SmartGurlz
SmartGurlz is a company from Bethesda, MD, that has created a kind of product to engage girls and inspire them to get into coding. The entrepreneurs see a real need for more engineers and believe that girls will be the ones to fill the gap.
To entice girls into the field, SmartGurlz spent a year creating a toy robot on a self-balancing hoverboard that looks like Barbie and can be driven by a smartphone or tablet. It can also be programmed with additional actions that teach users how to code.
Coding is done with drag-and-drop parameterized pre-defined functions. However, the core of the functions and their use can be edited in Javascript-like code that is actually compiled to drive the robots as the user becomes more advanced.
SmartGurlz has been sold for less than six months and has grossed $250,000 in sales. Each toy sells for $79.99 and costs $18 per item landed.
Previously, money has been raised by attending the World's Toy Fair and raising money from distributors. The entrepreneur believes that the $4,000,000 valuation is worth it based on the self-balancing technique alone, which has a provisional patent, but also because it is the only product in the robotics section aimed at girls.
This deal aired on Episode 9.10.
Making A Deal
Daymond was interest in SmartGurlz but specifically saw it as a licensing play rather than trying to bring the product to market directly and competing against other toy companies. Once receiving agreement from the entrepreneur that they would be open to a licensing deal, he offered the requested $200,000 for 25% instead of the original 5%.
This represented a substantial bite to the value, taking $3,200,000 and reducing the value of the company to just $800,000.
Analysis
Dayond really did take a substantial bite off the original value of the company. However, the $4,000,000 was a very overly optimistic value given the $250,000 in lifetime sales. Additionally, given Daymond's prowess with licensing, there is no doubt that this useful and needed product will make it onto shelves with the backing necessary to succeed. So while valuing the company at just $800,000 seems a little cruel, it may actually reflect reality better and will certainly increase once sales begin.