Modern Christmas Trees
Modern Christmas Trees is a company from Denver, CO, that has a new take on what a Christmas tree can be. Constructed from concentric rings so that it can store flat, Modern Christmas Trees are themed light shows that can be hung from the ceiling or from the side of the wall.
The original Modern Christmas Tree was designed and built by the entrepreneur's grandfather. The business was started in his honor after he was diagnosed with Alzheimers.
The big "tree" model retails for $799 per item an costs $232 to manufacture each one. The entrepreneur claims that in the current year they have made $380,800 in gross sales and that they have seen 70% growth each year since starting in 2014. The entrepreneur stated that their profit margin is near 50%.
In terms of sales, 80% of customers find their product through their own website while just 20% are sold through retail channels.
This deal aired on Episode 9.13.
Making A Deal
Barbara was having a big night after having already invested in The Original Comfy. But rather than just offer another straight equity deal, Barbara went for something more akin to what Mr. Wonderful might offer.
Not only did she want 18% in equity instead of just the ten the entrepreneurs originally pitched but she also wanted a $5 per unit royalty on every product until the original $100,000 was paid back. Even though this represented a bite of almost 50% off the original value or $444,444, the entrepreneur accepted.
The Stats Shark is not generally opposed to royalty deals if the company has the margin with which to absorb them. In this case, at least for the large "trees", the company has a profit of $567 per item which can easily afford the $5 royalty. However, the 18% in equity does seem particularly sharky, especially considering that she took 20% from The Original Comfy, a company that had no sales and no royalty as part of the deal.
For all intents and purposes, the entrepreneur is giving away 18% of their company for the privilege of an interest free loan. Whether this deal ends up being worth it depends entirely on what kind of additional sales Barbara can bring through new partnerships. But an $800 light show seems like kind of a tough sell, especially as it's pitched as a Christmas tree replacement.