The Space Traveler
Dressed as astronauts, these two entrepreneurs and mothers from San Antonio, TX, radio in "support" when they demonstrate kids arguing and pushing and pinching each other in the back seat of a car. This support arrives in the form of a three-sided fabric dog-box looking thing that isolates the kid in the middle seat from the ones on the right and left and effectively leaves them all in their own little spaces in the back seat. Apparently, the divider works with both seatbelts (because, it would have to) and with or without booster seats.
One of the entrepreneurs developed the idea the summer before when she couldn't figure out how to keep 'm separated. Apparently, the original prototype was made out of a plastic laundry hamper. Imagine being those kids... The second prototype actually <was a collapsable dog kennel!
The Space Traveler now has two prototypes but is... shall we say, "pre-revenue". The plan, once manufacturing ramps up, is to charge $28.99 retail for each Space Traveler on a production cost of between $17 and $18 per unit.
The entrepreneurs behind the Space Traveler have been idea and development partners for a while. In fact, they claim that they pitched one of their ideas to an NYC licensing company that declined to pick up the idea but, apparently, thought it wass good enough to go ahead with later and the entrepreneurs saw their product in a big box store. Then, it happened to them a second time... with the same company, proving the old maxim about, "Food me once..."
Making A Deal
Despite admitting their ability to be taken advantage of repeatedly, Robert says that he liked the presentation but, importantly, not the product and he drops out of the deal.
The entrepreneurs state that they see the Space Traveler as a perfect vehicle for character licensing.
Lori says that she likes the entrepreneurs but also sees issues with how new the business is. Also, by not having any public response to help gauge how much the public even wants the thing, it's all too new for her to be involved and she drops out. Mr. Wonderful drops out a little later citing the same issues and that he "doesn't want to take the journey."
Mark brings up another company named "Under the Weather" with a product that he thinks is too similar. Suggesting that they do a patent search (because, of course although for something like this there shouldn't be a patent...) and worries that they might find the area already covered. And... he's out.
The Space Traveler looks like it's about out of options when Barbara reminds everyone that she's still there and that she had invested in The Original Comfy from the previous season and that it had seen $150,000,000 in sales since then. And, much like The Original Comfy, Barbara says she doesn't understand the Space Traveler either. However, she needs to start seeing a return "right away."
For that reason, Barbara offers $100,000 at 33% equity in the business but with the addition of a $2 per unit royalty until earning back the $100,000. In exchange for this, she promises to help the entrepreneurs with both the manufacturing and marketing process. The entrepreneurs leap at the deal.
At first glance, this appears to be Barbara at her sharky best. They're already offering 33% of the business in exchange for a very reasonable amount of money. However, what's she's really done is turn the deal from a classic equity investor relationship into a kind of venture debt arrangement where the "loan", if you will, is paid back as sales are made rather than on a strict timeline.
This has several advantages for both Barbara and the entrepreneurs. For Barbara, she begins seeing a return right away and a repayment of her original capital although, since she asked for only $100,000 as the repayment milestone, she's actually getting less as the capital loses value due to inflation. The entrepreneurs, on the other hand, now have a shark who is motivated to help them start manufacturing and selling as soon as possible, an interest free loan with no repayment timelines, a royalty that will eventually go away and no longer encumber the business in the case of a sale, and a third equity partner who is equally as motivated in seeing the business succeed as they are.
When one sits down and really thinks about this deal, the more generous it actually seems to be!