FireAvert – Fire Prevention Device
DEAL
EPISODE SUMMARY
🕓 Air Date: January 5, 2016
Asking For:
$300,000 for 7%
Investor:
Lori Greiner
Deal:
$300,000 for 10% + 10% royalty until $400,000 is repaid
PRODUCT SUMMARY
FireAvert is a device that cuts power to a stove when triggered by a smoke alarm, preventing kitchen fires.
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Background Story
Peter Thorpe, a firefighter and entrepreneur, created FireAvert after witnessing the frequent occurrence of home fires caused by unattended stoves. He recognized the importance of preventing these incidents and developed FireAvert as a simple device that cuts power to a stove upon detecting a smoke alarm.
Facing financial challenges, Thorpe initially brought in investors, one of whom, Jeff, became the majority shareholder with a 60% stake. Despite financial support, Thorpe continued to face hardships, putting his personal finances on the line. Seeking a deal on Shark Tank, Thorpe aimed to regain control and secure funding for FireAvert’s growth.
The Product
FireAvert is a device designed to prevent kitchen fires caused by unattended stoves. The device is simple to install – users plug their stoves into FireAvert, connect FireAvert to the wall, and it’s ready to function. When a smoke alarm is triggered due to burning food, FireAvert detects the signal, cuts power to the stove, eliminates the heat source, and effectively prevents a potential fire.
The product is currently tailored for electric stoves and is priced at $195. Thorpe emphasized that smoke often precedes fire, and FireAvert aims at fire prevention rather than firefighting. The product has been on the market for 18 months and has garnered attention for its effectiveness in addressing a significant cause of home fires.
FireAvert primarily targets multi-family housing and senior housing facilities, where stove fires are a recurring issue. Thorpe highlighted the strategic partnership with Jeff, a major investor and a multi-family housing owner, who has facilitated networking opportunities. The company’s focus is on selling directly to these housing facilities, making it a practical solution for property owners concerned about stove-related fires in their portfolios.
How It Went
The company’s position before Shark Tank
FireAvert’s financial performance indicates positive growth. With an expected revenue of $2 million in the current year and a net profit margin of 37%, the company seems to be in a healthy position. The product has been on the market for 18 months, already reaching $1.5 million in sales. Thorpe mentioned direct sales to multi-family housing and senior housing facilities, showcasing the product’s relevance to property owners dealing with stove fires. The cost of producing FireAvert is $45, and Thorpe believes this cost can be further reduced to $20, potentially increasing profitability.
However, the company faced challenges early on, with Thorpe giving away a significant portion of the equity to early investors, including Jeff, who became the majority shareholder with 60%. This led to financial struggles for Thorpe, forcing him to put personal savings and even mortgage payments on a credit card to keep the business afloat. Despite the challenges, Thorpe remains optimistic about FireAvert’s potential and seeks a deal on Shark Tank to propel the company to greater heights.
The Negotiations:
The negotiations revolved around the initial equity distribution and the impact it had on FireAvert’s ability to secure new investments. Sharks expressed concern about the high equity Thorpe had already given away, with his friend owning 60% of the company. Kevin O’Leary proposed a deal to buy out Thorpe’s partner 60% for $300,000 and give Thorpe 51% voting control. However, this offer was declined, as Jeff (Thorpe’s partner) wanted to retain his equity position. The founder made a counteroffer to Lori of $300,000 for 12%, while Kevin O’Leary and Robert Herjavec continued to negotiate with different terms.
Ultimately, Lori Greiner closed the deal with a $300,000 loan, a 10% royalty until paid back $400,000, and a 10% equity stake in FireAvert. The negotiation process revealed the challenges Thorpe faced due to the initial equity distribution but also highlighted the strategic value of Jeff’s involvement. The deal with Greiner provided the necessary capital for FireAvert’s growth, securing a partnership that Thorpe believed would benefit from Greiner’s investment and expertise.
