Kevin O’Leary is perhaps the most popular shark on “Shark Tank” today. He is known for playing hardball with the entrepreneurs and rarely ever changes his offer for their benefit. However, in an earlier episode of the show, an entrepreneur who is perhaps just as stubborn as "Mr. Wonderful" came to the show, and she forced him to agree to the terms that she wanted on a deal. It was a huge gamble on her part since he was the only shark left.
The name of the entrepreneur was Alexandra Ulmer, the founder of Au Baby. The company specializes in manufacturing baby-friendly blankets that are stain and smell-proof and can also regulate temperature based on the baby’s needs. It’s also not harmful to their sensitive skin. “As a new mom myself, I wanted to create a blanket that I could trust against my baby’s sensitive skin,” she said. The entrepreneur wanted $80,000 for 25% of her company.
Alexandra is a knitwear design expert who claims to have worked at Nike, where she designed and engineered high-performance fabrics for LeBron James. Her background was impressive enough for the sharks, and the product, too, was undeniably of a high quality. The problem, however, was its cost. The entrepreneur revealed that it cost her $74 to make each blanket and that she sold them for $160.
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To call this blanket a premium product would be an understatement. None of the sharks debated about the quality of the product, but such a high cost meant that getting customers was never going to be easy. Her sales figures reflected that as well. At the time of recording, the company had done $62,000 in lifetime sales and $38,000 in sales the year before. Year-to-date sales were $14,000, but Alexandra said that they were on track for $100,000.
It may be expensive, but that doesn’t mean it wouldn’t do well in the future. The cost of customer acquisition plays a big role in how the company goes forward since there is a fair bit of educating to be done to make new mothers buy this. However, when O’Leary asked for a number, the entrepreneur had no definitive answer. “I wish I could give you a very specific number to that, but because we don’t do traditional digital marketing, I don’t have an analytic tool that could tell me specifically,” she said.
Why did Au Baby have no digital marketing? Well, as per Alexandra, it was just too expensive. Rather, she focused on community building by appearing on podcasts and such. Unfortunately, that hadn’t translated into any meaningful sales figures just yet. The company was quite early in its journey, and that was something most sharks were uncomfortable with. Combine that with its high product price, and four of the five said no.
O’Leary was the only one left, and he was confused. He saw value in the product, but there was so much to be done. “My team is watching this, and they’re saying what the f***are you doing? Are you out of your mind?” he said. “It’s very bad when I am suffering like this. I’m very unhappy with you.” Despite that, he offered a deal: $80,000 for 50% of the company.
This was way too much for Alexandra to give up, and she responded with the same stubbornness that Mr. Wonderful has been famous for. “25% is definitely enough to get you up in the morning, I know that,” she said. The entrepreneur then raised her offer to 30%, but O’Leary wasn’t going to take that either. Instead, he suggested that she go up to 40%. “That would value us at less than $300,000,” she said.
“You have no value!” O’Leary retorted. The entrepreneur knew she had to adjust, but she simply was not going to meet the shark where he wanted it to be. Alexandra then went up to 35% for $80,000. Mr. Wonderful was happy with that figure, and after some back-and-forth, a deal was finally agreed upon.
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