Why buy Loliware products?
The benefits of Loliware products are they have yummy flavors like Yuzu Citrus and Matcha Green Tea and Tart Cherry (I’d like to try this one). They are edible as well as delicious. They are biodegradable giving a big nod to the green police.
They are also vegan and gluten-free providing healthy eaters pleasure without the guilt. The investors on ABC Shark Tank were delighted with the samples and presentation the founders provided.
What is the cost structure of Loliware?
Here are the questions the investors asked and the answers the founders gave them:
How much have you done in revenues or sales?
In three months; $110K
What’s your unit cost and what do you sell them for?
Wholesale price is $1.50 per cup; Cost of Goods Sold is $.97.This means their gross margin is about 33% or 1/3.
How have you financed operations?
They put in $10K of their own money. (This sits well with investors; if you’re sacrificed, you believe in what you’re doing.)
They have a letter of intent to raise $1.3 million (with a date of confirmation)
They want to raise $1million in addition of which $400K has been committed.
They have $600K left to raise. Remember they were only asking for $150K from ABC Shark Tank investors.
What happened next will blow your mind; the investors started arguing over who would get the deal! I’ve never seen this level of enthusiasm on the show. Honestly.
What ABC Shark Tank Investors Offered Loliware
First, Robert Herjavec made an offer to finance all $600K, but wanted more equity. At the rate the founders were asking, a $600K investment would give the sharks 4X the equity they were originally offering or 40% of the company.
(It’s doubtful the founders would give away that much of the company given all the other investor interest they have. They were smart. They didn’t.)
Then Mark Cuban stepped in to do the deal.
Then Robert Herjavec offered to split the deal with Cuban; $300K and $300K for 25%.
Then Barbara Corcoran (whom I LOVE and respect a lot) stepped in and said, “you’re crazy if you don’t choose me as an investor. I have so much experience in the food business”. She does.
Barbara offered a joint deal with Mark Cuban, same terms.
Whom would you choose if three world-class investors were arguing over who should invest in your company? High order problem, right?
What deal did Loliware founders choose?
The Loliware founders choose the Mark Cuban and Barbara Corcoran combo.
$600K for 25% equity. Wow. Only in your dreams do you have this kind of outcome.
Think about it; this means the founders of Loliware went into the meeting believing their company was worth $1.5 million and by the time they left, the sharks actually BID UP the price of Loliware to $2.4 million. Do you see it? $600K is 25% of what number? $2.4 million.
In a span of one meeting the company almost doubled in value. That almost NEVER happens on ABC Shark Tank. Usually the investors discount the value of the business.
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