Vengo Smart Vending Machine
DEAL
EPISODE SUMMARY
🕓 Air Date: March 18, 2016
Asking For:
$2,000,000 for 12.5%
Investor:
Lori Greiner, Kevin O'Leary
Deal:
$2,000,000 for 3%
PRODUCT SUMMARY
Vengo is a modern, slim-form factor vending machine that hangs on the wall like a picture frame, bringing video content to the point of purchase with a focus on cashless transactions and digital technology.
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Background Story
Founders Brian Shimmerlik and Steve Bofill, based in New York City, saw an opportunity to revolutionize the traditional vending machine model. Brian, with a background as an aerospace engineer, made a career shift to create Vengo. Frustrated with the inefficiencies and outdated appearance of conventional vending machines, the duo decided to develop a sleek, wall-mounted vending machine with advanced technology. Their vision was to bring vending machines into high-traffic areas, eliminating the need for floor space and enhancing the overall consumer experience.
The Product
Vengo stands out due to its slim design and cashless, digital operations. The vending machine is wall-mounted, resembling a picture frame, and offers an attractive alternative to traditional machines. It operates by bringing video content to the point of purchase, allowing users to browse products on a digital screen and make cashless transactions quickly. The machine is capable of fitting up to 100 small-sized products, thanks to the expertise of the team’s aerospace engineers.
The company’s business model involves selling the hardware to vending companies, and they charge a monthly fee of $20 per Vengo for the front-end software and maintenance. Vengo’s unique selling proposition is not just its physical product delivery but also the valuable data it collects from each transaction. The founders emphasize that they are not replacing traditional vending machines but positioning themselves as a software and media company managing a digital network from the cloud.
How It Went
The company’s position before Shark Tank
At the time of the pitch, Vengo had generated $1 million in sales for the year, with a strategic partnership with the largest vending machine company in the country. The founders disclosed that they had raised $3.4 million from reputable investors and were looking to secure additional funding on Shark Tank. Their current focus was on creating a network of Vengo machines, having already deployed 150 units with plans to expand to 250.
The company’s partners included the largest vending machine company in the country and collaborations with major brands like the nation’s largest chocolate manufacturer. Vengo’s sales model includes selling advertising space on the machine’s screen to brands at $200 per SKU per machine per month. The pitch highlighted their potential to reshape retail and marketing for physical products, leveraging the decline in traffic to physical stores and the need for innovative point-of-purchase advertising.
The Negotiations:
The negotiations were marked by skepticism from the Sharks regarding the company’s $16 million valuation. The founders justified their valuation based on the three years spent building the platform, partnerships with industry leaders, and their innovative approach to combining retail and media. After some Sharks dropped out due to concerns about the valuation and business model complexity, Kevin O’Leary made an offer of a $2 million, 7% interest loan for 3 years, and 3% equity.
Lori Greiner joined the deal, resulting in a combined offer of $2 million for 4% equity (2% each for Kevin and Lori). The negotiation continued with counteroffers from the founders, eventually settling at $2 million, 7% interest loan for 3 years, and 3% equity. The deal was accepted, and Vengo secured an investment from both Kevin O’Leary and Lori Greiner. The founders expressed excitement about having two Sharks on board and the potential for growth and expansion.
