THE FOLLOWING IS A ROUGH TRANSCRIPT OF THE VIDEO ABOVE
The final entrepreneurs into the Shark Tank this week were presenting their business Guardian Bikes and were seeking $500k in exchange for 10% in the business. They have developed the worlds safest children’s bike by using their patented Sure Stop Technology. It eliminates the possibility of flipping the bike by pressing the wrong brake. Their single lever brake system first activates the back brake and then intelligently applies braking to the front wheel.
As for their numbers, they have been licensing out the braking system at only a $4 cost increase to the other companies. They sell each pad to the manufactures for $5 and have made $200k in the last three years. Once they started manufacturing their own line of bikes, under the Guardian Bikes brand, they made $95k in 7 months and project to do $350k in their first year. Their 24 inch bike wholesales for $240 and costs $146 to make, while their smaller model wholesales for $228 and costs $132.
Due to their two pronged attack for getting their braking system onto bikes, there was a lot of controversy in the Tank over whether or not that was the best course of action. Some were on board with them manufacturing their own line of bikes as a way to build recognition and do more licensing, while others were convinced that all their focus should be on licensing and they should forget about manufacturing for themselves.
As for me, I have thought through it and chewed it over and I’m still on the fence. I can see the sense in both sides. If they get lean and focused on licensing and selling the pads to manufactures, then it really comes down to hiring a few stellar employees into their sales staff and going after every existing bike manufacturer and business as hard as they can. They would have to push far more volume to see the same revenue, but a focus on licensing will often mean better margins than they would see doing it all themselves.
On the other hand, if they are able to carve out a respectable marketshare as the “World’s Safest Children’s Bike” then they would need to sell far fewer units to see the same kind of revenue. As well, if they lean in on some smart online marketing, which it didn’t seem like they had been doing much of yet, they can cultivate the kind of attention and brand recognition that they would never get by purely focusing on licensing and selling directly to manufacturers.
The only thing I am fairly certain they shouldn’t do right now is try to focus on both. If they really want to go the route of manufacturing their own bikes, they need to put the brakes...no pun intended...on licensing and selling to manufactures for the time being and hire an amazing PR and marketing professional onto their staff to help them market the bikes. But if they go the route of focusing on licensing and selling to manufacturers, then as I said before they need to go all in and hire some spectacular sales staff.
Anyway, they did end up getting a deal with Mark and it seems like he wants them to go with manufacturing for themselves. He did have some contingencies though. They don’t get anything from him until he can confirm that their product is entirely unique and there is nothing else like it. He also wants them to hit their sales projections for the next 6 and 12 months, as well as hire an internal PR person. If they agreed to all that, he was willing to do $500k in exchange for 15%. They quickly agreed.
Anyway, like I said before, I am on the fence about the best path. I see merit in both, but I congratulate them on getting a deal and I hope their partnership with Mark will lead to amazing success!