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When Rener Gracie pitched QuikFlip on Shark Tank season 10 episode 22, he sought $500,000 for 5% equity, valuing his company at $10 million. His convertible hoodie-backpack product had achieved $500,000 in revenue with a 38% profit margin. Sharks expressed concerns one by one. When it came to Kevin O'Leary, he stated,
"Everybody agrees the product probably has a market and you're a force of nature. No question. You're asking me to pay 20 times sales. Forget about profits. It's crazy. Classic deal where you ask for too much money at too early a time. $500k for this you'd have to have 50% maybe more. I'm out."
However, despite getting out initially, Kevin jumped back into negotiation and entered a bidding war with Lori Grenier. In the end, the entrepreneur left the Shark Tank with Lori’s offer.
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Shark Tank's Kevin O'Leary called QuikFlip's valuation 'crazy' in season 10 pitch
QuikFlip's Shark Tank presentation explained specific operational data that shaped the investment discussion. Each unit costed $14 to manufacture and retailed at $50, maintaining healthy margins. The company moved its initial inventory of 5,000 units in two and a half months through digital sales channels, bringing in $200,000.
The hoodie-backpack combination stemmed from Gracie's personal experience as a fitness enthusiast and martial arts instructor. After warming up during training sessions, he needed a practical way to carry his removed layers. This led to the creation of a patented clip mechanism that allows smooth transformation between wearing modes.
The Shark Tank company's direct-to-consumer strategy proved effective, with all sales occurring through online platforms. This approach allowed for higher profit margins and direct customer feedback. The business model focused on maintaining control over the sales process and customer experience.
Gracie brought substantial industry knowledge to the venture. His role as an instructor at the family's martial arts academy since 1989 provided deep insights into athletic wear needs. This background influenced product development and marketing strategies. His connections in the martial arts community created built-in distribution opportunities and market validation.
The patent-pending status of the conversion mechanism added concrete value to the company's assets. This protection covered the unique clip system that enables the hoodie-to-backpack transformation. The intellectual property portfolio strengthened QuikFlip's market position and differentiation from standard athletic wear.
Kevin O'Leary focused on QuikFlip's financial metrics during his evaluation. He analyzed the $500,000 revenue against the $10 million valuation request. The numbers indicated a 20 times sales multiple, which O'Leary considered too high for an early-stage company. His analysis emphasized the gap between current sales and the proposed company value.
Mark Cuban aligned with O'Leary's assessment and exited the negotiations. Daymond John expressed concerns about retail visibility, stating customers might miss the product's transformative feature on standard clothing racks. He opted out of making an offer.
Robert Herjavec saw potential in the concept and proposed $500,000 for 25% equity. This offer valued the company at $2 million, significantly below Gracie's initial ask. The negotiation shifted as other Shark Tank investors considered different investment structures.
Final developments
Lori Greiner, after observing the previous offers, structured a unique deal. She proposed $250,000 in cash combined with a $250,000 credit line for 10% equity. The deal included a contingency requiring patent approval. Gracie accepted these terms during filming.
As per Shark Tank Blog, the post-show trajectory showcased different outcomes. The televised deal with Greiner was not finalized for unknown reasons. However, QuikFlip experienced substantial growth. Time Magazine recognized the product in its 2019 Best Inventions list.
The company secured retail placement in Walmart and expanded its product range to include pullover hoodies, rain jackets, and designs for women and children. As per Shark Tank Blog, in 2024, annual revenue reached $4 million.
New episodes of Shark Tank are airing on the ABC network.
