Supply
Supply is a company that is making something old new again. Supply, a company out of Ft. Worth, TX, founded by a husband and wife entrepreneurial team, wants people to shave with single-bladed razors, claiming that the multi-bladed razors fill up landfills and "clog" a shaver's face. And shaving with a single blade was good enough for George Washington, as an impersonator came out to attest.
When guest shark Daniel Lubetzky commented that he'd never known a single-bladed razor to shave as close as the multi-bladed variety, the entrepreneur responded that that was because multi-bladed razors raise the hair before shaving it, leaving it below the skin after and at risk for in-grown hairs. He also stated that multi-bladed razors were a thing that only started in the 1970's, clearly believing that this fifty-odd year trend might still yet be reversed.
This year, Supply expects to book $2,500,000 in sales. In the previous year, Supply booked $1,000,000 which isn't bad when one considers that they only invested $125,000 of their own money into the business to get it started.
The entrepreneurs stated that all of their business is direct to consumer which allows them to have gross margins around 50%. Their starter kits sell for $129 and cost $28 per unit to manufacture. However, the entrepreneurs stated that in two months that cost will drop to as low as $10. They state that their average sale is $110, which must assume that people are coming back to purchase more if the starting kits sell for $129.
The entrepreneurs state that they have been married for nine years. Prior to starting Supply, the husband had been selling stealth fighter jets (which seems like a thing that would sell itself) and hated it. Clearly, because he dumped his spare time instead into starting one of the biggest shaving review websites. Which, you know, good for him. We all get obsessed about topics. Imagine wanting to document everything that happened on a TV show that lasted for over a decade. That would be stupid, right? Right...?
Making A Deal
Lori states that she likes the handle and the packaging but that the product just doesn't speak to her and, thusly, she won't be participating. Daniel, likewise, drops out of the deal, stating that he doesn't see how he could bring any additional value to Supply. Mark also drops out quickly, stating that he's addicted to his multi-bladed razor and shaving cream.
Robert compliments the entrepreneurs, stating that he thinks it's hard to elevate a commodity product to be premium but thinks that they've accomplished it. Kevin also seems to agree because he leaps in with an offer of $300,000 for 5% equity and a $1.5 per unit royalty.
Robert dismisses Kevin's offer by saying that there's absolutely nothing wrong with a royalty if the investor is afraid they won't get their money back. He, however, thinks the entrepreneurs should hold onto the money and keep it in the company. Therefore, Robert offers $300,000 for 15% of the business.
The entrepreneurs ask Robert whether he'd consider adding more money to the deal in order to preserve the value of the business. At 15% instead of the originally offered 10%, Robert would be biting a cool million off the value of the company. But Robert says no.
Mr. Wonderful responds that he hates greed (from Robert, obviously, not from himself) as a justification for his equity/royalty mix of a deal--he's not taking such a large bite off the value. He also says that he prefers a royalty because he views it as a "tip" back to him.
The entrepreneurs attempt to get Robert to drop his ask down to 12.5% but Robert still isn't willing go there. But, when the other option is Kevin O'Leary, the entrepreneurs quickly decided that, even with the hit to their valuation, Robert looks good and decide to go with him anyway.
And that is how Shark Tank enabled yet another shave club to come into existence.