tv The Profit CNBC October 27, 2015 11:00pm-12:01am EDT
(man) the sharks are back in an all-new season of "shark tank," where hopeful entrepreneurs from across the country dream of a chance to secure an investment and gain powerful partners to start, grow, or save their businesses. who wants a drink? you're gonna need a drink. saliva goes down, and they suck it up. if the sharks hear a great idea, they're ready to invest using their own money. i'll offer you a million dollars. i may consider going in with big shark daddy here. and they'll fight each other for a piece of the action. if you take that deal, you get wiped out right now. you sold your soul. you, my friend, become a millionaire. but first, the entrepreneurs must convince a shark to invest the full amount they're asking for, or they'll walk away with nothing. an engineer that comes on national tv
and can't do their math-- that's not good. it's sink... my--my--my--that was-- that was-- or swim. okay, kiddies, time for you to leave the shark tank. this could get very ugly. ♪ who are the sharks? they're self-made millionaire and billionaire investors who are entrepreneurs themselves. kevin o'leary is a venture capitalist who turned a $10,000 loan into a software business worth $4.2 billion. lori greiner, the queen of qvc, holds over a hundred patents and has launched over 300 products, grossing over a half a billion dollars in retail sales. daymond john is a fashion mogul and branding expert who grew his homemade clothing line into the globally recognized fashion brand fubu. robert herjavec, the son of an immigrant factory worker, is now a technology mogul who sold his first internet companies for over $350 million.
and mark cuban, notorious billionaire entrepreneur and the outspoken owner of the dallas mavericks. ♪ first into the shark tank is doug marshall with the next generation of face painting. (chuckles) hello, sharks. my name is doug marshall, and i'm the creator and owner of the game face company. we are here seeking an investment of $450,000... damn. for a 25% equity stake in the game face company. the game face is a patented product that has revolutionized the face-painting, makeup, and costume mask industry.
avid sport fans love to paint their face, and kids of all ages love trick-or-treating and dressing up for halloween. my son here, will, is dressed up for a maverick game if he could only score on some tickets. and katie, my daughter, is dressed up as a butterfly girl. i would like to give each of you a face... i love it when we get free stuff. (lori laughs) the faces are one size trimmed to fit. i'm sporting the patriot face right now. kevin, what face are you sporting? (lori laughs) mr. wonderful's face. always smiling. i would like to give you a tiger face. ooh! thank you, doug. lori, this is an exotic mask face. (laughing) this skeleton face may do just the right thing for you. (robert) oh, that's so perfect for you, kevin. i like that. that is perfect. over the past year and a half, all of our faces have been wash-away faces, much like a tattoo. so, we have had inquiries, and people say,
"well, why couldn't i wear a face and then just be able to take it off?" so, if i can grab a-- an edge here of this face, and as i peel away... you can see that i'm not having to wash it. wow! "mission: impossible." (lori) so it's a one-time use, doug? yes. but it's peel off, as opposed to wash off? right. (robert) it's incredible. and it's--it's very comfortable to wear. i mean... (mouth full) you can... what? eat it? (laughs) you can just eat it? why? is that just a nasty habit, or are you trying to show us-- it's made with vegetable dyes, and it's all water-based, and it's very safe for kids. let's go to the economics. tell us about the business, your revenues, your costs. we're in our fifth year of business. and let me preface this-- this is a part-time job for me and my wife. and we literally have an office above our garage, and we ship out of our garage. our first year, we did $6,700 worth of sales, and last year, we did $102,000. we anticipate doing $105,000 this year.
$102,000, and you are valuing that you you have a part-time $1.8 million company... yes. in your attic. why are you worth $1.8 million? well, first of all, we haven't even tapped into the big box. we have about 400 customers that are all retail, small mom-and-pop shops. we have licensed ncaa teams. we have a local license-- texas tech, tcu, and a&m. what does it cost you to make? what do you sell 'em for? so we wholesale them for $2.50, and our cost will range from 25 cents to 60 cents. it's all volume-driven. great margin. only our designs are all retailed for $4.99. (daymond) it is a great margin. (mark) so you're paying 10 per-- it's a $5 item. and, doug, on the $102,000 that you sold last year, how much money did you make on that? we made $32,000. the numbers just don't add up. okay, kiddies, it's time for you to leave the shark tank. your daddy's asked for $1.8 million value on his company. this could get very ugly.
