Transcript

00:00 First into the tank is a customized version of a bedtime essential. Hi sharks. I'm susanna I'm kevin and we're seeking 400 000 for a 5 equity stick in our company pluto pillow. Now. I know what you're all thinking another pillow company well yes but thankfully here at pluto we do things differently see finding. The perfect pillow can be so amazing but finding the right pillow for you can also be super hard. Here's how it usually goes while shopping online you're faced with an overwhelming number of options that can be hard to compare with one another and with tens of thousands of search results. How do you know which would work best for you in stores is it better to squeeze pillows with your hands or should you awkwardly place your head on the dirty display pillows. The answer is both suck well with pluto. There's a better way. Pluto is a custom pillow company that custom builds pulls to you based on your body stats how you sleep and what you like here's how it works simply visit our website fill out a quick questionnaire tell us about your current pillow. What you like what you didn't like about. It then answer a few questions about your personal preferences.Then all of your data runs through our algorithm helping us create the perfect pillow for you. Our modular design allows us to create over 35 possible variations through our innovative process. The best part while there are a ton of pillows out there. Nobody else does this even better. Our customers love us so sharks before you hit snooze which one of you will join us in helping everyone get a good night's sleep. All right sharks um right in front of you. In those really cool boxes are your very own custom pluto pillows. Now we had to do some research to figure out what we should craft for you. We think these make great starting out points so mark word around the league is that you prefer fill pillows over foam pillows and you like your pillows to be really soft. So we made sure to cross that squishy squishy squishy. I like my pillow squishy daniel we heard how important it is for your sleep products to be hypoallergenic. The good news is all of our pillows are we crafted a pillow for you that's both light and soft mr wonderful.We heard that you prefer fill pillows over foam pillows so we made one for you. That's just that but one that never flattens lori you tend to heat up at night and you like more of a medium firmness level and lastly robert lucky. You you're exactly the same as mr wonderful. Both of you love thick plushy filled pillows. Yours is a quilted cover while kevin's is a smooth so sharks enjoy your out of this world pluto pillow susanna I have a question. I always assumed that there was actually a better pillar for everyone are you saying that that's not the case that really truly there is no scientific best.For everybody. There isn't so we take your body stats sleep positions and preferences so we know that like let's say if you're a side sleeper you need that like neck support for the neck to shoulder tip ratio whereas like a stomach sleeper. It's better if you sleep on a flat pillow. But besides that we also have empirical evidence we have over 1.5 million data points that we take into account of like what makes a great pillow for you. What do you mean by those 1.5 million data points. So we have an algorithm on our site that every time anyone goes on. Our website orders a pillow. We store this information and then we look at other people who answer similarly to that person and then we see like exactly what kind of pillow would be best for them with this data point and this has actually led to a very low return rate compared to the industry average. The industry average is 12.95 while ours is sub 8 and we did this in two years break down the numbers for me 2018. 197k when we first started 2019 473k and this year so far is 490k. There you go wow what's the average sales price. We saw our standard sizes for 95.How are you manufacturing so how this works is if you guys open up your pillows. Inside there's actually a foam core and it's surrounded by a plush outer cover. So there's these two main parts and through our questionnaire when it goes to our algorithm. The computer actually decides like hey. This person needs this foam with that plush cover so someone's in the facility picking yes. They just put it together just two components and variations of those two components. Two components make over 35 variations that feel really different one pillow.

