Bite Toothpaste Bits
Bite Toothpaste Bits claims to be a re-invention of a product that hasn't seen much change in one hundred years. In fact, according to the entrepreneurs, the first toothpaste tube was actually invested in 1886 and hasn't changed much since. In the meantime, she claims, one billion toothpaste tubes end up in landfills every year. Also, apparently, we also swallow about 1.4 gallons of toothpaste over an average lifetime.
To combat these evils of big toothpaste, these entrepreneurs have created Bite Toothpaste Bits that come in single serving sizes sold in recyclable glass jars. All one need do is pop a "bit" into their mouth, bite down, and then start brushing with a wet toothbrush. This then turns into toothpaste and does the job without all the attendent garbage (though it remains unclear how this helps with swallowing toothpaste...)
Bite Toothpaste Bits are flavored with natural peppermint oils to make them extra tasty.
Guest shark Katrina Lake speaks up and let's the entrepreneurs know that she likes the idea and has had simmilar concerns about toothpaste but stopped using other "bit" type toothpaste after a warning from her dentist that they don't include flouride.
Pitched by an entrepreneurial team of a girlfriend and a boyfriend, one of them made friends with a chemist to help formulate the bits. And, in fact to Katrina's point, they are currently developing a flouride line that they will seek the American Dental Association's approval for. Once this launches, Bite Toothpaste Bits will then be the only flourinated tablet type toothpaste in the United States.
The entrepreneurs admit that there are several competitors to their product but that Bite Toothpaste Bits is the only one that is 100% palm oil free and that comes in a recyclable bottle.
The product has currently been on the market for ten months and the entrepreneurs predict making $1,300,000 by the end of the year. They also hand built their website (which was featured on a prominenent women's site) and have received 2,000,000 visitors. Thus far, Bite Toothpaste Bits has no outside investors and carries no debt.
There are currently two sizes that the "bits" are sold in, one ounce bottles that cost $3.15 to produce and ship that retail for $12 and four ounce bottles that retail for $30. A one ounce bottle is intended to last a month whereas a four ounce bottle is intended for three months with a reoccuring subscription model. All of the company's sales are direct to consumer and they have 10,000 subscribers.
Kevin voices a concern about how quickly popular things can be ripped off. But the entrepreneurs point to their quick innovation as a way to keep competitors at bay. For instance, the original formulation used palm oil and their customers objected to it over ecological concerns so they reformulated in just four months. Sales doubled after they did this.
When asked about customer acquisition costs, the entrepreneurs state that each customer costs them $4.50 to acquire. Kevin then worries that there's nothing proprietary about their product and that acquisition costs will go up as margins fall. But the entrepreneurs aren't fretting, stating that they believe consumers are both discerning and loyal. But Kevin insists that toothpaste is as competitive as any market can be.
Katrina says she respects the entrepreneurs, especially their bootstrapping of the business, but that she thinks the market is too croweded and wishes they already had a flourinated version. So she drops out.
Robert's main concern seems to be about how much of the company he would get. The entrepreneurs say that they really do want a shark but Robert says there's no way he would do it for just 5% and is out.
Mr. Wonderful, despite his expressed concerns, goes ahead and makes an offer anyway: $325,000 in exchange for 20% equity. He justifies asking for four times what the entrepreneurs had offered by saying that he sees serious risks to the margins and customer acquisition costs. He says he thinks just just appearing on Shark Tank will help but that it will also invite a lot of knockoffs.
Lori compliments the entrepreneurs by saying that the most successful have the strongest principles and that she respects them but that she has to "go with [her] gut" and decides to bow out.
Mark, on the otherhand, says that he likes going into a stodgy market and turning it upside down. He asks whether the entrepreneurs have sold the product through Amazon, to which they say they tried but that they didn't find it to be a good fit and subsequently yanked it. Mark then says that that's where a lot of knockoffs can take root and suggests that they return and the founders agree that they will. Mark then makes his offer: $325,000 for a 15% equity stake in the business.
The entrepreneurs respond with a counter of 5% normal equity plus another 2% in advisory shares which leaves Mark almost speechless. He says that if they want his help, they're going to have to offer a hell of a lot more than 7% to get it done.
Kevin asks the entrepreneurs what they see as the maximum amount of equity that they would be will to give up but they say that they're not really willing to move from the 7% they offered Mark. And, because of this, they decline Mark's offer.
Kevin then, jokingly, because he was the last shark still in the deal, to 25% from his original 20% offer but the entrepreneurs obviously say no to this and leave the tank without any sharks on their side.
This seems like one of those pitches where the entrepreneurs are on the tank as an advertisement for their product and are hoping to benefit from the Shark Tank bump but never had any real intention to make a deal. And this seems to be born out by the numbers.
Channeling Mr. Wonderful for a moment here, a company that has only earned $1,300,000 in what's probably gross sales, a $6,500,000 is crazy. And, as anyone who's ever watched the show before knows, 5% is not a number that gets any shark excited. And having no flexibility to go above 7% is insane. Any company that wanted a deal should at least have had the flexibility to go to 10% with the possibility of another 2% in advisory shares, especially one that, according to the entrepreneurs themselves, has no outside investors. No outside investors means that the equity distribution is shared among the entrepreneurs themselves and would leave them with maximum flexibility in deciding how much of the company to give away.
The verdict is still out as far as how much a shark may actually help a company post-deal but, one would hope, it actually might or, at least, that the investment was needed. But to be unwilling to negotiate for either makes your Stats Shark at least a little bit suspicious.