer to scaling honeyfund is to do another fund. our answer is to do a whole portfolio of funds. ugh. are these up and running? plumfund and honeyfund are running. these are planned. okay, give us the metrics on plumfund. when did it start, what are the revenues now? we've generated $400,000 with plumfund and about $10,000 in revenue. how many months? uh, for about 12 months. herjavec: i think it's a fantastic idea, but you -- you're not selling me. i've got another idea for you. all right. fondodemiel -- that is spanish for "honeyfund."
there are 53 million spanish speakers in the u.s. alone. this could double our business over the next few years. you told me $217,000 after you paid yourself, pre-tax. yes. that's $150,000 after tax of free cash this calendar year. yeah. mm-hmm. for the value on it of $4 million. mm-hmm. you want me to pay 26 times your free cash flow to buy equity in your company. we are -- thank you for asking about the valuation. it's based on projections for 2015. so you're going to grow by 350%? how you gonna do that? by adding the other life events and spanish. oh! so that's the risk i have to take -- that your customer acquisition costs will be the same for that as they were on this. they'll be somewhat higher, but they come down over time, in our experience. you know, i love the idea of you taking it to other countries -- doing it in spanish. you're just expanding it. i think that's really smart. but i think crowdfunding is crowded.
for that reason, i'm out. thank you for your time, lori. thank you. if you get funded today, how would i get my $400,000 back? so, what we're planning to do is scale the business quickly over five years, really dominate the crowd-gifting space. guys, just -- just what you said right there does not make sense. there's no such thing as scaling quickly over five years. you're trying to make this a technology company, and by saying that you're looking at all these other options, you're telling me you don't have a solution to go out and dominate just what you already supposedly are dominating in. we already do dominate this market. cuban: then -- we have 30% market share in this space. you've got a nice, little business, like i said. bravo. right? but when a business gets to a point where you have to start looking everywhere else, it suggest to me that it's on autopilot. if it was growing so fast and it was so profitable, then you'd be telling us, "we need this capital just to keep up with it." and that's not what's happening. for that reason, i'm out. thank you.
herjavec: okay, sara, here -- here's where i'm at. in my world, there's two types of companies -- the quick and the dead. all right? you're approaching your core value and trying to monetize it the wrong way. hmm. i can help you. i think you've done a phenomenal job of creating transaction value. that's where you got to go to, not the brand extension. okay. here's my offer, sara. i'll give you -- you're asking for $400,000. i'll give you $500,000... and the plot thickens.
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before earning 1% cash back everywhere, every time... 2% back at the grocery store... and 3% back on gas... vince of the flying branzinos got a bankamericard cash rewards credit card, because he may earn his living jumping through hoops, but he'd rather not earn cash back that way. that's the spectacle of rewarding connections. apply online or at a bank of america near you. just serve classy snacks and bew a gracious host,iday party. no matter who shows up. [cricket sound] richard. didn't think you were going to make it. hey sorry about last weekend, i don't know what got into me. well forgive and forget... kind of. i don't think so! do you like nuts?
narrator: two sharks are out, and robert has offered the online gifting registry honeyfund $100,000 more than they were seeking. but how much equity will he want? i'll give you -- you're asking for $400,000? i'll give you $500,000... ...for 50%. thank you. so a $1 million valuation. robert: $1 million valuation. it's four times what you earned last year. because of the directions you want to go, i got to be an equal partner. hmm. because i don't want to have those arguments with you about you want to go this way, i want to go that way. we got to be on the same page. if you want to dominate this space, i'm your guy. and the plot thickens. o'leary: okay. sure does. i'm gonna make you an offer that's completely different. i'll give you the $400,000. i don't want any equity. i want 1/3 of your transactional revenue until i get three times back on my $400,000. that means you have to pay me back $1.2 million. and here's the good part.