04:30 You sell it at 95 dollars and then what does it cost you including fulfillment and what is your. What do you have left so 95 18 shipping and it cost us 25 to 30 to make the pillow so forty three dollars so you only have half about fifty percent. Margin yes so with that it's 50 or 60 just cost of goods sold so that's not a big ratio that sounds like you're normally gross. Margin structure is not so good is there a reason why because no matter how much you grow if your gross margin out the gate is bad you're just compounding the problem. So why are your gross margins not healthy and that's why with like if we could have a bigger size warehouse to order more materials. We can get that down to 20 to 25 instead of 25 to 30.You're talking about a few dollars like 18 of your cost to shipping right tell me a little bit about the back end operations how big is the team. So before this year it was actually just us two we boxed every pillow. We answered all the customers you guys did all the boxing in the warehouse. We were boxing in the warehouse and now we have we hire two pillow builders um. We have pillow builders yeah and we have someone who is full-time on customer service. I want to share with you a few things my thoughts well you're picking something smart because pillows are great and everybody needs pillows. It's also an extremely competitive space and I just think the combination of that along with your valuation just not the right investment for me.I'm sorry. I'm out thank you very much yes guys. You guys are are super impressive. I think lori makes a really good point about how competitive that industry is. But nobody does what we're doing in terms of taking body stats sleep positions and preferences into account and we have a utility patent penny. We have over one point five years depending on what on the way we make the pills combined with the algorithm and we have over 1.5 million. Data points that no other company has in terms of like evidence on like what makes a good pillow. We did all the hard work already right we already established the brand. We already created a product guys you haven't so here.I'm guessing you're using machine learning because it's linear right 1.5 million data points is nothing but you actually have kind of dropped the ball and I can tell by your answers because the better approach is to say based off my data points including my orders. I can build in anticipation of what will be ordered and will to be ordered from because you already know based off your machine learning algorithms. How many orders are going to take place from this part of the country that part of the country. This part of the country that part of the country right. I'm saying all this because I don't think you've gone through that whole process yet right and I don't think you're fully aware of all. The things you're going to have to go through yet to get there.So for those reasons. I'm out I love pillows. I'm obsessive about pillows but you know this world of algorithm. Everybody talks about how they have an algorithm and I'm not 100 sure that nobody else can do that. I don't think this is where I'm going to sleep comfortably so. I'm thank you very much daniel if this had been for a lower amount of capital risk. I would have probably done it just for the talent but you guys are too small for 8 million bucks. I'm out thank you kevin. I have to tell you when you came out here and you started talking about pillows. I was born out of my mind. I couldn't have been less interested but you sold me and I think there's a couple of big problems to mark's play your algorithm. It's not predictive. You've got to know what the potential orders are going to be before you get them. And I think you'll start getting that once you get the volume yeah but come on who up here knew everything about their business and to make those mistakes so at the end of the day. It's not about the mistakes you're making. It's about my confidence and your ability to overcome them and you've sold me on that so I like it all hate the valuation hate. The valuation don't let that get in your way. Robert so I was being quiet with my own algorithm and saying what number would make me feel comfortable sleeping at night. Four sharks are out but robert is interested in kevin and susannah's custom-built pillow company pluto. What number would make me feel comfortable sleeping at night so you're looking for four hundred thousand for five percent. I'm thinking four hundred thousand for 20 percent. Ichi.

09:28 It's aggressive but your ass was very aggressive. It's a mount. I feel comfortable with but. I think it's one of those things you won't need more money. You're going to need more expertise and more ways to get out there faster. It's an offer you've got a shark tank offer.Go 10. I think that's just a little bit hype would you be able to go down to nine percent or four hundred thousand. No. I'm not going to come down that much. I mean would I go down to nineteen nineteen and a half. Some marginal amount sure maybe if you could convince me. But I think it's a lot of money. It really is and it's a lot of my time and I do think you're one of these investments we're going to look back on and say wow pluto went to the moon. I think 19 is just a little bit too much. We've seen triple digit growth year over year. Since we started and we feel like there's not really much in our way to keep growing. We do want. Some experts yeah there's nothing wrong with sticking to your face agree guys. He could help you a lot for me is a matter of investment and risk and I think at 20. I'm deeply invested. What do you want to do. Let's shoot for the stars thank you so much for the offer robert. But I think 19 20 is just a little bit too much. I think we can't really go more than 10 for 400 000. I can't get there okay thank you robert guys good luck congrats guys and good luck thank you thank you very much guys thank you while we're so flattered by robert's offer. We felt we were worth way more than what he was offering and we feel that we could still grow this company ourselves. Next into the tank is a product designed to make a dreadful household chore. Easier hello sharks. I'm lola and I'm from los angeles california. I'm here asking for one hundred and fifty thousand dollars for 10 of my business badly sharks let's face it.

