Brief Summary
Kobe Harris pitches Kobe's Co., a line of natural, handmade lip balms and personal care products, seeking $300,000 for 6% equity. He impresses the Sharks with his story of starting the business in college and growing it to $1.5 million in sales this year. The Sharks are impressed with Kobe's sales and marketing skills, particularly his use of social media. Ultimately, Kevin O'Leary offers $300,000 for 20% equity, which Kobe counters. After negotiation, Kobe and Kevin agree to a deal of $300,000 for 15% equity.
- Kobe's Co. offers 100% natural, handmade, and sustainable lip balms and personal care products.
- Kobe started the business in college with $200 and grew it to $1.5 million in sales this year.
- Kevin O'Leary offers $300,000 for 20% equity, which is eventually negotiated down to 15%.
Introduction to Kobe's Co.
Kobe Harris introduces himself and his company, Kobe's Co., seeking $300,000 for 6% equity. He emphasizes the natural, handmade, and sustainable aspects of his lip balms, highlighting that the ingredients are so clean they are edible. Kobe jokes about sourcing beeswax from happy bees and oils from plants that have won beauty contests, before clarifying that the lip balms are made from beeswax, coconut oil, sunflower seed oil, and mango butter. He mentions expanding the product line to include lotion bars, lip scrubs, cuticle butter, and hand salve.
Product Presentation and Initial Questions
Kobe presents an assortment of Kobe's Co. products to the Sharks. The Sharks comment on the packaging and flavors of the lip balms. Kobe explains the compostable packaging design, which requires a wider and shorter tube due to the absence of a twist function. He clarifies that sales are primarily online through the company website and Amazon.
Kobe's Background and Business Growth
Kobe shares his story of starting the business as a college freshman while researching packaging and bees with a sustainability professor. He recounts receiving $200 from his mother to purchase raw ingredients and spending the summer formulating lip balms. He describes making lip balms in his bedroom and distributing them to people at the pool, leading to significant sales. Kobe mentions making $3,000, then $10,000, and eventually $15,000 in sales in a single day, which led him to drop out of college to focus on the business.
Financial Performance and Marketing Strategy
Kobe details the company's financial growth, from $30,000 in sales in the first year to $200,000 the following year, and $864,000 last year. He reports current year-to-date sales of over $1.5 million. He attributes the growth to learning how to run Facebook ads and posting videos on TikTok. When asked about his return on ad spend (ROAS), Kobe estimates it to be around 2.5 to 3. He states that it costs $14-15 to acquire a customer, with an average order value of $32. Lip balm accounts for 75% of sales, while other personal care products make up the remaining 25%. The lip balm costs 26 cents to make and sells for $5. Kobe projects $3.5 to $4 million in sales for the year, netting $700,000 to $800,000.
Sharks' Feedback and Initial Offers
One of the Sharks expresses admiration for Kobe's story but declines to make an offer, citing that it's not the right investment for her. Kobe expresses his need for guidance and help with distribution, particularly in retail settings. Another Shark states he could get Kobe retail placement but would require a listing fee. He offers $300,000 for 20% equity.
Sharks' Concerns and Further Discussions
Another Shark expresses concern about the challenges of standing out in the competitive retail lip balm market and declines to make an offer. Another Shark admires Kobe's story and drive but doesn't see the lip balm business as a good fit for him. Kevin O'Leary states he would never go into the lip balm business due to its competitiveness. However, he acknowledges Kobe's business acumen and offers $300,000 for 20% equity, focusing on scaling the business through increased ad spending.
Negotiation and Final Deal
Kobe questions the valuation and suggests he could obtain a loan for marketing instead of giving up 20% equity. Kevin argues that his buying power and scale would yield better results. Kobe counters, expressing unwillingness to give up 20% of his company. Kevin refuses to lower the equity stake to 10%. Kobe proposes taking more money, but Kevin insists $300,000 is sufficient. Kobe suggests meeting in the middle at 15%. After a moment of consideration, Kevin agrees to $300,000 for 15% equity.
