Makeup Junkie Bags
Makeup Junkie Bags is a company that manufactures makeup travel bags in Houston, TX.
Founded by a woman who could never find just the right bag for traveling with, she created Makeup Junkie Bags to be that bag. It has several features that she had been looking for, including that it lie flat on a surface and was fully leak proof.
The entrepreneur claims that after having posted about her homemade bags on social, the idea went viral and she was contacted by a retailer to see if she could meet retail orders. Through several expansions, she self-taught herself how to grow the business. The Makeup Junkie Bag is now sold in 1,200 retail stores.
The Makeup Junkie Bag is manufactured in Houston, TX, in a factory that she started and employs enough seamstresses to manufacture 6,000 bags a month.
The bag comes in different sizes. The small size was not detailed but the medium and large sizes cost $6.75 and $7.50 a piece to manufacture. One of them sells for $24 at wholesale and retails for as much as $50. Wholesale sales represent as much as 90% of the business. The entrepreneur has also created a bag for men called "Man Junk", however no sales or cost information was shared with the sharks.
The entrepreneur claims that within the first twelve weeks of being on the market, she made $100,000 in gross sales. Within the eighteen months of the company's lifetime, the Makeup Junkie Bag has seen $1,150,000 in gross sales.
According to the entrepreneur, the company carries no debt.
This deal appeared in Episode 10.11.
Making a Deal
The entrepreneur, when asked why she was in the tank when she appeared to be extremely successful, stated that she was looking for an investor and a mentor. She also stated that she is currently limited to producing just 6,000 bags a month and would like help from someone with experience expanding production.
Barbara dropped out after explaining that she saw being cash poor as one of her main motivations to being successful and that she didn't want to deprive the entrepreneur of the experience. Guest shark Sara Blakely, likewise dropped out but not because she believed poverty was some great motivator. Instead, she stated that she did not want to dilute the entrepreneur's ownership stake in the business by taking a piece of it.
Mark dropped out of the deal because he stated that he didn't understand the business and therefore wouldn't make a good partner.
Lori stated that she was on the fence about making an offer but that the entrepreneur and her attitude changed her mind. She offered the requested $200,000 as a loan at 5% interest and a $1 royalty on every item into perpetuity.
Interestingly, Mr. Wonderful himself called out how shark-y the deal was and, himself, offered the same amount of money for a $1.5 per item royalty until paid back $750,000 with no additional interest and then the royalty would go away and he would keep only 3% equity in the business. He also stated that Lori has plenty of bag companies while he has none and, therefore, would have no conflict of interest and would be all the more dedicated to her business.
With royalty offers floating around, Sara returned to the deal and offered $200,000 for a $1 royalty that would go away when it was repaid. However, when questioned, Sara stated that she couldn't and wouldn't spend as much time as Lori probably would on the deal.
Because this deal involves loan interest beyond the simple royalty, it has been classified as a debt/royalty mix type of deal.
- What the fuck? Really?