Why Mark Cuban Made a $1 Million Deal For a Startup That Keeps Beer Cold
‘Why is it that I always drink myself into spending $1 million?’ Cuban asked on the recent episode of ‘Shark Tank.’
PHOTO CREDIT: Getty Images
Mark Cuban hates warm beer.
On Sunday's episode of Shark Tank, Cuban teamed up with Lori Greiner to invest in BottleKeeper, an El Segundo, California-based startup that makes a stainless steel container designed to keep glass beer bottles cold while protecting them from breaking. Cousins Adam Callinan and Matt Campbell launched the company in 2013 and generated $20 million in sales during the past three years. They came to Shark Tank seeking $1 million for 5 percent of their company, which sells its flagship product for $34.99. Guest Shark and former New York Yankee Alex Rodriguez didn't invest in the company, but he did test out the product by throwing a softball at a row of BottleKeepers to ensure that they do prevent beer bottles from breaking.
With $20 million in sales, BottleKeeper's founders didn't convince Cuban it was a small business in dire need of capital. "Either you guys are the world's worst business people or you don't need us," Cuban said, sipping a cold beer out of the BottleKeeper. "So why are you here?"
The entrepreneurs explained that they want to take their online-only operation into retail stores, but don't have the capital to produce the required inventory to do so. The pair spent $4 million on Facebook ads alone and hired an intellectual property lawyer for $500,000 to help them fight copycats. As a result, they've amassed a waiting list of 3,000 U.S. retail stores that want to purchase BottleKeeper's product.
Despite their impressive sales, Callinan and Campbell put themselves at a disadvantage by offering just 5 percent equity. The Sharks typically want a larger percentage of profits to incentive the work they're prepared to do.
"This is what I call a schmutz deal," Cuban told the co-founders. "Even if you guys hit on all cylinders, where is the upside for us?"
After opting out of the deal and watching as the other Sharks offered BottleKeeper various royalty deals, Cuban changed his mind, teaming up with Greiner. The pair offered $1 million for 5 percent equity and a royalty of $1.50 per unit until $2 million is recouped, split equally between the two Sharks. The co-founders quickly accepted.
"Why is it that I always drink myself into spending $1 million?" Cuban asked as he put down his beer.