Little Elf Gift Wrap Cutter
Little Elf Gift Wrap Cutter is a product by a company from West Boston, MA, founded by an enthusiastic twenty-one year-old entrepreneur. The Little Elf Gift Wrap Cutter is a device the entrepreneur came up with because he found scissors left wrapping paper ripped, torn, and ruined. So he invented this little device which wraps around a roll and cuts the paper as one slides it up.
Both Lori and Barbara tried out the Little Elf Gift Wrap Cutter and both said they found it extremely easy to use. And, it doesn't have to always cut a full sheet a paper, the entrepreneur demonstrated how it could be used to cut half a sheet as well.
The Little Elf Gift Wrap Cutter is sold both on Amazon and direct to consumer through the company website. On Amazon, the cutter is sold in packs of two for $13.99 per unit while on the company website individual cutters can be purchased for "between" $5.99 and $7.49. The cutter costs $2.09 per unit to manufacture and the average sale is approximately $15.
The entrepreneur told the sharks that he has always struggled with reading, writing, and composition, often frustrating his teachers, but that he has always enjoyed creating things. The Little Elf Gift Wrap Cutter was created while the entrepreneur was still in high school. When the episode aired, the entrepreneur was then a junior at Stanford studying product design.
The Little Elf Gift Wrap Cutter has grossed $250,000 since it began selling. Currently, the entrepreneur has an exclusive licensing agreement with the "world's largest gift wrapping company" for the next two to four years, giving them all rights to retail sales. In return, Little Elf Gift Wrap Cutter receives between 10% and 13% of the sale. However, Little Elf Gift Wrap Cutter maintains the rights to sell online and on the home shopping channels.
The entrepreneur is looking for a shark to help formulate an ad buying strategy to drive online sales.
Making A Deal
Lori comes out swinging, saying right away that she believes the entrepreneur would make a great partner and that she believes she could blow the cutter up on QVC. She drops a $150,000 offer in exchange for 30% equity into his lap.
But, not to be outdone, Kevin (admitting that he's a fellow dyslexic) makes his own offer of $150,000 for 10% equity, plus the usual Mr. Wonderful royalty of $1 per unit until earning $450,000. He also promises to blow up the sales by driving customers to Amazon and to the company website.
Lori says she'll match Kevin but even lower, asking only $0.75 per unit as a royalty. Kevin responds by dropping his to just $0.50 and a bidding war for Little Elf Gift Wrap Cutter is officially on. Lori goes even lower to $0.45 per unit. Kevin and Lori trade blows until Lori is as low as $0.35 per unit on her royalty.
It's the entrepreneur that actually puts a stop to all this nonsense by stating that his preference is for an equity partner. Lori goes right back to her $150,000 for 30% offer which Kevin then undercuts by making his deal for 25%. Lori then drops to 20%.
Robert perhaps realizing that he's just not in the running, says that he thinks the entrepreneur is impressive and that he likes him quite a lot but that the product just isn't in his space and drops out. Barbara says she doesn't think the entrepreneur needs a shark at all and, likewise, drops out. Mark doesn't drop out right away like the others and, instead, asks where the entrepreneur wants to go with this.
Kevin, not wasting a moment, cites his investment in Lovepop, and says that it's been an "unmitigated hit". However, the entrepreneur proves that he's not so easily bowled over and say that he wants to make sure it's seen as a cool item that people can find and buy online. Mark says that if the entrepreneur wants to see his product on TV then it's not within his wheelhouse and is out.
The entrepreneur makes a brave try to get Kevin and Lori in on the deal together but neither is willing. So, in the end, he sides with Lori and, presumably, her 20% equity deal. In the end, by allowing Mr. Wonderful and Lori to bid against one another, this entrepreneur saw a bite of just $250,000 off the original value of his company.