BetterBack from Shark Tank

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In this week episode of ABC’s Shark Tank, Katherine Krug pitched BetterBack to the sharks, this time the sharks were Mark Cuban, Barbara Corcoran, Lori Greiner, Kevin O’ Leary and Robert Herjavec.

BetterBack on Shark tank

Katherine Krug, a startup founder, realized that sitting in front of a computer for long hours will cause back pain,  so after testing various products, she decided to create her own. Katherine asked a buddy of hers who was in industrial design to create a prototype, and then launch a croundfunding campaign in which they raise $1.6 million, and thus BetterBack was born. BetterBack is a posture correction device, that not only help avoid the back pain, but also teaches the body to sit in a better posture.

According to their website:

“BetterBack allows you to effortlessly sit in perfect posture, easing back pain—and preventing it. Lightweight and portable, it makes every chair ergonomic. Wearing it for just 15 minutes a day can retrain your body’s default posture, so when you stand or sit without BetterBack, your posture is greatly improved.”

 

betterback

The  investing request: Katherine asked for $750,000 for a 7.5% equity.
The Value reasoning: $10 million,based on $1.2 million in sales in just a month – during crowdfund campaign !!
She believes she can generate $4.5 million in online sales next year. The projection is based on selling on Amazon, and optimizing the listing thanks to Growth Hacking.

Why she need the money question:  No idea !!??
Strong points:
– Good product, and have proved a demand on it.
– Good margin made for $8 sold for $$49.99 & $59.99 -on website-
Weak points:
– The product haven’t even been tested by customers, as 1 shipment have just been shipped.
– The valuation is based on a kick-starter campaign, you can’t do that. As it is a one time deal can’t be repeated.
Sharks Responses:
Mark Cuban & Barbara Corcoran: pull out mainly due to high valuation, and reasoning -weak point 2.
Robert Herjavec : Believes she has all the right answers but valuation is high. He offers the $750,000 for 20%.
Kevin O’Leary: Offers the $750,000 for 25%, at a later stage he changes it to a loan on 7.5% interest with 5% equity when the loan is repaid.
Lori Greiner : Offers the $750,000 for 20%, but later copies the offer of Kevin and offer a loan on 7.5% interest -but with 3 years to repay- with 8% equity when the loan is repaid. She accepts the loan deal by Lori.
Shark Tank Effect & Outcome:
Lori Greiner is a good fit, as she can sell the product on QVC, maybe the best fit among the sharks. But the deal was bad, she turned down a 20% equity in exchange of a $750,000 LOAN. She did not get a normal loan, she got a shark loan.
The Loan she got have a 7.5% interest rate, and to be paid over 3 years, it means, if she is able to pay the loan in 3 years she will have to pay the $750,000 + 22% of that, and she will still lose 8% of equity … All that to get on QVC, she could have done it by her own without doing a deal with Lori. Robert’s offer was the better deal here!
Shark tank effect wise, there’s no doubt there will be an increase in online sales for this product, but that’s just for a couple weeks, she might make another $2million in sales thanks to Shark tank, then another million via QVC.

Abdallah Alaili

Abdallah Alaili

I'm a tech entrepreneur, this is a blog to learn from other entrepreneurs and spread the wisdom to many more. You can find me on: Google+ - Twitter - Linkedin - more about me

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