BetterBack Posture Corrector
DEAL
EPISODE SUMMARY
🕓 Air Date: February 26, 2016
Asking For:
$750,000 for 7.5%
Investor:
Lori Greiner
Deal:
$750,000 for 8%
PRODUCT SUMMARY
BetterBack is a portable posture corrector designed to alleviate back pain by promoting perfect posture during sitting.
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Background Story
Katherine Krug, the founder of BetterBack, entered the Shark Tank seeking a $750,000 investment for a 7.5% equity stake in her company. The inspiration for BetterBack came from Katherine’s own experience with back pain, which started over three years ago due to long hours spent working on her startup. Despite trying numerous products and therapies, she couldn’t find an effective solution. With a background in industrial design, Katherine collaborated with a friend to create a prototype that eventually became BetterBack.
She launched the product on Kickstarter with a funding goal of $12,500 but exceeded expectations by selling $1.2 million worth of BetterBacks in just over a month. Katherine’s success on Kickstarter made her the first solo woman to surpass the million-dollar mark on the platform. The demand for BetterBack is evident, considering the alarming statistic that 50% of working Americans suffer from back pain, leading to a $50 billion expenditure on back pain treatments annually in the United States alone.
The Product
BetterBack is a lightweight and portable posture corrector designed to address the prevalent issue of back pain caused by poor posture during extended periods of sitting. The product aims to make every chair ergonomic, allowing users to sit effortlessly in perfect posture. It consists of a back pad and knee pads that are wrapped around the respective areas, providing support and helping users maintain proper alignment. The simple yet effective design allows for easy and quick application after the initial setup.
The product’s cost per unit is $8.05, and during the Kickstarter campaign, it was sold for $49. With impressive initial sales and 30,000 units in production, BetterBack has the potential for significant market penetration. Katherine plans to expand distribution through Amazon and has enlisted the help of an Amazon growth hacker to optimize online visibility.
How It Went
The company’s position before Shark Tank
BetterBack’s Kickstarter campaign was a massive success, surpassing the initial funding goal and generating $1.2 million in sales within a month. Katherine states that she has $875,000 in the bank from these sales, with an additional 30,000 units in production. The company has ambitious plans for online sales, targeting $4.5 million in the coming year.
Despite the positive reception of the product on Kickstarter, there is an element of risk associated with its broader market reception. The Sharks emphasize the need for proven success beyond the initial campaign, emphasizing the gap between a successful crowdfunding campaign and building a sustainable business.
The Negotiations:
The negotiations revolve around the company’s valuation and the Sharks’ concerns about the transition from Kickstarter success to sustained online sales. Lori expresses her interest in BetterBack, offering $750,000 for a 20% equity stake, highlighting her experience with demonstrable products and successful launches on QVC. Robert and Kevin also make offers. Robert offers $750,000 for a 25% equity stake, valuing the company at around $3.5 million to $5 million. Kevin proposes a $750,000 loan at 7.5% interest over three years, with 8% equity in the company.
The negotiations intensify as the Sharks discuss the valuation and the potential risks associated with the online transition. Lori sweetens her offer by suggesting a partnership that could complement BetterBack with her existing product line, leveraging her success on QVC. In a surprising turn, both Lori and Kevin offer financing options. Lori proposes a $750,000 loan at 7.5% interest, while Kevin offers a similar loan with an 8% equity stake. The terms vary slightly, with Kevin providing a longer repayment period.
After deliberating and seeking advice from the Sharks, Katherine accepts Lori’s offer of $750,000 for an 8% equity stake. The deal is made, and Katherine expresses excitement about the mentorship and guidance she anticipates from working with Lori.