yeah, we're gonna put on some ugly faces... bye, guys. and, uh, talk to your dad. (laughs) are there competitors? there's no competitors. okay. and there can't be any competitors, because of our patent. (robert) but--but, doug, that can't be true. i've bought stickers-- the key is full face. the key is full face. full face. full face. what's your full-time job, doug? i work for xerox selling copiers. you've got these big margins. it's working for you. yeah. why still sell copiers instead of do this full-time? well, we've got two kids. we got-- we got into the real estate bust in east texas. okay, so you gotta pay the bills, basically. i gotta pay the bills. what's the $450,000 for? $300,000 would get me on a salary for the next three years, get us going with the licenses. we want to get nba. (daymond) one second, one second. doug. you just basically said, "i want $100,000 a year for 3 years." i think that's absurd. i-i didn't make any money from my business for nine years. i'm out.
doug, i-i really like the product. but i gotta tell you, when you said, "i'm gonna take a $100,000 salary for the next 3 years, and that's why i need an investment"-- to guarantee that for the next three years, with all due respect, you gotta be friggin' kidding me. when i started my business, do you know how many years before i made $100,000? and you're coming here and asking me to guarantee that for you? this could turn water into gold, but i'm sorry, my friend. i wouldn't want to invest alongside with you. i'm out. okay. (mark) what are you gonna use the money for, doug? to get me to go full-time and license acquisitions. (kevin) doug, let me solve that problem for you right now. here's a deal for you. i'll give you $450,000. here's how i'll do it. i'll give you $150,000 of it for 30% of your company. the other $300,000 you've asked for,
i'll give to you as a loan. and i'm going to put a 25-cent royalty on every mask until i get my $150,000 back. (lori) i-i would like to make you an offer-- the $450,000. but i'd like mark to go in with me. and for 40% stake. but i can immediately get you into all the licensing and into retailers all over the country. i would like to hear from mark. he's been awfully quiet. (lori) yes. mark, what do you have to say? um... i gotta tell you-- so, when i first took over the mavs, no one would go to the games. right? i-i literally had to hand out tickets. and one of the promotions i ran was-- and it's running to this day-- that if you come to a mavs game with your face and/or body fully painted in mavs colors, we're gonna have a contest, and we'll pick the craziest and give you free seats. yeah. and it's such a mess. there's paint. there's mess everywhere. yes. so i-i can relate. it's a great option. yeah. okay, here's the offer i'll make. um... i'll offer you a million dollars...
yowza! for the entire company. whoa. included in that million dollars is a salary to you of $80,000 a year for five years. lori, i'll bring you in if you'd like-- if you'd like to come in, i'm happy to bring you in. i'm in on mark's offer. i like it. (kevin) you understand what's happening to you, right? if you take that deal, you get wiped out right now. you gave up your future. u soldour soul. you onothing. ♪
from mark and lori. (kevin) you understand what's happening to you, right? if you take that deal, you get wiped out right now. you gave up your future. you sold your soul. you onothing. you, my friend, become a millionaire. doug, i saw your soul drift out of the shark tank. (mark laughs) there it goes. (lori laughs) it could've been worth $15 million, but no. that's exactly what's happening. (laughing) so, my offer makes a lot more sense. i leave 70% of the upside to you. it's perfect. i move lightning-fast, and i have all the connections. i think that mark would be the right partner. with his abilities and with mine together, this can become an overnight sensation. so, doug, when i started my business, a guy came along, offered me $5 million. it was more money than i had ever dreamed of. i went home, and i told my wife about it. and she looked at me and she said, "i don't believe you started this business
"to work for somebody else one day. i think you can make it much bigger." i was shocked. we had car loans, we had a huge mortgage. it was worth hundreds of millions of dollars, and i hung on to it. it was the best decision i ever made. what are you going to do? i would like to, uh, talk to my family about it. okay. mark, partnered with lori, has offered us, uh, a million dollars... (laughs) in order... (laughs) you're taking a guy's company underneath him. also, kevin has offered us $150,000, and then would, uh, bank us on the other $300,000. (mark) we sit here all the time and talk about how unfortunate and how tough things are in this country right now, and here we are giving the guy a million dollars-- you're stealing his american dream. he's not gonna sell his soul. you know, getting this started