after that, i'm gone. you give up nothing. and what are you going to do for them? i'm going to fund them. that's it. you've met a banker here today. yep. i am funding your growth for you and getting a pretty decent return for doing it, but no equity. if you hit it out of the park, it's all yours. i got it. cuban: he's right. he's right. i've never, ever, ever in my entire life said, "mr. wonderful offered a good deal." sara: i have never heard a deal from him like that. you know what you're doing? you're doing a phony royalty deal disguised as something else. no, he's not. no, he's not. no, he's not. it's the same thing. if you have something better -- you don't have any creativity, barbara. josh, the only thing he cares about in his offer is getting his money back. of course. which is fine. and so do you. who doesn't? no, no, no, no, no. hang on a second. what i care about is growing the business fundamentally. what i care about is growing i would prefer that you focus on getting back more of that 70% share you don't have, and i would work towards that, because it would compress the time i'm waiting to get my $1.2 million back. sara: yes. i can tell you unequivocally it's a bad idea. i don't lend money to small businesses
and try to get it back at any cost. i invest in companies to grow them quickly. barb, what are you doing? i love the two of you. you're rock solid. you couldn't be better partners. here's my offer. $400,000 for 30%. sara, i'll match barbara's offer. so, what are you going to do? so, robert, we would be interested in doing a deal with you if you would be willing to go down to 25%. herjavec: that's ridiculous, josh. you're gonna negotiate with me on a 5% deal? we don't want to start that way. i'm sticking at $400,000 at 30%. [ whispering indistinctly ] mr. o'leary, you have a deal. whoa. wow. what a surprise.
i think you made a wise decision. wow. o'leary: that's good discipline. sara: thank you. congrats, guys. whoo-hoo! i think we just got the best deal out of mr. o'leary that anyone's ever got out of the shark tank. i think so. i think so. kevin, i think you -- you wake up at night in your crib, and you say, "what deals can i come up with today?" robert, you have no creativity. you -- you sharks have no creativity whatsoever. i'm sending you an invoice just because you've learned something today. cuban: are you kidding me?! narrator: in season 5, we saw charles michael yim make a deal with all fives sharks for his innovative smartphone breathalyzer, breathometer. plug it into a smartphone. within seconds, you'll be able to know what your breath-alcohol level is. $1 million for 30%. i accept. narrator: let's see what's happening now. i came by the tank today because it's hard to get all five sharks in the same room. hey, look at this guy. hey, guys. and i personally wanted to drop by to show them breeze, our newest product. this is bluetooth. it's wireless.
so if i click this button on the back, it'll pair within seconds. oh, wow. breeze is the most advanced smartphone breathalyzer in the world. it's wireless, and it has a state-of-the-art sensor which allows it to have real-time results. this really turned out nicely. we always love to hear great news. now get back to work. [ laughter ] we formed a partnership with cleveland clinic, which is the number-one breath analysis lab in the world. together, we'll build products that will revolutionize the breath-analysis space. it's perfect. up until now, we've been predominantly online, but we're about to roll out nationwide. because of the help of the sharks, we're gonna be available at best buy and brookstone. there it is. oh, there it is. on my last update just a few months ago, i reported a little over $1 million in sales. now, just a year after airing, we have close to $10 million in sales. good job. awesome. i feel like i'm living the american dream. power of "shark tank" bringing something that was just in my garage to store shelves today -- it's like a dream come true.
narrator: next up is an innovation in the personal security business. hello, sharks. my name is phil reitnour from melvin, pennsylvania, and i'm the founder of emergensee. and i'm jason friedberg, a retired police chief, also from pennsylvania. we are seeking $250,000 in exchange for 10% of our business. emergensee is an amazing new mobile technology that turns your smartphone or tablet
into a personal security system. this streams live video, audio, gps, location, and movements to get the help you need immediately, all with a tap of the app. sharks, each year, over 237 million emergency calls are made to 911 centers in the united states alone. 70% of those calls are made from mobile devices. unfortunately, not all 911 centers can receive gps location information, and only a handful can receive text messages, and none can receive video -- until now. emergensee is the perfect solution. please take a look. woman: the emergensee app turns your smartphone into your own personal security system that instantly connects you to family, friends, and authorities during an emergency. if you're walking alone at night and feel unsafe or threatened, just tap the emergensee app and your personal security system engages. emergensee instantly transmits streaming live video, live audio, pinpoints your exact location on a geo-map,
and all this is sent directly to your designated emergency contacts and responders. help is just a single tap away with the free download of emergensee. sharks, emergensee is currently providing this state-of-the-art security technology to numerous individuals and businesses throughout the country and around the world. so, which one of you sharks would love to emerge with us and see your investment grow? so, how's it all configured? you download the app, and you put all your information in, and it goes directly to our back end 911 monitoring center. you have a -- you built a back end interface to the existing 911 system? we -- actually, to our own private monitoring center. so you do it like a security firm, basically. correct. jason, when that person in your center is getting the information, what do they gain? they get audio, video, gps tracking, the ability to text and have a conversation immediately. in your own example, that girl is walking, she's got the phone in her hand. sure. correct. she taps the button. yep. she's worried there's somebody behind her. correct.
