No Deal

Gallant



Gallant is a company from Philadelphia, PA, that wants to bring the miracle of stem cell treatments to the pet world. Inspired by the way that stem cell treatments helped heal his ailing back, the entrepreneur behind Gallant decided that it was time to bring the same type of treatments to dogs and cats.

Gallant provides a kit that is either shipped to a veterinarian or given to the vet by the customer that the doctor can use to harvest stem cells during an otherwise spay or neuter operation. The vet would then return the samples to the company which would then provide a storage service for these cells until such a time as they are needed to create a cure for a pet illness. The entrepreneur claims that such stem cell therapies can extend the life of a pet by up to 30%.

According to the entrepreneur, the company consists of two divisions: a research and therapy division dedicated to creating the cures to be used by an animal (though it was unclear whether this "division" had accomplished anything yet), and the kit/storage division that will earn yearly revenue by charging customers for the storage of the cells until they are used. The company will charge customers $95 a year for this service.

Currently, this is the only planned revenue stream for the company and even it was still three weeks away from launching at the time of filming. In terms of customer acquisition cost, the company estimates that it will be $275 per customer in marketing and an extra $100 per kit which is costs $275 to the customer, totaling $375 per customer, and, thus, losing $100 per sale.

According to the entrepreneur, Gallant holds four patents on the method for isolating and harvesting stem cells from the reproductive waste created after a spay or neutering procedure.

The entrepreneur stated that Gallant is currently burning $400,000 per month on research for stem cell therapies. Which, while concerning, is backed by a $10,000,000 investment round that has already been raised and that had valued the company at $25,000,000. However, when pushed by Mark about their burn rate and the need to raise more money, the entrepreneur admitted that it was already in the plan to raise an additional $25,000,000 in 2021.

First time guest shark, Anne Wojcicki, co-founder of 23andMe, stated that it was a good business to be in because, with pets, companies have more freedom to experiment on therapies than they otherwise would with human patients.

The entrepreneur behind Gallant had been a high school science teacher and, when he and his wife were both unemployed in 2009, started a dog watching/walking service that they called DogVacay. He claims that the company became worth $100,000,000 before it was merged with a competitor to become Rover, a company that is now worth $900,000,000.

This deal aired on Episode 11.08.

Making A Deal

Anne expressed concern about the revenues and customer acquisition costs, stating that they're losing money on every sale.[1] The entrepreneur responds that Gallant is "well capitalized" but both Mark and Anne object and press him on when the company intends to raise more capital.

Because of this discussion, Daymond drops out from the deal stating, "If Anne's nervous, then I'm out."

Anne says that she believes that the company should raise the price of the kit to $399 which would lose them some customers but still sell to the type of customer the company would really want. But the entrepreneur objects that, as a new business, they want to attract as many customers as possible and not limit them based on price.

Kevin drops in and makes two offers the entrepreneur can pick from. The first is $500,000 in exchange for 2% equity and 2% in stock options. The second is $500,000 for 1% equity plush a 10% royalty per kit sold.

Mark states that he believes in stem cell treatments as valid medical treatments and in what Gallant is trying to do but he also says that he doesn't think the company has yet to figure it out and, therefore, is out of the deal.

Anne jumps in and says that she believes that she and Lori combined could do a lot for the business and offers $500,000 in exchange for 8% equity to be divided equally among themselves. The entrepreneur responds that their equity ask would devalue the company too much and that it would be too large of a hit to the scientists and employees who have been granted options. He counters at 4%.

Lori counters at 5%, claiming to split the difference and the entrepreneur accepts even though this represents a significant $15,000,000 "down round" bitten from the value the company came into the tank with. Still, a deal with Anne Wojcicki might represent a significant strategic partnership.

Scroll chart to see it all!

Scroll chart to see it all!

Notes

  1. It is true that, in the short term, every sale is a loss until after the fourth year when both the marketing and kit costs could be recouped by the yearly fee. What is not mentioned is the yearly cost of storing the cells. One could assume that this could cost as little as $95 for the entire life of the pet (giving industrial medical freezing facilities). Given that, it would take five years to recoup the cost of acquiring a customer leaving an average of just five to seven years of profit making on the storage service. However, one should also presume that the therapy arm of the business is where the company intends to make real money if or when such therapies become available.


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This page was last edited on 9 December 2019, at 13:34.