has been a huge sacrifice for us. okay. okay, bye. (kisses) love you. all right. (laughs) (exhales deeply) sorry. (kevin) what are you gonna do? all right. um... i really think it's too early in the game for us with the game face company to give up 100% of the company. ooh. but i do like lori and mark working with us. we could go with the $450,000 and $80,000 in salary, and we would give out... 35% equity in the company. so, i would like to counter back, mark. $450,000 at the 40% that i started with, and he can get the $80,000 salary for the first three years. i would do as lori suggested,
or $450k for 35% plus the $80k guaranteed for 3 years, but a 10% royalty till we get our money back. i'm good with that. (kevin) it just shows you my deal is the right one anyways. they're just copying my deal. so it's just a question of how you value the 5% in equity, and i'll leave that up to you. (robert) so, doug, you've done something remarkable. you've made mark cuban grovel. (laughs) he has not. there's no groveling here. (lori laughs) ♪ well, i like the 35%, and i like the 10% royalty on it. so, mark and lori... let's do it! put your game face on! put your game face on, baby! whoo! whoo! let's do it! let's do it. congratulations, man. it's gonna be awesome. thanks, man. we'll have fun. we'll bring you-- bring the kids down to a mavs game. you came here with a company that makes $30,000 a year,
and you got a million dollar value. it's unbelievable. great job. wow. that guy just turned down a million bucks amade you guys counteroffer. i was just trying to solve his problem, which was he wanted security. and he wanted to walk the rest of his life with a soul, and i solved that problem. (laughs) i don't think of this as walking away from a million dollars. i think of this as walking towards $20 or $50 million. and that's what we're doing. we're going towards the future. ♪ this bale of hay cannot be controlled. when a wildfire raged through elkhorn ranch, the sudden loss of pasture became a serious problem for a family business.
faced with horses that needed feeding and a texas drought that sent hay prices soaring, the owners had to act fast. thankfully, mary miller banks with chase for business. and with greater financial clarity and a relationship built for the unexpected, she could control her cash flow, and keep the ranch running. chase for business. so you can own it. chase for business. big day? ah, the usual. moved some new cars. hauled a bunch of steel. kept the supermarket shelves stocked. made sure everyone got their latest gadgets. what's up for the next shift? ah, nothing much. just keeping the lights on. (laugh) nice. doing the big things that move an economy. see you tomorrow, mac. see you tomorrow, sam. just another day at norfolk southern.
i'm brant myers, and we live in san luis obispo, california. i met brant in fifth grade. we played soccer together. we were in boy scouts together. we've been friends for the past 22 years. ooh! come on. yeah. brant and i love to do all sorts of things together. (whirring) dan and i have always been tinkerers. so it's really no big jump for us to go into business together. he handles one side of the business that i don't want to do. i do the things that he don't want to do. (clicking) between the two of us, we have one big brain, and we can get anything done that we put our mind to. well, thank you for your order. all right, dan. we just got another sale. let's go celebrate. yeah! (laughs) (dan) our product is... 3-way split! two of our favorite pastimes in one. when people first see our product, they don't know what to think, they don't know what to say. they just drool. (clink) bom. now we need a shark to take our product to the masses. ♪
my name is dan grimm, engineer, gaming nerd. i'm brant myers, card-carrying beer connoisseur. our product is the arkeg. and we're offering 33% of our business in exchange for $100,000. we had a house in college with a "kegerator" and an arcade game. first, we turned the refrigerator into a kegerator. then we fixed up this old arcade machine with parts laying around the house. we found ourselves staying in on weekends, saving a ton of money. it was paradise. i went and poured myself another beer, looked back, and saw these two massive appliances, and a lightbulb went on. well, what if, with my manufacturing expertise, and dan's superb electronics skills, we could create a product that would combine our two favorite pastimes? ladies and gentlemen... let me introduce to you what has been called
the greatest invention of all time... the arkeg! (laughs) ta-da! (laughter) drink... drink... and game. (lori laughs) oh, lord. drink n' game! it not only pours any beer you want, but it comes pre-loaded with some of the most popular classic arcade games. is it a fridge? it's a keg. it doesn't just pour beer. how about some wine for the chef of the house after a long day? (clink) (laughing) that's how you drink your wine, kevin--from a tap. wine's not your thing, what about some root beer for the kids and their friends? put one in your family room, in your game room, your man cave. who wants a drink? guys, you're gonna need a drink when you try to sell these. i'm out. whoa! (brant) that was fast. that's a record. was it the beer, or was it the game that got you out? it was the combination thereof.