she's not gonna take that phone, turn around, and go like that. we're not asking her to. what we hope to do in a situation like that is they actually start to roll the police department, fire, and ems if they feel uncomfortable. but i don't get why that's an advantage in any way. like, say, for example -- why wouldn't i speed dial 911 and feel just as -- well, 911 versus tapping that -- or speed dial 911. greiner: well, one versus three. well, and -- and the real issue with dialing the 911 is all they're gonna get is muffled noises. with a video, it adds a completely new dimension. how many people are using it? uh... 211,000. do you charge them to download it? it's a free download with the ability to upgrade for a monthly service. with the free version, there's no monthly monitoring. it's sent to family and friends. it doesn't go to the police. but you have to pay for it. correct -- the free version. the paid version -- do you have 211,000 premium subscribers? no. no. you have 211,000 downloads. correct. ding, ding, ding, ding, ding, ding, ding! just let me say that, as far as the premium customer goes -- the monthly subscribers -- that was only rolled out a month ago. of the 211,000, how many went for the premium service?
well, we just stared a month ago. i think there's like 138. how much are they paying a month? $8.99 a month. but over the past six months, we've signed up numerous colleges and universities. we have, uh, some enterprises, businesses, we signed up. we also have some government agencies. tell me about the enterprise version. just -- we come to your college or university or corporation and we install it. we set up a geo-fence at your location. anything that happens within that geo-fence goes right to your public safety or security department. and geofence means that you can recognize anything inside that perimeter? correct. so, lori's at college, and that university or college is part of your enterprise program. right. so she pushes the button. tell me what happens. if they hit it and they're on the college campus, it goes right back to the public safety department. are they paying you for this? average installation for a college or university is about $25,000 to start. $25,000 annually? yes, annually. so that's a little business. now we're talking! okay, so what's your total sales? $180 -- $185,000. of the $185,000, what was your profit?
there's no profit at this time. we're probably gonna be profitable around october. greiner: but what did you lose? how much did you put in yourself? i put in over $3 million. both: $3 million? ooh. corcoran: oh, my god. where did you get that money from? i was in banking, oil, real estate. sold all those off. who -- who's your tech -- who's your main geek? main geek is a guy named -- is a guy named jean. it's a great company that we have working with us. so you came up with the idea, right? reitnour: yes. you thought it was a great idea. and then you outsourced it to these guys, who charged you how much? we started first with a guy who was a director, uh, of technology at apple. he put me in touch with somebody else. you realized that was a super-competitive business, right, that was gonna be very difficult? yep, that's correct. that's correct. so you said, "i need some more brain power to make it more -- more advanced so that i can differentiate myself." right. how much have you paid them to develop the technology? the first section of the development for the technology was about $500,000, and then i'd say the next part was, you know, $750,000, and then the last part was about $750,000. whoa. they saw you coming, bro. yeah.
you put $3 million in. what's left in the bank? roughly, there's $68,000 in the bank. wow! look, you -- you're going through a problem that every entrepreneur who's non-technical deals with trying to create a company that's built on technology, right? the one constant in any technology-based company is what? change. you have to know the technology inside and out to be able to anticipate where things are going. that's not you. i'm out. okay. i totally trusted you guys. you're great. but i don't know if you're gonna make it. i just don't have the faith that this business will work. i'm out. thank you. thank you. i know there's a sense of concern because you've shown me a valuation of $2.5 million when yours is over $3 million. so you're telling me, as an investor, you're willing to take dilution if i deploy my capital. yeah, he's in so deep, your pant legs are rolled up right now.
i mean... what it has to be -- phil, the numbers don't lie. reitnour: yeah. right. they speak to me. i'm a cash whisperer. so, you know, i wish you guys luck, but i'm not gonna be part of this journey. i'm out. i like the concept. i think anything that keeps people safer is a great thing. mm-hmm. but i'm not sure that it's being executed properly or not at this point. sure. and for that reason, i'm out. appreciate your time and your questions. thank you. let me tell you what i think the mistake you've made up until this point. okay. you started with too much money. yep. okay. so, i went back to work nine years ago. i was a stay-at-home dad. and i was gonna conquer the world of security, so i opened up the business. we started with millions of dollars, 'cause i knew everything, right? right. our forecast was $5 million in sales. you know what we sold? $400,000. we lost $1 million. and you know what i said? "that's okay. let me put another $1 million in." that's the curse of success. you get arrogant thinking everything you do is smart.