11:45 The duvet cover struggle is real. It's definitely one of the most frustrating tasks ever first. You may have to crawl your way into your comfort after that trying to line up all four corners while somehow getting out of this maze is beyond me now you're lost confused disoriented and almost cannot breathe and when you finally make it out alive you're left jumping up and down on your bed in hopes that your comforter will magically line up. All of this sweat and hassle making your bed does not have to be challenging complicated that respectful. There's gotta be a better way that's why I created the easiest fastest and most user-friendly duvet cover ever known introducing a bentley our signature. Innovative duvet cover has a three-sided opening that makes inserting or removing your duvet a breeze like never before simply unzip. The three sides place your duvet on top straighten things out. The badly duvet cover is just very easy to use. Even a child can handle it and sharks no need for crawling inside. So now she's gonna zip. The duvet cover off using our signature nylon zipper zip zip zip so no more stuff in shopping or you know duvet gymnastics with bedrooms.It's so easy think about how much time you saved and what you can do with that precious time so sharks who's ready to zip up this deal with me and bring badly to bed everywhere. I have samples for you robert thank you very much welcome sorry. Thank you mr wonderful is getting wise. He is pure as the driven oh yeah and damon and mark thank you lola thank you appreciate it. So you sharks may not know the difference between a blanket and a duvet let me explain the difference well. Mark doesn't. I certainly do not. The duvet was first made popular in the french course in versailles. It is a down filled large pillow and so the duvet cover allowed them to not have to wash the down every time they had to wash just the cover and so duvets became immensely popular with royalty all around the world. What years were those these are back in the 1400s how old were you in high school because I am a duvet expert lola it looked complicated even when she did it no that was easy that was very easy how complicated how would I how would. I know that from looking at yeah that's going to be my question. Like if.I'm in the store do you only sell this online today. Oh right now just online. So you have a video demonstrating what we just saw on the website yeah absolutely yeah because otherwise why would. I know the difference between yeah because it's a demonstrable yeah like I don't know. I wouldn't have known how to do that. So when you pick that up on the retail shelf you look at that. Hopefully you look at that label and it tells you it has a three-sided opening. It's hard to know that though lola looking at it because it's very small and the representation you don't have anything there. That says that okay well lola tell us about you okay. So what's your background so equipped with a degree in chemistry and physics. I'm originally from nigeria. So I i immigrated to the us. I ended up getting a job in uh investment banking on the technology side and then while working full-time. I went to colombia and got my mba. I've always had this entrepreneurial yearning. So I'm brainstorming what ideas can. I you know what can.

15:35 I so then. I'm like every time. I have to wash my duvet cover for a king size. Bed. It's a pain and I'm not a lazy person. But that was the one thing I did not like doing. I'm like no this has got to stop. There's got to be a solution to this so I looked. I didn't find it so. I decided. I'm going to make one everybody has this problem if they've ever changed their duvet cover exactly.So what does it cost you to make it and what the units that you sold. What did you sell them at right. Now. It's made in the u.s so our costs are very high and I know. I can get that down drastically so right. Now. It's 57.50 to make and we sell yes on average and I know. I can get this down and you sell it for what one for 130 140 average what are your sales okay. So. I'm gonna preface that with do not judge me by myself are you sure we promise you we will not judge you by your sales. I am going to judge you by your sales. 150 000. For ten percent. It puts a million and a half dollar valuation because your investment banker you know that I know okay so but you know what. I wasn't gonna let sales that are not gonna be pleasing to you. They're not stop me from getting here. Oh yeah don't worry about it. I'll just tell you the sales so our revenue from 2018 because that was when we really started to sell before that was just a few here and then just for life. What were the 28. We're not impressed okay lola. We don't live in the past thank you we do not live in the past and so this is 2019 year-to-date yeah 19th year to date is about 12 000. Yeah now we're judging you now we're judging you. This isn't important there's nobody suck on the number listen to me your sales suck. It's okay. I've been bootstrapping on this. I was paying like 91 000 all my own money and because my budget was so limited it wasn't going to stop me. So. I I hustled you didn't hustle enough. Why didn't you think you didn't sell more. I haven't been doing a lot of marketing tell you what I've done right. Now.We have this um in a macy's pop-up shop and I've been talking to you're in macy's qvc. And they like it enough to put it on there yeah. With this packaging pop-up shop yeah at two locations lola. This is a quality product but for me respectfully. It's not a product for me. But I wish you the best. I'm sorry. I'm out lola you deserve a ton of credit right. You you what you've accomplished is amazing your. Relentlessness is amazing for sales not so much yeah right. But it's telling you something honestly. I'm not a marketing expert. But I said I'm not going to