i just don't see it, guys. sorry. wait a minute. are you serious with this? absolutely. it's a great product. (robert) how much is it? $4,000 retail. (daymond) wow. (kevin) $4,000? have you sold any of them? absolutely. we've sold 20. (daymond) you come in here, guys. you're very, very rude. you haven't even offered me a beer. my apologies, daymond. wine, root beer, beer? can i pour that thing? let me see that. (brant) by all means. it's actually capitalizing on the current trend, which is pour your own beer. what do you got in wine? yeah, i'll have a wine. it's a 2010 estate pinot noir from central coast, california. oh, please, i'll have some. kevin, would like some, uh, night train or ripple? no, no, i'm doing some, uh, pinot, i think. (laughing) thank you very much. thank you very much. yes. i see this as-- as more of a gimmick. (clink) i don't see myself as being in the arkeg business. i'm out. (robert) i remember when games like this were very, very popular. so i bought, like, 12 games. i put 'em in my basement.
i thought my friends could go down there all the time and play. i gotta tell y, i haven't been in that room for eight years. you sold 20 units over 2 years. that's low. i'm out. guys, i think the beauty of games now is that they're small, you can play it on your tablet. this is just really a dinosaur. i just don't think it's anything for me. i'm out. mr. wonderful, what are you doing? i'm, uh, looking at it as a limited opportunity. not every business is destined to be huge. i prefer to invest in the ones that are. kevin, with your capital injection, we can get our price point low enough to get into big box stores. you're talking about a high-end refrigerator. "look, honey, we can get an arcade game with beer that comes out of it." we have a lot of wives that buy them for their husbands. it's a great-- listen, guys, i appreciate the wine, and it's actually quite good. thank you.
i'm gonna take a pass. i'm out. no counteroffer? all right, i'll get lori to give you $50,000. (laughs) lori, we'll take it. (laughter) gentlemen, cheers to arkeg. cheers. thank you, guys. good luck, guys. (brant) appreciate it. cheers. good luck. ♪ only on "shark tank" would you see that kind of insanity. (laughs) we're disappointed we didn't get a deal. but we get to do what we love. we're still making money, and... we own 100% of our business. ♪
next up is dan rothwell with a product that aims to make outdoor eating safer. ♪ hello. my name is dan rothwell, and my product is dura-tent. i am seeking $50,000 for a 30% equity stake in our company. spring is the official start of picnics and parties with family and friends in the great outdoors. but there is nothing more irritating than standing around swatting the flies away from the food, and rightfully so. (laughs) how many times have we seen the flies hovering around and getting on that dog poop and walking around? (buzzing) then that fly says... (mark laughs) "there's a party going on. i'm gonna go walk on that potato salad." (laughing) and it does. and it leaves behind little particulate of the disgust it just picked up along the way.
ew. poop potato salad, anybody? no, thank you. stop the madness. (laughter) let's take a look at a clip of a fly's day. (robert laughs) here's flies swarming around the garbage. now they stick their tongue out, and saliva goes down, and they mix it with your food, and they suck it up, and it's disgusting. flies leave behind parasites, larvae, salmonella, and even antibiotic-resistant e. coli. the same types of bacteria that hospitalize thousands of people across the u.s. each and every year, and unfortunately, some of these people die. is this what you want for your family and friends, sharks? no! exactly not. our solution to this problem is the dura-tent. (sharks laughing) as you can see, it's a full enclosure. are we going camping with that food? we're going to the backyard parties and picnics.
it's a full enclosure, not just a little pop-up umbrella. a little velcro on the door. flip it up, get your food. look at how much food this protects. easy to clean, easy to set up. my customers love the product. with your help, we can not only make this a national success, but an international success. how many have you sold? 50,000 units. (robert) wow. wow. where do you sell them? how much do they sell for? it sells for $19.95-- on my picnic. my banquet--between, uh, $29.95 and $34.95. what's your cost? my cost is, uh, $4.65 on my picnic and $7.27 on my banquet. out of the 50,000, where are most of them sold? county fairs. this is a product that screams demonstration. that's the problem, right? or screams a media that gets into the, uh, awareness of people that they have the product available to them, so when they go into the store and they see it, so... i've seen little mesh screens... yes. that you put over individual bowls or plates. yep.
