Vurtego – Flipped Over and Bounced Out (Episode 2.1)
by Shark Tank TV Show on Thursday, March 31st, 2011 | No Comments
Third Guest: Brian Spencer, Vurtego Pogo Sticks
This segment had one of the most impressive openings we have ever seen with professionals doing flips on pogo sticks. We especially liked it when the two athletes turned back flips in unison. Wow!He was looking for $500,000 for a 20% stake, for a pre-money valuation of $2,000,000.
They have “reinvented the pogo stick” and have sold 7,000 so far. Kevin was surprised that no one had broken their neck so far, and we were too! Brian said they were “deceptively safe because you weren’t dealing with speed”, which was just plain nuts. You can easily break your neck with a fall of just a few feet!
The retail price was $330 with a cost of $100. There was not enough margin in that price strategy. Mark said he thought it should sell for $600 or so, and we agree. With that kind of margin, you can find a lot of routes to market and offer a lot of creative discounts. There was definitely an opportunity to sell a more premium brand.
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Brian said “in order to make money with this, we need to approach the masses” and we totally disagree with him, siding with the sharks. Mark was very correct in saying that when he goes mass market, he is a lot less “cool and hip”. All of the sharks agreed with him.Barbara was out because she was a mom, and thinks it is a miracle that someone hadn’t been killed already.
Mark said “When you try to please everybody, you end up pleasing nobody” and he was out.
Kevin said to sell it for $1,200 and make an obscene profit, and he was out.
Daymond said that “you don’t need us” and he was out. Robert said mass marketing the concept was a very bad idea and he was out.
Our Analysis:
- Presentation: Brian was very “cool and hip”, matching the brand of his product.
- Business Strengths: The product appeals to thrill seekers currently doing tricks on skateboards and BMX bikes. (Think Extreme Games). They have a strong foundation.
- Business Weaknesses:. The idea to go mass-market is a bad one, and there is the obvious liability risk that extreme sports suppliers have to deal with.
- The Deal: He wanted $500,000 for 20% of the company. here were no counteroffers and there was no deal.
- Sharks: All agreed that mass market was a very bad idea for this product. We agree too.
Next Step Suggestions:
- Raise the price, establish competitions around the country, and go for the cool!
Lessons:
- Premier brands can’t also be mass market brands. They should carry a premium price and appeal to a much smaller marketplace. Selling a premier product to a small market at a huge price can make a company very successful.
- I loved Marks statement: “When you try to please everybody, you end up pleasing nobody”.
- You have to have a lot of margin in your products. The general rule of thumb is that your retail price should be at least 4x your cost to manufacture.
Followup:
- You can learn more about Vurtego Pogo Sticks at www.vurtego.com. They still sell for around $330.
(If you are interested in raising capital for your business, visit us at www.AngelNetwork.com)