yeah, 'cause i know everything. the beauty of not having a lot of money is you try something, and then you change. and as mark said, neither of you are a geek. if you're a technology company, you got to have technology brain trust in a leadership position. you guys are not the two guys to execute this strategy. o'leary: what are you gonna do, robert? i'm out. well... i think that's it, guys. thank you all. good luck, guys. thank you all. appreciate it. thank you all for your time and attention. appreciate it. they see the technology pitfalls and the things that we need to improve upon to make it a viable product, and i think that advice, in and of itself, is gonna be a huge success for us.
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all right, guys. let's do this. narrator: next into the tank are young entrepreneurs with a beverage for a new generation. hey, sharks. my name's justin fenchel. i'm brad schultz. and i'm aimy steadman, and we're from austin, texas. our company is beatbox beverages, and we're seeking $200,000 for 10% of our company. now, kevin, you know wine. so picture this -- a delightful cabernet from the bordeaux region of france. it's been aged in oak barrels for 15 years. it's perfect.
[ laughs ] you can almost taste it, right? if that's true, bring it over. [ laughter ] well, there's just one problem. what? together: boring! exactly! [ laughs ] corcoran: now we're getting down. oh. this is beatbox beverages, and we are not boring. we're changing box wine forever with flavors like cranberry limeade and blue-raspberry lemonade, all in one sweet-looking beatbox. but it's not just a box. it's an experience. ooh. take beatbox to your next party, and you're instantly a legend. [ laughs ] steadman: boxed wine is incredibly popular. it's affordable, it's convenient, it's got a large size where you can share with everyone at the party. but the wine you find inside leaves much to be desired. we're using a unique orange wine that drinks more like a spirit than a wine and allows us to create mixed drinks that our customers absolutely love. beatbox is a party in a box, with almost seven bottles of wine packed into every box. wow. we created an innovative, fun brand that's really speaking to our generation,
and we're ready to take this company to the next level. the only question is, will the sharks be joining the beatbox party? let's try some! yeah! yeah! what is orange wine? i've never heard of that. yeah, so, orange wine is a -- is a unique wine. it's actually, uh, clear, much more like a white spirit. the blue one is the blue-raspberry lemonade. the pink is a cranberry limeade. the yellow-ish color is our margarita flavor. and the tea is a sweet tea. this tastes like [bleep] oh, are you kidding? this is good. he loves it! man: yeah! this is delicious. he's crazy. it's a party. i love this one. reminds me off those, like blue-raspberry snow cones. how much alcohol is in here? 11.1%. what?! yes. corcoran: wow. lori, cheers. only 120 calories per serving. whoo! whoo! and only 7 grams of sugar per serving. herjavec: you know what? i love the wine. kevin, give them the money. o'leary: no, but let's... tell us more about the business. see, he's the party pooper. where is it manufactured? what are your margins?