why is this better? we are a full enclosure. it is not going to blow away on you. you have a large banquet, you're having a lot of food. so, dan, how did you come up with this? what's your background? i'm an engineer-- electrical engineer. uh, pulse power, power electronics. i went fusion research to excimer laser technology, and i sold my stock and stepped away. my goal was to take a product from inception to the consumer market. i had some technology ideas. we're sitting around my brother-in-law's pool, and mom is doing this, and we came up with some sketches. so you go from high-tech laser blasting aliens to fly tents? exactly. i love it. (laughs) but the numbers don't add up. if you've got 300% margins and you're doing $140,000 in business, um... right? yes. then how--why don't you have just a huge bottom line? i'm--so last year, the majority of my business was wholesale more than it was retail. gotcha. okay, what's the breakdown? 7,800 in year 1... oh. 10,000 in year 2,
13,000, uh, in year 3, and i'm on track to, uh, be around 13,000 this year. the numbers didn't add up to me. you said that you sold 50,000 of these in the last three years. but then you said you sold 13,000... 50,000-- 13,000 and 7,800. is that what you said? first year was, uh, 7,800, 10,000, 13,000, and through today. my apologies. so this year, you gonna do 19,000? pardon? it's still not adding up. yeah, 'cause this year, you would have to do 19,000 units. 'cause you came up to 41,000 units. my apology--my--my-- no, $31,00you came up to $31,000. so, so, technically, what have you sold? an engineer that comes on national tv and can't do their math-- (kevin) oh... that's not good. (laughs) (robert) so what-- my--my--my--that was-- that was-- so what's the math, dan? it--it--no. my apology. 35,000 heading towards 40,000. dan, do you have a patent on this? yes, we actually have, uh, three patents in total. once we-- what is the chance we could go to one of the largest companies that makes tent supplies
and say, "listen, license my fly tent. let's get in bed together"? the right deal, kevin, without a doubt, but i'd like to know the marketing plan behind that. well, i mean-- so, tell us specifically how you would use the $50,000 and how you think that'll accelerate your sales? mark, the $50,000 is well thought-out. i did the national hardware show. i had two key reps into qvc. both of 'em sent me contracts. all roads lead to lori. so, $50,000 plus 50,000 that i have of inventory, plus getting that pipeline ready for our qvc. we gotta keep pushing this thing until the big buyer box stores pull it because the consumer wants it. well, dan, let's--let's hear what lori has to say. so reps want to rep product. yes. so of course they're going to anything that piques their interest, because they don't have anything to lose. they can try, get it on, see if it works. yes. yes. you know, it's not their money. they didn't invest in the product. i agree. dan, i-i--you know, i'm just, uh, i'm just a simple croatian guy. my mother would have died
if i put my food under a tent outside. so i'm just not buying into the concept of... okay. "let's have a picnic and put our food in the tent." yeah. (laughs) i mean, i can't get there. i'm out. thank you for your consideration... very much, robert. i think it's an ingenious product. thank you. and i think it's well engineered. you've really thought it out and done some-- some great things with it. i just can't really add value to it. so with that, i'm out. thank you, mark. i believe you're gonna sell a bunch of fly tents. i really do. thank you. thank you, kevin. uh, well, don't thank me yet. well-- you haven't heard my offer. ♪
let's hide behind the chainsaws. smart. yeah. ok. if you're in a horror movie, you make poor decisions. it's what you do. this was a good idea. shhhh. be quiet. i'm being quiet. you're breathing on me! if you want to save fifteen percent or more on car insurance, you switch to geico. it's what you do. head for the cemetery!
two sharks are out, but kevin o'leary seems interested. i believe you're gonna sell a bunch of fly tents. i really do. thank you. thank you, kevin. uh, well, don't thank me yet. you haven't heard my offer. (laughs) i'll give you the $50,000, but i don't want any equity in your company at all. what i want is a way to get my money back if you're successful. every time you sell one of the smaller ones, i want $2, and every time you sell one of the big ones, i want $2.50. if you just stay on track, i'll get my money back in two years.
which i don't-- is, you know, not unreasonable. then i start to collect profits in years three and four. assuming you don't get eaten by a fly. that's... (laughs) i appreciate that offer, kevin, but what i'm really looking for is somebody who has the marketing vision that can help get-- that gets that-- well, i have that, too. that's my partner lori. she's gonna give you that. (laughter) i may consider going in with big shark daddy here. ooh... but--but-- big shark daddy? i have some more questions. (laughing) did you like the structure of my deal, lori? no. really? because--no. i don't. it's a lot of money that you're asking off of each one. how do we get our money back? how do we get our money back? well, let me ask a couple of questions. why'd you name it dura-tent? shouldn't it be, like, "fly be gone," or "no more fly," or... dura-tent. dura platter. dura picnic items. i worked with a marketing company. the person said, "your name does not need "to describe the product as much as the tagline needs to describe it." "dura-tent," now you can take the "tent" away and you can add on accessories.