stop you know you've got 91 000 of your own money that you've spent. You don't have enough money for marketing. You know. I don't want to keep saying this but it is what it is. I haven't been able to give this product. The brand awareness that he deserves most of our customers. They find this on google you know and they don't even market. Marketing is really a black hole if you don't figure it out now how are you going to figure it out with the money.What do you expect but I've learned a lot. I've seen a lot and then I can also have. I need help. I can get help. I think it's a genius idea. You know you're doing something that's very important. You're saving people time right and that's a lot of times why people purchase something. I just don't think you've figured it out yet so I'm out oh okay well. I um. There's a great saying I forget where I saw it every time you see somebody with a small business yeah. Somebody made a courageous decision yes so. I admire your courage thank you you are in love with the romantic idea of starting a business. But my money's got to go somewhere in order to get back an investment okay and today you didn't do a good job of presenting that I'm sorry. I'm out lola you're going through the same thing. A lot of entrepreneurs go through okay where they have a great product and they say to themselves well. I can't really sell a lot of them. It must be. I mean. I don't have enough money for marketing and if I only had more money for marketing. I can build a brand and if I build a brand then everybody will come rushing to me and buy it except that never works marketing dollars never build brands product satisfaction and execution build brands. I don't think you've got to figure out working hard on this. I've been working who doesn't. I got it. Everybody does it lola everybody. That's amazing. I got qvc. Interested lola self-awareness is key for every entrepreneur absolutely.We all lie to ourselves some more than others. You're in the more category right. Now you got to get to the less category. I'm out okay thank you good luck thank you kevin. Kevin didn't speak and then there was kevin that's shocking too no oh my god never no. I'm out okay thank you so much thank you.

20:58 I think the sharks were hung up on my sales numbers. But I know that all I need is just one breakthrough and I can push this into the millions. This woman has an mba. She got an mba are you saying that in a good way or about yeah. I'm saying where is that. I'm not a fan of mbas anymore. You know I got to tell you guys something.We've been together 10 years and it's the first time ever in shark tank history. I was speechless all. I could think of was no first in the tank is a product to help kids sleep more soundly. Hi. Hi hi sharks I'm katie and this is my mom. Lou. We're from atlanta georgia and we're here seeking four hundred thousand dollars in exchange for twenty percent of our company. Slumber pod traveling with your kiddos can be crazy stressful whether you're in a hotel room or crashing at grandma's. It can be a nightmare to share a room with a little one. Many babies need total darkness to sleep well. Parents often resort to crazy stuff like building dangerous homemade forts what is that mother doing for cables or if things really start to get crazy taping aluminum foil to the windows. Parents don't deserve to be sleep deprived and miserable on trips. So we decided to kick those sleepless nights to the curb and create our own easy solution. Slumber pod yay it's a portable privacy pod that gives your baby its own dark and private place to sleep. It's a test. Once your slumber pot is assembled simply slide it over your travel crib and just like that sweep is moments away designed with your baby's safety in mind it's made of breathable fabric. It's not having slumber pot is made of breathable fabric. It weighs less than six pounds and best of all. It fits in carry-on luggage. Our customers call our product a lifesaver a game changer and a marriage saver. I don't know sharks don't sleep on this amazing opportunity. So who's ready to join us in creating more 90 nights. Next time use a fake baby.All right oscar good night. Oscar those are real tears. Dammit. Real tears believe it or not. Oscar actually sleeps in this every night at home. He's just having a little stage anxiety thank you bye oscar. This lumber prison costs how much what do you sell it for a prison we sell for 149.99 and the landed cost is 56. Lou how did you come up with the idea of a tent for children so when I was home for the christmas holidays. When my oldest daughter was a year and a half we had to stay in the same room with her that room didn't have great window treatments. So some light was coming through and she kept waking up in the night seeing us across the room and not understanding that she needed to stay in the bed that it wasn't time to wake up. I think we got two or three hours of sleep. A night two nights in a row to the point where we went home a day early like sleep deprivation is a military torture tactic because it makes you miserable and crazy yeah that's a good point.Also how long will it take you to put it back in a box. Breaking it down probably takes two minutes or less and then putting in the bag. Another 30 seconds unless you have the pack and play otherwise the child curls out from under it. That's a great question barbara. So it also fits a toddler cotton side or you could make a pallet on the floor out of blankets. It's not designed to confine a child. It's designed to create a dark and private sleep environment. It looks really complicated their instructions sewn right into the bag as simple as setting up a camping tent and you know it may look a little bit um cumbersome but what you make up for that is in how small it gets. That's what allows it to fit and carry on luggage.

