CertifiKID is a family activity discount site based in Potomac, MD, and begun by a husband and wife pair of entrepreneurs. The site offers discounts on "adventurs" and other kid-centric activities. Mark points out early in the pitch that it sounds a lot like Groupon but for kids activities.
Each day, CertifiKID mails out daily deals to its email lists in Washington DC, Baltimore, Los Angeles, Chicago, Philidelphia, and Atlanta. However, the service also maintains a website where these same deals can be searched out and redeemed. Currently, Washington DC is the company's biggest market.
The great thing about this business? There is absolutely no cost to CertifiKID to acquire these deals. Instead, the business takes a percentage of every sale the came from one of their customers. By the end of the year, the entrepreneurs project their business will gross $5,000,000 and net $700,000 in profit. Since 2010, CertifiKID has made $30,000,000 in sales. They claim the company has been profitable since the third month.
The entrepreneurs claim to have one million subscribers to their daily newsletter with a 10% open rate and a 14% click-through.
When asked why they are looking to raise money, the entrepreneurs replyt hat the investment money would be used for sales and marketing, adding staff to their marketing department, and increasing their newsletter subscriber base.
This deal aired on Episode 10.18.
Making A Deal
Mark, as is often his style, ducks out of the deal early, stating that he sees too many hurdles to the next level of growth.
Daymond jumps in with quite the shark offer: $600,000 in exchange for 17.5% equity. Barbara also looks to make a deal, stating that she'd like to turn it into a franchise and, on the condition they do that, she would go for $600,000 in exchange for 25%.
Kevin states that he'd be interested in learning more about what data they collect and whether it would be a good fit for his Something Wonderful platform. He then goes on to offer $600,000 for 20% but adds the condition that, should they exit, Kevin would see $1,800,000 from whatever sale; from them if the sale price is to low, or paid out from their profits if high enough.
Daymond reminds everyone of what his offer was but no one seems terribly interested. He soon goes out, seemingly peeved that Kevin seems to be sucking up most of the oxygen.
The entrepreneurs attempt to counter Kevin at 15% equity but Mr. Wonderful isn't interested. They then ask if he'd be willing to drop his contingency on the sale. Kevin responds that he'd lower his equity ask to 17.5% but that the contingency had to remain. There's some back and forth but, eventually, everyone agrees to $600,000 in exchange for 18% equity in CertifiKID. What's interesting, is that the value of the company dropped by more than half from $7,500,000 when they walked in to $3,157,895 . That's quite a heafty bite!