Birddogs
Birddogs is an athletic wear company from New York, NY, that makes gym shorts for men that don't require underwear. The shorts are made from a dry fast material with pockets and a liner strong enough that it will (supposedly) survive a watermelon being smashed through (but didn't).
Birddogs was started as a company three years ago. "A bird dog," an entrepreneur claimed. "Is a guy who can fit thirty-six beers into his parka and get into Fenway."
The company grossed $200,000 in sales their first year, $2,100,000 in their second, and project grossing $6,300,000 in the year in which the episode was filmed. The product is sold exclusively online. The shorts retail for $55 per item and cost $18 per item to manufacture. Each new customer costs $13 to acquire and shipping is an additional $6.[1] The entrepreneurs estimate that they spend 20% of net sales on marketing.
In terms of fundraising, they have previously raised $560,000 from friends at a value of $3-9,000,000, representing 11% of the company's equity.
The entrepreneurs stated that Birddogs was already sitting on $600,000 in cash. They claimed that they would be doing even better if not for the fact that a third of the time they had no inventory to sell and that it takes six months lead time to acquire inventory.
When the sharks pressed the entrepreneurs on why they weren't acquiring enough inventory, they explained that they were making conservative orders and selling out to keep the risk low. This, combined with the entrepreneurs constant claims to be doing things "the best" left the sharks cold and the entrepreneurs left the tank without a deal.
This deal aired on Episode 9.14.
Analysis
This seems like an easy company to make a deal on. The product is selling in increasing numbers and merely has an inventory problem to overcome. In the history of Shark Tank, this is far from the worst deal presented even at the astronomical valuation. And yet, the Stats Shark can't get over the product.
The product looks fine. But even the Stats Shark owns three pair of workout shorts that don't require underwear and not a single pair of them were made by Birddogs. One was made by Lululemon and two pair were made by a little company called Nike. Projecting $6,300,000 by the end of the year may sound like big money but that's pocket change to either of the companies I've just named. As Mr. Wonderful might say, they could get crushed like the bugs they are.
Maybe there are people who won't or don't buy athletic wear from major companies, maybe that's important to some people. But the workout gear segment is so crowded and the differentiating factor of Birddogs to everyone else leads the Stats Shark to believe that the sharks really did make the right choice on this one.
Notes
- ↑ When the costs are taken into account, $18 per item to manufacture, customer acquisition of $13 and shipping of $6 ($37), the margin on the retail price ($55) begins to actually look really low at just $18 per item.