25:30 If you started selling them how much your sales we launched in august and then this year we've done 556 000. That's right what a surprise how did it take off because moms are obsessed. They love to talk about things that work and they love to put it on instagram. No advertising we've done very limited advertising so you guys have got to be just so profitable and just generating cash printing money. We became profitable in february. Uh we have no debt. What is your background tell us about you. I actually went back to college as a single mom at 39 years old. I got my master's degree at 50 um and I've worked for fortune 500 and small software companies um. So that's my background how about you katie and she's also a mom to six kids and I'm the oldest kids. I'm in the automotive space currently and I'm a mom to three. I have three old twins.So. I think about sometimes if I had given away. A percentage of my business would it have been right for me or was it better that I had to figure out everything and do it myself which made me stronger smarter better and not a one-person company anymore. I don't say this often but I think you should continue to do what you're doing because. I truly believe that I'm going to go out obviously. We have mixed feelings about that response but thank you. I want to add to lori's story if I may uh because something happened to me that was a real lesson in my career. I was in a terrible real estate recession. I owed the whole world so much money and as luck would have it merrill. Lynch came and offered to buy my business. They offered me 250 000 but here's what happened they changed their mind and I thought the sky had fallen and you know it was only five years later. I sold my business to 66 billion dollars to laurie's valid point be careful when you sell your stock but that being said I want to take advantage of you.One shark is out but barbara may be interested in lou and katie's child sleeping tent slumber pod be careful when you sell your stock but that being said I want to take advantage of you yeah. That's the truth she's nothing if not honest right so. I'm going to offer you 400 000 for 25. But I have one contingency. I don't want to wait forever to be paid back every time you sell something you name the number. I just want some kind of a payment so that I know. I'm getting paid back first get that money out. But I'll be a terrific partner okay. I'm gonna put some pressure great and I need you to answer me 25. That's a savage offer and greedy and I don't like that. I just. I don't. I do not appreciate that kind of greed. I'm going to loan you 400 000 at nine percent for three years that'll cover all your inventory costs. And I'm going to take seven percent equity for that loan. You're getting a bidding war going here. Oh there's just greed and reigns. Barbara made you a really fair offer. I would have made a more aggressive offer. I'm out thank you guys. I'm going to share a story similar to barbara's when we had started broadcast.com as audionet and we were the first streaming company in the country and microsoft got into that business and microsoft invited us up and we started talking about an offer and to barb's point. We thought we were right there for an offer that was going to be for 75 million. God better than my story didn't get that offer. But two years later we sold for 5.7 billion dollars because we didn't take that offer I'm out. This is more than money.We're looking for someone to help us scale. We're looking for those relationships. They want to help you of course. They want you to be successful. Barbara would you do our original deal yeah. I would let's do it. We'll do it.

29:55 Congratulations. Come give me a hug. I'm coming in really well you're squeezing on the money. But you're too nice thank congratulations. Guys congratulations ladies biggest sale ever done. In pajamas. We made a deal with parliament making a deal with barbara. It's a dream come true. She is a female shark which is what we were hoping for and she just seems like she'll be an incredible partner and to be able to grow our business together with my daughter is a dream country you.