Element Bars is an energy bar manufacturer out of Chicago, IL. Element Bars makes "custom" bars where customers can select from a variety of whole grain ingredients through the website ordering system. Addtionally, customers can personalize thelabels, select which fruit, nuts, and "boost" that can be added. Most interestingly, the FDA nutitrition information updates on the fly as users tweak their bar contents.
Element bars ships about 1,000 bars a week. Though only a year and a half old at the time of filming, Element bars has shipped over 30,000 bars with just 20,000 being within the current year for the company and the entrepreneur predicts shipping 44,000 by the end of the year. In dollar terms, this translates into $55,000 in sales thus far in the year. Element Bars made $12,000 in sales in the previous year.
The entrepreneur does not yet draw a salary from the company but has invested $50,000 into the business.
Kevin Harrington decides to make a deal with Element Bars. In exchange for $150,000, Kevin receives a 30% equity stake in the business and a license to resell the bars. From any revenue Kevin makes on this license, the entrepreneur will receieve a 4% royalty.
The ongoing license and royalty is an interesting structure for a deal like this but it did come at a hefty price. By taking double the amount of equity originally on offer, Kevin essentially bit the value of the company in half to just $500,000. On the other side, however, the entrepreneur did just acquire Kevin Harrington as a salesman.