who's actually distributing it? so, we self-distribute it. we actually became a winery ourselves. as a texas winery, you can self-distribute it. but we got, you know, to the point where we were spending more time in our facility making it, gluing the boxes, and distributing it. we couldn't market it, right? we're getting too big. so we found a co-packer in dallas, and they now make it for us. we signed on with a distributor. since then, we've grown our sales pretty dramatically. herjavec: what are your sales so far, justin? we've done $235,000 in 14 months, and $120,000 is coming just this quarter. how much money did you raise when you started this? so -- so, we self-funded it for $55,000. we took on $100 -- $100,000 in family and friends' debt. so tell me how you're gonna go from $235,000 to $5 million. so, the strategy is to identify new stores where we know it's gonna sell, go into that store, support it with at least six tastings. tastings are by far the best way for us to get the product out there. what do you need the money for? fenchel: it's for the engine for growth. opening up new stores and, you know, supporting it with tastings. our tastings cost, on average... so, hiring the people --
...$100 per tasting is on average into -- that's expensive. that's expensive. it is. doing it in the stores sounds really, really good, but it's really hard to leverage. one store at a time, even with brand ambassadors, your leverage points per any one store aren't great. in my mind, the strategy was wrong. you know, you need to -- taking advantage of events, taking advantage of big, you know, places where there are thousands of people. feel like we've eliminated a lot of the risks associated with a new consumer-products company in this space. we've got outsource manufacturing, we've got the largest distributor in the states, and we need someone to help us scale this business. the good news for you guys is there -- there's -- there's examples of beverages that have gone viral and gone national. you remember skinny -- the skinnygirl story? absolutely. absolutely. that was the same thing -- very viral -- from one location. then new york, florida, texas, california. but she ran like hell for everywhere else. yeah. the -- the path of least resistance
is converting that person that's buying that box of wine for a party, but they don't know why they're buying it. herjavec: right. yeah. that's the easiest conversion. and so, franzia -- an example -- is the number-one box wine in the world, number-one by volume. a billion dollars in sales. franzia does $1 billion. it is 3% -- what?! but you know why? because they've got 100% penetration and distribution, and everybody's tried to knock it off. i'm in the wine business. i sell 50,000 cases a year, $2.6 million this year. took me three years to get there, and the thing that's holding me back -- you forgot -- i'll tell you what's holding you back -- the name. it's called "o'leary wine." that's why it sells. you got to call it beatbox. yeah. i'll make you an offer. i'd like to offer you $400,000 for 20%. thank you so much. thank you very much. thank you. really appreciate it. $400,000 for 20%, barbara? yes. guys, the biggest challenge is breaking those states through their distribution system. and -- and you could certainly help with that. no, definitely. or the blue states. but i'll put my offer on the table. with my own experience, i think i'm worth twice as much as barbara.
i'm sorry. how lovely. she doesn't know what she's doing in this space. i'll give you $200,000 for 20%, 'cause i think the business is worth a million bucks right now. $200,000 -- so you're cutting barbara's offer in half. yeah. now, they could go with barbara. because you make a snooty wine that has nothing to do with this. no. unfortunately, i've lived through distribution. it's tough. we're gonna do 22,000 cases, 9-liter cases, this year. mark? what? what up? [ chuckles ] "what up?" homey. i don't see this as a wine product. you guys got that down, right? you guys don't sell wine. right. period. end of story. you guys sell fun. you're absolutely right. that's right. you got it. and the biggest question is, how do you connect with enough people quickly enough to make it grow fast enough that, all of a sudden, you're going, "what am i gonna do now?" right? 'cause y-you're going as fast as you can. you need a lot of help. you want to create as big a splash as possible, and i think i'm best suited up here to do it. so what i want to do is make you an offer of 600k...
narrator: all sharks are still in. beatbox beverages has three offers on the table -- $400,000 for 20% from barbara, $200,000 for 20% from kevin, and $600,000 for 33% from mark. but lori and robert may also be interested. i think you've to blast off, you've got to go fast. the last thing you want is not being able to deliver, 'cause, you know, viral is just that, right?
and either you're there to fulfill... schultz: yeah. ...or you lose an opportunity. schultz: i really appreciate you saying that and that offer, you know, thank you for making it. we -- we didn't anticipate giving up, you know -- you got a counter, just come back and tell me. yeah, so, would you do $1 million for a third? yeah. all right. deal? you ready? [ chuckles ] wow! [ laughter ] congratulations. let's party. [ laughter ] let's do work, baby. that's a $3 mil valuation. all right, guys. i'll be in touch real soon, and we'll get it turned around. thank you so much. wow. you know what, he's gonna make money on it. thank you so much. congrats, guys. thank you so much. and those are all mine. don't take them. [ laughs ] we were gonna make an offer, but -- i knew you were. yeah, well, it wasn't gonna come nearthat thing. aah! whoo! did that really just happen? oh, my god! would i have ever imagined that we'd be doing a million dollar deal with mark cuban? no. but here we are.
(man) this is the shark tank, where hopeful entrepreneurs come seeking an investment from the sharks, five powerful, self-made investors worth billions. last season, the sharks invested over $5 million in products and businesses. this season, the stakes are even higher and the sharks are even richer. what if i offered you $1.25 million? the sharks are ready to invest using their own money, but only for the right person with the right business. oh! it'll kick you in the throat a little bit. ugh. and if the sharks hear a good idea, they'll fight each other for a piece of it. mark, you're saying, "screw the other sharks." yep.
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