Monti Kids is a box service company from Oakland, CA, that believes that kids can never start their formal education too soon. Seriously. The Monti Kids boxes are a learning curriculum designed to "fill the gap" between birth and a child's school years.
Parents can subscribe to the service before the child is even born, beginning what will no doubt be a life long pattern of planning their child's life for them, and receive a box every three months containing toys geared to the child's age and development. Each box will also contain instructional videos to validate the giving of more toys for the parents. In the end, parents get to feel good because they have given their children a "strong foundation for learning".
In perfect honesty, there appears to be nothing unique about the toys. They look like the typical learning blocks and shaped pegs into shaped hole type toys that most children will play with at some point in their childhood. However, slap the name "Montessori" on it and charge $297 every three months and suddenly they're a "strong foundation for learning" and not just a $10 toy your sister-in-law gave you.
The entrepreneur behind Monti Kids studied at Harvard and received a masters degree from the Harvard Graduate School of Education. She also taught in a Montessori pre-school and claims that 0-3 is the "most important time for learning."
The products Monti Kids offers are structured like a box subscription service in that parents pay a quarterly subscription fee and received whatever the entrepreneur decides to drop in a box and mail off that go-round. Each box sells for $297. This includes six toys that cost the company $120 per box to produce. The company offers eight "levels" that can get mailed out to subscribers ever three months between the child's birth (when, face it, they're not playing with fucking toys) until they are three years old.
Thus far, the company has offered subscriptions for 14 months and grossed $550,000. The entrepreneur claims that the company is seeing 20% month-over-month growth. However, the business is currently losing $95,000 a month after having been losing $20,000 a month as a result of hiring a new person and moving into an office. Thus far, the business has burned $900,000. However, the sharks mentioned that something seems wrong in these numbers as the entrepreneur stated that the business had raised $2,800,000 in funding but only had $200,000 left in the bank.
This deal appeared in Episode 10.12.
Making a Deal
Lori, being the sharp cookie that she is, called out the toys right away as being extremely familiar to the point of having already existed for a long time. The founder replied that the difference is in the explanation behind how to "play" with them that brings the value. Lori then stated that asking parents to pay $1,200 a year for the kinds of toys being offered with an explanation seems steep. Given that, she finds the valuation being put on the company being a bit steep given the dollar amount being asked for.
Daymond helped pop the bubble right out of the gate and stated that none of the sharks had much of anything for toys and yet still succeeded. He clearly didn't like the product or the explanation and dropped out.
Robert says that he doesn't like the burn and says that it's not at all appealing bit says that he'll keep listening because he likes the market though he warns that he thinks the entrepreneur lacks discipline. He offers $200,000 in exchange for 10% equity and a seat on the board to help impose some discipline.
Mr. Wonderful points out, rightly, that at Monti Kids' current burn rate, the business will be done in six weeks without a deal. Seeing this, he makes a very Mr. Wonderful offer for $200,000 in exchange for 2.5% equity and a $10 per unit royalty until earning back $200,00. The royalty would then drop to $2.50 per unit until another $600,000 is earned, at which point it would go away. Kevin refers to it as venture debt.
The entrepreneur counters Robert with 5% equity instead of the 10% offered. But Robert declines. She then turns to Kevin and asks whether he might consider more money and more equity in order to make the royalty go away but Kevin also declines. Finally, the entrepreneur asks if Robert would consider $200,000 for 5% common stock and 5% in advisory shares.
When Robert agrees, the entrepreneur asks if he'd be willing to work with Kevin but both sharks say no and Robert goes one step further and drops out entirely leaving the entrepreneur only with Kevin's offer that she accepts.
Strictly speaking, the deal resulted in Monti Kids leaving the tank with exactly the valuation the entrepreneur had come in with but the $10 per item royalty will certainly have an effect on their cash flow as that comes straight off the top of any sale.
- If it's not already clear that the Stats Shark is suspicious of this product and it's claim, let's make it really clear here. Children, it should go without saying, are learning machines. Despite catchy adages, the human animal is a learning adaptation machine. The idea that children need specific educational toys to progress is frankly, stupid. One could make the argument that children need to be prepared for the educational system they will be forced into for the next ten to twelve years but that's not what this offers. This purports to subscribe to the Montessori method which involves unstructured free-play, something children already excel at if left the fuck alone. But... parents like to feel as if they're doing something, anything to give their kids a leg up and so people can re-package classic toys with a video and charge an outrageous sum for it like this...