Boost Oxygen
Boost Oxygen is a company from two entrepreneurs who want to make doing whipples of oxygen the new bottled water. Seriously. That's what they said. Not the "whipples" part but... watch the deal, what do you see when you see them huffing it? But they did say the bottled water part.
Boost Oxygen sells 95% pure oxygen in compressed containers and they think that huffing it can help improve people's quality of life.
Sadly, they have sales. They project doing $6,400,000 in sales by the end of the year in which this deal was filmed, making $1,500,000 in net income. It also sounds like they made 705,000 net the year before. They claim to have a 95% market share in a new vertical that they've created. Bottles of air come in small for $7.99, medium for $9.99, and large for $14.99. To produce one bottle of air costs Boost Oxygen $2.05 and nets the purchaser two hundred huffs.
This product is not FDA approved because the entrepreneurs claim they don't need it.
Boost Oxygen is raising money to be able to expand their sales staff to sell more into retail because they believe there's a thriving impulse market around it.
Making A Deal
Barbara doesn't waste any time exiting the deal, strictly because of the valuation. In fact, she was out half-way through the pitch, we just saved telling you this until here because that's the way we structure our articles. (Oooh! Sooo meta! We're telling you how we do things behind the scenes here!)
Guest shark Rohan Oza says he see some value in the product as a mountain impluse purchase (because... well... yeah...) but that getting people to use it every day would be much more difficult because of the education of consumers required (and because education usually stops people from making dumb decisions). He drops out.
Barbara reinforces how much she doesn't like the product but stating that she'd rather spend the asked for $1,000,000 on a new beach house. Oh, yeah, and is out!
Lori claims to like the entrepreneurs but doesn't think it's a good deal for her.
Mark makes an interesting observation that it's really rare for a company to have a 95% market share. And that if you are one who has one, it might mean no one else looked at the market, said "wow!", and decided to take a shot at it themselves. (He's saying it's not a segment worth even trying to compete in, natch!) Therefore... he's out.
Mr. Wonderful may very well be the new patron of lost causes because he comes in with a deal, though he says the entrepreneurs will need some oxygen. Praising their cashflow, he offers $1,000,000 as a thirty-six month loan at 9% interest plus 7.5% equity. In exchange, he says that he thinks he could help move product.
One of the entrepreneurs worries about taking on debt when the company doesn't need to and responds with his own term sheet of 6% interest and 5% equity. Kevin seems open to the deal and replies with 7.5% interest and 6.25% equity to seal the deal.
We prefer not to assign a value to a company after a venture debt deal so, for that reason, we have no bite value for this. And it may very well earn Mr. Wonderful his money back. But that's about as much thinking about this business as we prefer to do.