Roominate – Toys That Inspire Innovation
DEAL
EPISODE SUMMARY
🕓 Air Date: September 26, 2014
Asking For:
$500,000 for 5%
Investor:
Mark Cuban, Lori Greiner (50/50)
Deal:
$500,000 for 5%
PRODUCT SUMMARY
Roominate is a wired building system designed to inspire girls aged 6 and up, allowing them to construct three-story structures with working circuits to create various designs, from high-rises to merry-go-rounds.
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Background Story
Roominate, based in Palo Alto, California, was founded by Alice Brooks and Bettina Chen, two visionary engineers with impressive academic backgrounds. Both women studied engineering at renowned institutions, with Alice pursuing mechanical engineering at MIT and Stanford, and Bettina focusing on electrical engineering at Caltech and Stanford. Their paths converged at Stanford, where they formed a friendship rooted in their shared experiences as two of the few women in the engineering field. The inspiration for Roominate arose from their childhoods and the realization that toys played a pivotal role in shaping their career paths. Alice, at the age of 8, asked for a Barbie but received a saw from her father instead.
This unconventional gift ignited her passion for building dolls and dollhouses out of wood and nails, marking the beginning of her love for engineering. Bettina, too, had experiences with toys that influenced her trajectory. Recognizing the gender gap in STEM fields and the lack of exposure for young girls, Alice and Bettina set out to create Roominate. Their mission was to empower the next generation of female engineers and innovators. The product, a wired building system, was designed to inspire creativity and exploration in girls aged 6 and up.
Roominate enables the construction of three-story structures with balconies, spiral staircases, and a working circuit that powers various moving elements, from windmills to elevators. The duo’s unique backgrounds, shared passion for engineering, and personal experiences with toys drove them to establish Roominate as a platform for open-ended play, breaking gender stereotypes and encouraging girls to engage with STEM concepts from an early age. The company’s headquarters in the heart of Silicon Valley reflects its commitment to fostering innovation and diversity in the world of children’s toys.
The Product
Roominate is a revolutionary wired building system designed to inspire creativity and innovation in girls aged 6 and up. The product offers a unique blend of structural design and circuitry, providing an engaging platform for open-ended play.
The building process starts with the construction of three-story structures, complete with balconies and spiral staircases. What sets Roominate apart is its working circuit, allowing users to wire up various components, from spinning windmills to merry-go-rounds and functional elevators. The circuits are not only educational but also add an exciting and interactive dimension to the creations.
Roominate’s key features include its open-ended nature, empowering girls to decide what they want to build. The product serves as a departure from traditional toys and stands out by fostering imagination and hands-on learning. The diverse possibilities, ranging from recreating iconic structures to inventing entirely new designs, make Roominate a versatile and captivating play experience.
Roominate is available for purchase through various channels, including major retailers like Toys “R” Us, RadioShack, Barnes & Noble, Michaels, and Nordstrom, both in physical stores and online. The affordability and accessibility of Roominate contribute to its widespread appeal, making it an attractive option for parents and educators seeking to encourage STEM learning in a fun and interactive way.
How It Went
The company’s position before Shark Tank
Roominate has demonstrated robust performance, showcasing its health and strong market position in the toy industry. With $1.7 million in sales to date, the company has made significant strides since its inception. In the current calendar year, Roominate projects reaching $5 million in sales, having already surpassed $1 million, indicating substantial growth and market acceptance. The company’s strategic partnerships with major retailers underscore its market presence. Roominate’s distribution network includes prominent names such as Toys “R” Us, where they will be available in all 596 stores, and RadioShack, with a presence in 1,500 stores. Additionally, Roominate has secured deals with Barnes & Noble, Michaels, and Nordstrom, showcasing a diverse and widespread retail footprint.
The company is also expanding internationally, with plans to enter the Canadian market. Roominate’s customer base spans both genders, as the product’s appeal extends beyond its initial girl-centric focus. The founders highlight that while the product is gender-specific in its marketing, boys have also shown interest and engaged with Roominate. Funding for Roominate has been secured through a combination of investments and ownership stakes. The company has successfully raised $850,000 in investments, maintaining majority ownership. The valuation stands at $6 million, reflecting investor confidence in the company’s potential. The challenge of managing inventory, especially in the seasonally sensitive toy industry, is acknowledged.
The company seems well-prepared, having already secured substantial distribution deals for the upcoming fall season. Roominate’s current structure positions it as a player with strong retail partnerships, diversified revenue streams, and international expansion plans. The founders’ commitment to fostering innovation and diversity in the toy industry is evident in their strategic approach and the product’s market success. The company’s financial health, coupled with its commitment to inspiring the next generation of innovators, positions Roominate as a noteworthy player in the evolving landscape of educational toys.
The Negotiations:
The negotiations for Roominate unfolded with an initial ask of $500,000 in exchange for a 5% equity stake in the company. Mark Cuban and Lori Greiner made a joint offer, proposing $500,000 each for a combined $1 million investment, acquiring a 10% equity stake. The emotional aspect of Mark’s offer included the condition that his daughters, Alyssa and Alexis, could spend time with the founders to serve as positive role models, aligning with Mark’s personal values. The founders enthusiastically accepted this deal, marking a significant moment in the negotiation.
Prior to this offer, Kevin O’Leary expressed concerns about the valuation, stating that the toy industry is notoriously competitive and subject to seasonality. He ultimately opted out of the deal, followed by Barbara Corcoran, who felt that Roominate didn’t effectively communicate its girl-centric focus during the pitch. Mark Cuban’s emotional investment was supported by Lori Greiner, who also expressed her belief in the product and the importance of encouraging young women in STEM fields. The joint deal provided Roominate with not only the desired funding but also the support of two influential sharks with expertise in different areas — Mark in the tech space and Lori as an inventor.
In the aftermath, Kevin O’Leary humorously questioned Mark’s motives, emphasizing the perceived irrationality of the deal. However, the founders’ excitement and the strategic advantages offered by Mark and Lori made the joint offer an attractive and transformative opportunity for Roominate’s future growth. The negotiation highlighted the emotional connection that investors can have with a product, especially when aligned with personal values and aspirations for the next generation.
