Squid Socks is a company that wants to eliminate the scourge of lost socks and they've managed to do so by adding just a little bit of internal resistance that will stop a sock from being easily pulled off by little toddler hands. The Squid Sock is demonstrated directly to Lori who can easily pull off a normal sock but not so simply with the Squid Sock. In addition to this resistance to being pulled off, Squid Socks feature an anti-slip bottom.
The Squid Sock was inspired by the entrepreneur's honeymoon four and a half years before where a brother-in-law brought up how frustrated he was with children's socks. The couple behind Squid Socks then went home and brainstormed a solution to the problem.
Because nothing these days doesn't have one, Squid Socks has a utility patent pending and a trademark.
In order to demonstrate the product, the entrepreneurs are starting a program for retailers that will allow them to run a video in-store so parents can see the difference.
Squid Socks has sixteen months of sales but, unfortunately, only $40,000 to show for them because they had "significant" product issues that starved them of inventory. Squid Socks were originally sold only on their own site direct to consumer and the company made $20,000 in sales. But, when the second order of product came in the company was forced to reject it for quality reasons.
Today, Squid Socks has eighteen collections of socks. A package of Squid Socks cost $5.85 to manufacture and are sold at wholesale for $12 and at retail for $24.
Making A Deal
Kevin says that he likes the idea but wants to license it and, because they disagree on business model, he decides to exit.
Lori says that she likes everything about the product and the company but that it's not the right investment for her and that she's out.
Robert originally seemed like a tough nut to crack, stating earlier in the pitch that he doesn't even bother to put socks on his twins any more. But he states that he finds the entrepreneurs committed enough that, despite not being in the sock business but being in apparel with other companies, is interested enough to make an offer. Calling it a "flyer" on the product and the entrepreneurs themselves, Robert offers $125,000 for 40% in equity.
Daymond states that he, also, sees Squid Socks as a license play, an area where the company can best benefit from licensing the product to bigger manufacturers before those bigger companies can enter their niche and potentially dominate. He then offers $125,000 for 33%.
This entices Lori to want to come back into the deal if Daymond will partner with her but Daymond declines stating that this is his area. Robert then counters Daymond by offering $250,000 for 40% equity, which is the exact valuation the entrepreneurs have put on their company and double the cash but also double the equity originally offered.
The entrepreneurs then float 25% equity as their magic number. Daymond says that he's willing to go down to 33% but Robert says that he'll drop down to 30% which would actually give the company an increased value of $833,333 or $208,000 more than was originally valued. Showing that sometimes you should just ask even if it's ballsy given Robert's offer, the entrepreneurs as if either shark would be willing to put more money in. (Ballsy given Robert has already offered them double the cash.) But Daymond states that the entrepreneurs wouldn't need more money if they persued a license strategy.
When the entrepreneurs attempt to get Daymond to match Robert's offer, it becomes pretty clear that he's their preferred shark and Daymond says that he won't negotiate against himself. And, despite a bite of $246,212 from the value rather than an $208,000 increase, they select Daymond anyway!
With Bombas and now Squid Socks, Daymond looks to be building quite the little sock empire!