Dog Threads is a company from Minneapolis, MN, that is almost exactly what you imagine when you hear the words "dog threads", a "fashion" company making clothes for dogs. Plus, you know, matching clothes for their human owners. So, if dressing up your dog and then dressing yourself up to match is your thing, Dog Threads is there for you!
Supposedly Dog Threads have been worn by "influencers" on social media with their famous pets. Because... welcome to 2020 where that's a thing!
According to the husband and wife entrepreneurs behind the company, 80% of their sales are direct to consumer through their own website while the rest is retail. 75% of their business is in dog clothes which leaves 25% of the business being human clothes to match. "Most" of Dog Threads direct sales have some matching human element included as part of the sale.
How does someone come up with something like this? Well... back in 2014, the entrepreneurs had a dog that they loved dressing up but, unfortunately, they couldn't find the clothes that matched his personality. So, naturally, they were inspired to create them. It helped that the wife had gone to school for fashion design and had been a women's clothes designer to begin with.
Since 2016, the Dog Threads has sold $465,000 in dog "clothes" and matching human fashion because... welcome to 2020 where that's a thing! Last year, the company had $196,000 in sales and in the current year, by the time the episode was filmed, had $75,000 in sales. The entrepreneurs project reaching $240,000 in sales by the end of their year.
In terms of cost, it looks like they have about 20-25% margins. A dog shirt costs $10.75 to manufacture and sells for $40. A human shirt costs $21.50 and sells for $68.
In terms of investment, the entrepreneurs have put a grand total of $500 into the business. With that, they made the first twenty-five items and then re-invested their profits to make the next fifty, slowly scaling up as the business required it.
The entrepreneurs claimed that there is a bit of competition in the pet apparel space in that another brand makes pajamas that match both pet and owner but, according to them, no other brand does the everyday clothes that they make.
Making A Deal
Mark asks the entrepreneurs what they would think about engaging in licensing because he believes fans of the Dallas Mavericks would be into the idea. Naturally, the entrepreneurs are also into the idea. But the conversation spurs Lori to opine that Mark is their perfect partner and then drop out.
But Mark's not one-hundred percent sold. He does want to know how Dog Threads can increase their margins. The entrepreneurs state that they want to move their manufacturing (somewhere). When asked by Mark whether they'd ever go as simple as just t-shirts, the entrepreneurs say that they would.
Robert says that he can't get his head around the concept and is out.
Mark goes ahead and makes an offer of $250,000 in exchange for 30% equity, or a little less than double what was originally on offer when they first came in. Mark begins to say that he'll connect the entrepreneurs to the Mavericks licensing person and the NBA when Kevin interrupts and asks if they will hear his offer. Mark shoots back that all of Kevin's offers are "ridiculous". Still, Kevin tries to get something out.
But the entrepreneurs aren't really listening. Instead, they counter Mark at 25% so they can maintain their own equity. At first he doesn't seem to go for it but, after they guilt trip him by stating that they're on the tank rather than celebrating the first birthday of their child, he agrees.
The entrepreneurs came into the tank valuing Dog Threads at just shy of $1,500,000 and Mark's deal bit that remainder off the top, leaving the company valued at an even $1,000,000 instead. But, depending upon the business that the Mavericks and a potential deal with the NBA brings in, that value should be more than made up.
Not bad for a company that makes clothes for dogs.