Kreyòl Essence
Kreyòl Essence is a company out of Miami, FL, that has created a line of beauty products based on the "best kept secret for skin case": Haitian Castor Oil which this entrepreneur refers to as "liquid gold."
The castor oil behind Kreyòl Essence's products is made from castor seeds harvested after six months, and smashed with a mortar and pestle to get the good stuff. The harvesting aspect behind Kreyòl Essence has created jobs for three hundred women workers and producers in Haiti. The secret to using castor oil versus other oils is that castor oil supposedly penetrates deeper into the skin where as others sit on top of the skin. This is especially important for eczema but they also claim that it helps to grow hair. The supply of castor oil comes twelve hectares in Haiti that Kreyòl Essence owns and several cooperatives.
The product line behind Kreyòl Essence is diverse, they have mango-papaya rum punch body washes, oils, and body creams, and a "Haitian ground coffee" body wash as well, just to name a few.
Kreyòl Essence has been in business since 2014. In their first year, they saw $135,000 in sales. Those dropped to just $40,000 in sales in 2016 after the company had focused initially on wholesale and a major customer walked away. However, by 2017, the company had $327,000 after pivoting toward direct to consumer sales. By 2018 Kreyòl Essence had $1,000,000 in sales and the company was on track to do $2,000,000 by the end of the year in which this deal was filmed. Kreyòl Essence also just landed a contract with ULTA Beauty (a company the entrepreneur claims is the largest beauty company in the United States).
Retail, Kreyòl Essence sells for $22 per unit scented and $16 per unit for unscented product. Both cost just $2.50 per unit to manufacture. The entrepeneur claim that the company is profitable, having made $300,000 on $1,000,000 in sales the previous year. However, Kreyòl Essence does care $300,000 in debt.
Making A Deal
Barbara says that she thinks the entrepreneur is a great saleswoman but that the business is too dependent on her. For that reason, she drops out. For that matter, so is Mark.
Daymond says he has no experience in the space and, likewise, is out.
After the claims about benefitting people who have eczema and hair growth, Lori asks whether Kreyòl Essence has any studies backing up any of the claims the entrepreneur made. But there are none and this concerns Lori enough that she drops out.
Mr. Wonderful says, naturally, that he likes the sales but still sees a lot of risk and does not believe that the company is worth the $4,000,000 price tag. Instead, he offers $400,000 for a 37% equity interest in the company (reducing it's value to a million and change). The entrepreneur counters with 20% but Kevin says "never" to the proposal.
Kevin describes himself as impressed with the business that, also, that they need to have a "tough love" discussion. The entrepreneur raises her equity offer to 25% but, still, Kevin says no. The entrepreneur tries to appeal to Kevin where he lives and points out that she will have $2,000,000 in sales by the end of the year with that going up to betweeen $5,000,000 or $10,000,000 in the near future. And, what with those kind of sales, 37% is just too large of an ask.
The entrepreneur's husband reaches the verge of tears and says that Kreyòl Essence almost shut down in 2016. But this does not melt Kevin's cold, cold heart. The only thing that appears to be able to is the offer of a royalty.
The entrepreneur asks for $400,000 in exchange for a $0.15 per unit royalty and no equity. Kevin counters with a $0.25 per unit royalty and 5% equity and the entrepreneur accepts!
Based on the way that deals are valued on Stats For Sharks, this deal actually increases the value of the company. In fact, it's value has doubled to $8,000,000! Mind you, these are simplistic caluations that don't take into account how much a perpetual royalty might effect the value but, certainly, the value of the company increased after this deal and now this entrepreneur has the unlikliest of partners, Mr. Wonderful!