(robert) but it's not a tent. if that's on a shelf, i could see people walking right past it... exactly. and not having any idea what it was, because "dura-tent" doesn't mean anything about covering food... and-- from flies. usually i feel that, you know, i can tell instantly if it's a hero or a zero. my problem here is, i'm not sure there's this huge demand for it. and so actually, for that reason, i'm out. (kevin) whoa, dan. and i'm the only shark up here that speaks fly. daymond... i don't know if you said... well, dan, um, i was on the fence. so whether i like to admit it or not, i probably learn more from the sharks up here that are experts in their field. i'm gonna have to learn from lori's decision here. i'm out. and, lori, there's no way to come back in? (kevin) okay. i'm sorry. just to be clear, dan, you are turning down my offer? i don't think he turned it down just yet. at this level, you know... obviously you'd hate to turn down an offer,
but money isn't my problem right now. if we were to land a big box store-- you did--you didn't come here for money? i... my goal was to take-- to--to take a product from inception into the marketplace. but that requires money. exactly. but it also requires the marketing side of this. but for you to give me $50,000 and say, "just pay me back," that doesn't get me to the next level. ooh, kevin, he's saying there's smart money, and there's dumb money, and you're dumb money. i want to save lives. i want to save children. i want to kill flies. i am going to make it more interesting for you, dan, and here's my new offer-- i'm giving you nothing. however, i will buy a small tent from you at the full retail price to help you, but my offer is off the table. i'm out. you just got $20 without a perpetual license. that's good. (daymond) good luck, man. thank you very much. thank you.
i'm the only shark that believed in you. ♪ no deal is better than a bad deal. that's very true, mark. he turned down a very good deal. he was very smart to turn down your deal. no, he wasn't. that was a horrible deal. no, he wasn't. ♪ last season on "shark tank"... what year in school--you said you're sophomores still, or-- we're about to be juniors. you're about to be juniors. at the university of oregon. and i'm gonna make you rich. we watched erika welsh and keeley tillotson strike a deal with barbara corcoran for their wild squirrel nut butter. let's see what they're up to now. (ship horn blows) (chitters) yes, we'll have 500 jars to you next week. thanks for your call. the biggest thing we learned from the sharks was that we couldn't do it all. we couldn't be full-time college students while running our business. so after the show, we decided that we were going to put our college careers on hold to pursue wild squirrel full-time. it's the best decision we've ever made. this is, like, everybody's favorite. yeah, honey pretzel, the chocolate sunflower seed.
