On January 13, 2015, entrepreneur Michael Wooley appeared on Episode 607 of ABC's Shark Tank, seeking a $50,000 investment in exchange for 10 percent of his company, Vestpakz. Although several Sharks said they "loved the product," it took them less than 10 minutes to shred the entrepreneur. No Deal, but lot's of humiliation.
Uncertainty about Vestpakz stemmed from its lackluster test run at 75 Walmart stores -- a deal that Wooley says was very badly botched by the retailer, literally leaving his company at the mercy of sharks.
Vestpakz was invented by Wooley's daughter, Christen, as her 6th grade science project in 1999. "She came up with a new backpack that's more comfortable, convenient, and stylish" Wooley told the Sharks. "It's functional design helps distribute the weight." Vestpakz is a Florida-based family affair: Wooley is the CFO of the company, his daughter Christen Bell is the inventor and President, his wife Cheryl is the CEO, and his son Casey is the Executive Vice President. Vestpakz has been featured on Oprah, and Christen was picked from 4,600 girls to receive an award from the National Association of Women Business Owners for outstanding business accomplishments. In 2014, Christen was selected as 1 of 10 to exhibit at the inaugural Smithsonian/U.S. Patent and Trademark Office Innovation Festival in Washington, DC.
When Sam Walton bought his first variety store for $25,000 at age 27, he borrowed $20,000 from his wife's father. But Michael Wooley didn't have family money to take his daughter's invention to the next level -- so he turned to people like Walmart and the Sharks as potential investors. Instead he became shark bait.
Wooley did not face the Sharks alone. His co-pitchman was Arthur Grayer, a Senior Vice President for Sales and Marketing at Eastsport, a manufacturing brand owned by Bijoux International -- both located in New York City. Grayer is the "official licensee" of Vestpakz. He told the Sharks, "I've been the in the backpack industry for over 30 years, and I've never seen a product like this before."
The connection to Walmart began when Wooley read about the giant retailer's plans to invest $20 billion in women-owned industries. It was 2011, Walmart was launching what it called its Global Women's Economic Empowerment Initiative: "By using our unique size and scale, we are empowering women around the world." Walmart's goal was to:
• Source $20 billion from women-owned businesses for our U.S. business and double sourcing from women suppliers in international countries where we do business.
• Launch a dedicated women-owned product marketplace on walmart.com.
In 2013, Walmart touted its Empowering Women Together Campaign. "As merchants, we're always looking for new products to share with our customers that are quality, on-trend and priced right," the retailer said in a press release. "What each supplier shares is a drive to build a better future."
The Wooley family turned to Walmart to help them create a better future. According to Wooley, in October of 2013, Walmart agreed to a "100 door test" that would put Vestpakz in 100 stores for 13 weeks. If 85 percent of the vests were sold, the test would be expanded. Walmart also stipulated that they would choose the stores, and that the retailer would try to have the vests in stores by the end of November or first week of December. 100 percent of the marketing expense would be borne by Vestpakz. If sales exceeded 85 percent, Walmart said it would look at placing the vests in more stores -- but would be "judicious" about any expansion.
But the deal failed to come off as planned. Grayer told the Sharks the vests missed the Christmas holiday season and arrived late to stores in January and February -- after kids were back in school. In addition, the number of stores selling the vests was cut by 25 percent to only 75 locations. Wooley never got the sales reports he was promised. "Detailed business communication was zero," Wooley recalls. "When I told them their key supplier was going to have problems, they said January was a good month."
The financials behind this deal were simple: the cost to manufacture the vests was $4.75 per unit. Walmart would purchase them for $7.05 each from Eastsport/Bijoux, and sell them to Walmart shoppers for $14.88 -- more than twice what the retailer paid. Wooley's company was promised a 6.5 percent royalty based on Walmart's acquisition price. During the "door test" at Walmart, Wooley estimates that 1,000 vests were sold -- about 55 percent of the original sales goal. Wooley's share should have been roughly $3,666. Wooley notes, "I never got any sales reports, and I never got one red cent. If my product had been rolled out in all of their stores, and sold at the same level as in the test, we would have had more than half a million dollars in sales."
"It just drives me crazy when a big company pushes around little people and then promotes how they like helping the lower class," Wooley told me. "I really was excited that the Vestpakz would inspire young people. Even a 6th grade science project would take you on an amazing journey. But little did we know that at the end of the day, Big Companies don't pay the little people!"
Wooley says he repeatedly tried to get Walmart to use some of its clout to help promote the product. Before going on Shark Tank, Wooley attempted to get Walmart's cooperation. "The show's producers wanted to see proof of my Walmart purchase order. When I told Walmart I needed a purchase order for Shark Tank, they wouldn't produce a copy. I'm surprised that I got on the show -- but the producers didn't understand why I couldn't get a P.O. As this went on, I was starting to see that Walmart and their key suppliers did not want this women-owned business getting in their world."
"Nobody cared about our business. They did not care about putting a spotlight on innovation in America! They talk about helping U.S. businesses -- but behind the doors they are sourcing to China and not the U.S. They promote Made In The US, but send the work to China -- and then count it towards their women-owned business program! Best of all, the women-owned business program is run by a man!"
At the end of Wooley's 10 minutes on Shark Tank, Shark Kevin O'Leary wonders, "We still don't know yet whether [Vestpakz's] going to be delisted [by Wal-Mart] or not. I don't think it's worth $500,000 (sic) until I know Walmart wants to keep it on."
But Michael Wooley says Walmart played all its cards close to the vest. "Bottom line, Vestpakz was never supposed to make it this far. We've worked very hard and did most of the work -- other than getting the Vestpakz made. Everything else we did! Walmart and Eastsport/Bijoux scammed us by not helping women."
After 15 years of product development, after the mishandled rollout of his product by Walmart, and after his derisive reception on Shark Tank, Michael Wooley remains an unbowed entrepreneur -- proud of his daughter and her invention. As he was exiting the set of Shark Tank, Michael Wooley looked straight into the eye of the camera and said: "It's a great product, and Vestpakz is on its way to the top."
No thanks to Walmart or Shark Tank.