Transcription
Next into the tank is a new idea in the outdoor furniture space.
Hi sharks, my name is Jake Liu and I'm Carrie Lynn. We're the co-founders of Outer. We're seeking $750,000 in exchange for a four percent equity stake in our company.
Imagine for a moment, it's early in the morning. The house is still quiet. Your coffee just finished brewing. It's a perfect spring day. The birds are chirping. You look outside at your outdoor sofa, coffee in hand. You inhale deeply.
Oh, the cushions are wet and now so are my pants. We call that the soggy bottom syndrome, sharks. That's just one of many problems with outdoor furniture. It falls apart easily. It's very uncomfortable, or they're stored in the garage somewhere, never to be used.
At Outer, we've solved all of those problems. We've created the perfect outdoor sofa that's as comfortable as your bed and as durable as your camping equipment, all while using eco-friendly materials. Most importantly, no more soggy bottoms.
Without our patent-pending invention, the Outer Shell cover. Let me show you how it works. In the evening, all you have to do is cover up and then pull the Outer Shell over, and the cushion is completely protected from the elements. If you know there's a rainstorm coming, all you have to do is take it and go with you. So it's very easy to carry and store. Cool. For the next morning, there's going to be a layer of morning dew on here, but all you have to do is open it up, flip it open. The perfect sofa, ready for you to enjoy.
So we've created the perfect outdoor sofa, but we realized that the shopping experience wasn't great. Typically, when you see an outdoor sofa, you see it inside in a climate-controlled environment where it never has seen sun, rain, or bird poop. So we've actually revolutionized the shopping experience. We've developed a proprietary peer-to-peer showroom platform. It's where we convert our customers' showrooms into our showrooms. And in doing so, customers can see, touch, and feel the sofa before they decide to buy it. It's something that we call the Neighborhood Showroom. It's the sharing economy for retail.
So sharks, who is ready to join us to bring life outside?
How much does the sofa cost?
So the sofa you're looking at right now, the three-seater, is $2,500.
Okay, I don't think that's. What does it cost you, land?
So, so each share is $800. So they're modular, by the way. I don't know. Retail cost is eight, eight twenty dollars. You can average it out. And then the cost of goods made is about $225 or so.
$225? Yeah. So I want to make sure I understand this. Is instead of having a showroom where you have your own retail space, so to speak, your customers are opening up their backyards?
Exactly. You guys, do I understand that right?
You got that perfectly.
So what do I get paid for allowing that to happen?
Yeah, so we're testing that right now and you, you're expected to make about $20 to $50 per visit. And the platform that we built, when you, you have to book a visit. You can't just show up to somebody's home randomly, right?
Thank you so much. $750,000. Four percent puts $18.8. $18.7 million. Yes.
Why is this worth $18-plus million dollars?
So Kevin, they're, they're, so the outdoor furniture market in the U.S. is $9 billion.
Oh, that's the worst answer. It's a very bad thing to say. Kevin, how big is the bankruptcy market in the U.S.? It's really, really big. Well, go ahead, Jake. Uh, we, we just launched about four months ago and we did about $800,000 in sales to date.
You haven't made any money yet, have you?
Uh, we're not making money yet.
Why $18 million? What's the reason?
Yeah, um, so we, first of all, we just closed our last round with our VC-backed at what valuation?
That was a $13.5 million valuation.
So you came into the Shark Tank and raised it even more. How much do you project this year?
This year, we're going to close out at least a million dollars. Next year, we're projecting five.
So how many partners do you have and what percentage of the company do you two own?
I own 60%. Carrie owns 25, and my family factory owns 15.
So another, another answer to the valuation is because we've actually taken out the risk on the supply chain. So they're essentially giving us that cost.
Your family's subsidizing you by not taking a margin because they own 15% of the business.
That's right.
Have to pay for the inventory until we sell it.
That's interesting. So guys, uh, you know, the valuation is crazy. You know, you're going to, you only sold $800,000, hopefully $1.5, and you're evaluating it over $18 million. You know, exactly what's going to happen to you here, right? So I'm out.
So, so for me, coming from Silicon Valley, I'm used to seeing mass valuations all the time. And, and I, I frankly, I way overpaid for a number of deals that I think can potentially change the world or actually have a huge impact. I don't think it's, it's world-changing for me. So for that reason, I'm out.
Hey guys, I think it's a great business. Could it be a $100 million business? Yeah, it really could be. But look at it from my end, right? Let's just say you do $200 million. Sure. And your margins are 10% net margins, you'd be thrilled to death. You're making $20 million. I'm making $5 of that. That's, I mean, that's not bad money, but the risk reward for versus what you're asking just is not there.
Well, the current D2C brands have a multiple of anywhere from three.
Yeah, but that's great. You, and you found the VCs that pay those kind of multiples, right? That ain't me. That's not Shark Tank. For those reasons, I'm out.
I like it. I, I really do. But I don't need any disrespect to the previous VCs, they are not Mr. Wonderful. I am. You may not like this offer, but I'm going to make it anyways.
Three sharks are out, but Kevin seems interested in Terry and Jake's outdoor furniture company, Outer.
You may not like this offer, but I'm going to make it anyways. Now, traditionally, to get back my capital, I would want some kind of cash flow in the form of, you know, maybe I'd make it debt, or maybe I'll make a royalty. But I'm in a generous mood today. I'm feeling first. So I'm going to give you $750,000 straight equity. I want 20%.
I don't care if he laughs. He didn't give you any money.
I want to hear Lori. I love it. I want to be part of it. But you've just started selling it. How about this? Let me throw a different type of offer at you. So give you a $750,000 loan as a line of credit, but I want 20% royalty per chair. The royalty until I get paid back the $750 into a million. And then at the end of the day, I'll have 10% of the company.
You know, grasshopper, you've learned from the master. That sounded like your kind of deal. I know there's only one Mr. Wonderful, and he is amazing. I could easily do that deal and even bait it because that's my kind of deal. She basically, Lori learned that from the master.
Would you match that deal or how would you beat that deal? If you want him to match my deal and you would pick him, then I'm going to go out and do that. I'll do it.
No, I'll do the deal. Seriously. You're going to lose me, and that you will regret forever.
I'll do it forever. Let's equity. That's ridiculous. Yeah, baby. Just to shake it up. Make a decision. Make a decision, guys.
So I'll go for it. Yeah. Okay. All right. So our counter to, uh, Lori's offer is, um, $750,000 in loan, uh, and royalty. He will pay back the $750. And on the equity side, we would love to bring it down to 4%. What we asked for when we come in.
You want me to get up every morning and be like, I can't wait to blow that up? I mean, you need that passion. You need that. And I'm worth it. I'm worth it.
Kevin's willing to do 5%. $750. I think that's really attractive. But we do want to work with you. I, I feel that connection. So is there any way you can match that?
We'll even throw in the million dollars. So it's a million dollar payback to the royalty, but five percent.
You want to raise the royalty? The royalty? Like you want to kick up the royalty, and I'll go down in the percentage. You can afford it, especially with how many we'll sell.
What's your offer on the royalty?
Well, why don't we go to 30?
30 works. I think 30 works. 30 up until a million. So $750,000 is a loan. Okay. I get 30% a chair until a million. Okay. It's paid off. We'll make it 3% interest and 5% equity.
Let's do it. Lori, do it. It's good. This is so brilliant in the outdoor space. Wait till they see the other things. Honestly, it's brilliant. We're working more products. Congratulations, guys. Thank you, guys. Thank you, guys. You.