before "shark tank," we had $16,000 in revenue, and since "shark tank," in less than a year we've sold over $350,000 worth of peanut butter. we have projected sales of $1.2 million in the next 12 months. oh, look, keeley! look, look, look! oh, my gosh! look at this display! oh, my gosh, it looks amazing! it is so gratifying to walk into a store and see our peanut butter on store shelves. the "shark tank" experience has completely changed our lives. who would have thought that two girls from oregon would have dropped out of college to run a peanut butter company? all of our hard work has finally paid off. ♪
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my name's megan gage, and i live just outside of denver, colorado, with my family, and they're everything to me. whee! (laughs) my son christian is 3. he's a boy. he likes dirt and trucks and tools, but he always looks handsome. (laughs) look at mommy! (giggles) moms want the best for their kids, and a lot of the time, the things on the market are not the best, and i wanted to create something that could really give my son some style. hi. how are you? here's 40 more. okay. i grew up in a really small town. my dad was a coal miner, and most people in the town were. it taught the value of hard work, and i think that that was something that i'll always carry with me. we can get that right out to you guys. i entered into an industry where i knew nothing about nothing. it feels really impossible to get noticed. my family worked hard for the money we put in this. getting an investment from the sharks would give me that partner i need so that i could sleep better at night, knowing that things are gonna be okay and that i didn't lose our money. ♪
(mark) oh-ho! aw. (gasps) oh... (lori laughs) hi, guys. my name is megan gage, and i'm the creator of hot tot children's hair care. i'm seeking a $50,000 investment in exchange for a 15% equity stake in my business. hot tot produces professional hair products for babies and children without the use of harsh or harmful chemicals. moms take great pride in having our little ones look adorable from head to toe. i have always liked for christian to have stylish hair. (spritzing) this is just water, guys. (robert laughs) i gotta get it going in the right direction. (laughs) but the fruity-scented children's lines with cartoonish-looking labels didn't appeal to me at all. traditional formulas leave a residue in his hair that was pretty difficult to remove and also didn't smell very good or work very well. (sharks laughing) punk it up. that's right! (laughter) you may be surprised to know that many trusted children's brands commonly use a long list of unsafe ingredients
in their formulas-- things like formaldehyde which are not even required to be listed on a label. i'm a mom with a conscience who won't cut corners when it comes to kiddos. you're doing so good. and my products can easily be assimilated into any upscale salon throughout the world. i just need your help in getting them on the shelves. please help me in turning cool kids across the world into hot tots. is that your son? it is, yes. this is my little guy. (daymond) adorable. (robert) what's his name? his name is christian. can you wave at everybody? great job, christian. how old is he? (lori) he's so cute. he just turned 3. (robert) oh! oh! (mark) megan, tell us about the business. okay, absolutely. um, we've been in business for about 15 months. we started in children's boutiques. that was originally my goal for the line. um, but we've learned that salons are really our bread and butter. and christian's gotta go, guys. i'm so sorry. bye, christian. see you, christian. later, chris. can you wave good-bye to the sharks? (robert) see ya. oh! so, megan, what-- what were your sales in the last 15 months? we've made about $20,000.
um, but in the past 12 days, i've got $7,000 in purchase orders. what happened in the last seven days? i met a very nice lady, and she gave me some contacts with some of the children's flash sites, where they'll do like a 24-hour promotion on your brand. and everyone i reached out to, um, was interested. this was never my dream. if you would have asked me four years ago, i would have said this was a crazy idea. may still be. it's--it's not, uncle kevin. uncle kevin! (laughs) please, call me "mr. wonderful." absolutely. so this is a styling aid. it's good for boys and girls, for people who are concerned about using a hair product on their baby. oh, it smells good. my professional background is in clinical social work. i have a master's degree in social work. (robert) so you're not a hair stylist? i'm not. the packaging, to me, looks like something that would be for an adult. i mean, it's very pretty, but it doesn't say to me "children." i think it needs to say that it's for children and that it's healthier, that it has those safer elements to it.
are you opposed to changing your packaging? um, i don't think i would be interested in changing it. here's why. you know, we're not the only children's line on the market. you're not. i know that. right. but the other ones all had, like, cartoon-looking animals and children, and they smelled like fruit. are they safer, too? do they-- no. they're not? so there is a distinct difference... absolutely. between yours and theirs? (mark) megan, i have a 3-year-old son. i know you do. jake. and jakers has got eczema. yep. and who knows what other allergies he has? so what type of allergy testing have you done with these products? absolutely. my manufacturer does a lot of, um, like, stability testing and micro testing and things like that. (kevin) but do you have the market size for children's products like this, including all your competitors? 'cause that's what i'm struggling with. how big a market is this? well, there are 280,000 salons in america alone. the global baby care market does $48 billion a year and is expected to grow by 5% in the next 5 years. she's killing you, kevin!
way to take it to him, megan. that's not the hair. (mark laughs) you're talking about all the products-- that's okay. what about the baby hair products? well, there's not a lot of numbers on that, 'cause it's new. i mean, it's just kind of getting started. but with $20,000 in sales, why do you feel it could be something huge? uh, because people get excited about it. they say, "hey, that's a good idea. why didn't i think of that?" i've had two calls in the past two weeks from distributors in dubai. in dubai? (lori) in dubai. it's amazing. we've been featured by over a hundred different media sources, from, you know, mom blogs to beauty blogs to magazines. you know, i-- so why haven't you sold more, though? i mean, so you see--see why we're seeing a disconnect here? something's not adding up. i tell you, all the work you've done, the way you present yourself, your vision for the product-- that's all on the good side. where i really have a problem is $20,000. it's speaking to me, saying, "nobody cares." you know, i did my first trade show, and i sat in dallas, and they said, "prepare, "because they're gonna eat you for breakfast. they are not gonna be receptive to this."
