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Inc: Kevin O'Leary Was Wary of Making a Deal With a Company That Nearly Closed Up Shop.
Don't take an offer that doesn't work for you or your business, even if it's the only one on the table. That's the key takeaway from the latest episode of Shark Tank, in which two co-founders refused to give more than a third of their company to Kevin O'Leary.
Husband-and-wife duo Stephane Jean-Baptiste and Yve-Car Momperousse were pitching Kreyol Essence, a line of skin, hair, and body products made with organic black castor oil from Haiti. There, on a company-owned farm, the founders say as many as 300 farmers and other workers harvest the seeds from the Ricinus communis plant and extract the oil. They were seeking $400,000 for 10 percent equity in the Miami-based business, which sells its products on its website and through retailers like Whole Foods.
Jean-Baptiste and Momperousse launched the startup in 2014 with a primary focus on bulk sales, they told the Sharks. However, in 2016, they lost one of their top clients and sales dropped from $130,000 in 2014 to $40,000 two years later, prompting the couple to consider closing up shop.
"It challenged our relationship, and we felt we had failed our community and our ourselves," Jean-Baptiste said on the show. "It's my culture and identity, it's everything my parents sacrificed to get us here."
Instead of shuttering, they pivoted to a direct-to-consumer business model and took in $327,000 in sales the following year. At the time of filming in 2019, the founders said they expected to close the year with $2 million in sales thanks to a deal with Ulta to sell in 1,200 stores. On the company's website, products range in price from an $8 bar of soap to $60 for a 3.4-ounce bottle of face and hair oil.
Mark Cuban, Daymond John, Barbara Corcoran, and Lori Greiner dropped out early but praised the company's success and Momperousse's skills as a salesperson. That left O'Leary, who saw potential but believed it would be a risky investment. He offered $400,000 for 37 percent equity, which stunned the couple.
Momperousse tried to counter for 20 percent equity, but O'Leary declined. "I'm impressed by you, but now we are having a tough-love discussion," he told the co-founders. "It's about money, I want to make money."
Momperousse, like other sharp entrepreneurs who've recently appeared on Shark Tank, proposed a royalty deal to keep O'Leary as an investor but reduce the amount of equity he would receive. Eventually, the trio settled on a $400,000 investment, for 5 percent equity and a 25 cent royalty on every item, in perpetuity.
"We were not expecting Mr. Wonderful to be a partner in a Haitian beauty brand," Momperousse said after leaving the Tank. "But Kevin O'Leary surprises you."