and i thought, okay. but, like, i drug my family across the country, and i'm not gonna make a dime? and we were there, and we sold $1,000 in 2 days. which is nothing to you guys. i know that. um, but it was something to me. i love every $1,000 equally. have those folks reordered? they have. my average wholesale markup is 142%, and my average retail markup is 284%. um, as we make more product... great markup. great markup. we can get better margins. i have one-- (lori) that's a great markup. get better margins that that? we can. absolutely. yeah. that's... um, because my costs to make these have come down considerably, um, since we got started, because i'm learning things. so, megan, you've created maybe a new category. but $20,000 of sales in the hair care product industry is absolutely nothing. it's not even a rounding error. it's mist. i can't get over the hurdle of whether this is a business or not. i just don't know, and neither do you. so for that reason, i'm out. thank you, kevin. but i do know it's a business.
i just wanted to clarify that. i took a lot of heat in the beginning because people would say, "you're not a hair stylist. you're a social worker." and then i had the epiphany that these products are not for hair stylists. moms are gonna be the ones to buy these products. and when it's important, moms will listen. you know, i didn't do so well in chemistry in college. i would be honest, but when i learned about the toxins in children's products and their effects on a growing body, i learned-- moms can figure this out. then don't--don't you think we have to take it further and actually test and label that we've tested for these things? because-- absolutely, but those kind of studies are very expensive. h-have you priced them out to know how much? i know an optical test costs about $10,000. and if you look at my labeling, we do not use the term "tear-free." i cannot afford to use that term right now. i-i think it needs to be branded a little bit more towards children. um... sure. my heart is with you, but my gut right now is, i feel there's a lot of work to be done. sure. and for that reason, i'm out.
(mark) megan, i'll make it simple. i like it. and obviously, i have a personal connection. i think $50,000 is not enough. and for me, the testing is the most important, because if i can invest in a product that makes my kid's life a little bit better and opens a new market and has a chance to be successful, that's a no-brainer. so i want to make you an offer. i want to offer you $75,000 for 40% of the company. you know, we'll help you get out there into salons. we'll help you get into the kids' market. sure. so if that's something you'd be interested in, i'd like to partner with you. oh, my goodness, mark. you know, i-- out of respect for everybody else, i'd like to hear what anyone else has to say. no disrespect. no disrespect taken. (robert) wow, what a great answer. megan, i'm sitting here and--and i'm thinking, is it brilliant? have you created a brand-new category in hair salons? or... is it gonna be a really, really tough road?
i don't know. i think mark's made you a fantastic offer. frankly, better than i-- i would have made. uh... i'm out. so, a friend of mine is paul mitchell. mm-hmm. but i have to be honest. i think, uh, cuban is ready to take the ride with you all the way. i wouldn't be of any help to you if that one person i know says, "beat it," all right? so i guess i'm out. okay. mark, i would love to work with you. (kevin) well, wait a sec. wait a sec. wait--i was-- there's no waiting. wait a second. that's it. shake her hand. thank you, mark. wow. i'm so excited. thanks, megan. thank you guys so much. i really appreciate it. fantastic presentation. (daymond) good luck. good luck. thank you, guys. (robert) fantastic. (kevin) that's interesting. i mean, either she's got a category killer, or there isn't a category. that's okay. my kids will use all the lotion that's left then. (laughter) this means everything. it means that i can make a product... (voice breaking) and it's not gonna take the last 10 cents out of my bank account.
like, it's amazing. (crying) (whispers) it's amazing. (man) the sharks are back. they're looking for the best products and businesses america has to offer. the only thing that really matters--what is it? money. hopeful entrepreneurs come to the shark tank seeking an investment to start, grow, or save their businesses. (man) we're not asking for your money for a handout. we just need a little bit of work. if the sharks hear a great idea, they're ready to invest using their own money... got in over 400 requests for franchise information. love it, baby! all right, baby. let's go! and fight each other for a piece of the action. i'm gonna make an offer. okay, wait. before you make an offer... wait. let me make an offer. but first the entrepreneurs must convince a shark to invest the full amount they're asking for, or they'll walk away with nothing. we're gonna project $4.8 million in 2 years.