Shark Tank investor Barbara Corcoran has gotten a whiff of 1,000% sales growth thanks to a millennial, female-owned business, PiperWai. The former New York real estate mogul struck a deal with co-founders Jess Edelstein and Sarah Ribner in a December 2015 episode when they were 27- and 26-years-old. Corcoran pledged a mere $50,000 for 25% of the all-natural deodorant maker.
Before Shark Tank, PiperWai was sold in about 40 independent brick-and-mortar retailers across the U.S, one in Canada and one in Beijing. Sales skyrocketed from $110,000 (in 10 months) before the show to a mind-blowing $1.7 million within three months. Since appearing on Shark Tank, PiperWai has received more than 200 new wholesale requests from a variety of retail outlets including beauty shops, gyms, pharmacies, organic grocery stories, wellness centers and national retail chains.
Co-founders and best friends Jess Edelstein and Sarah Ribner have been business partners since fourth grade when they sold lemonade together. Before starting PiperWai in 2014, CEO Edelstein was a realtor and had experience in theatre management. Chief operating officer Ribner worked as an equity sales analyst at a major real estate investment bank. She’s getting an MBA from Columbia Business School.
A two-ounce jar costs $2.44 to produce and sells for $11.99 plus shipping online. The company so far has no employees. Edelstein and Ribner do as much of the work themselves and contract out the rest. Before Shark Tank, they made the product themselves in a rented kitchen and filled orders from their apartments in the suburbs of Philadelphia, Penn.
They explain how they successfully closed Shark Tank deal and launched a million-dollar business with a $2,000 loan from one of their parents.
The Sweet Smell of Shark Tank Success
Ky Trang Ho: What made your Shark Tank appearance a success?
Jess Edelstein and Sarah Ribner: We took careful notes on all the Sharks by reading their books and interviews and binge-watching the show. We practiced answers to potential questions and we decided the minimum valuation we’d accept from any Shark was $200,000, or 25% of our company for $50,000.
Ho: How did you value your company?
Edelstein and Ribner: An important takeaway from our research and preparation was how the Shark Tank value and the market value of your company are two very different things. We knew going into the tank with a modest valuation would help our chances in winning over the Sharks. So many companies go in with unrealistic valuations that hurt their chances of scoring a deal. We only asked for $50,000 in exchange for 10% of the company, a $500,000 valuation.
We ended up giving up a lot more – 25% for the $50,000, lowering our valuation to $200,000. Even though our sales once the episode aired caused our actual valuation to skyrocket, the deal was well worth it for the exposure and opportunity to have Barbara Corcoran on our side.
Ho: What are the next steps in working with the Sharks after getting a deal? (When did you meet next? What did you discuss? How did you divide tasks, etc.?)
Edelstein and Ribner: Though we haven’t officially closed the deal with Barbara, she has already proven to be an incredible resource for us and always makes herself available to help us out. She even invited us on her “All-Star Retreat” in Cabo San Lucas, Mexico last month so we could meet and learn from her other entrepreneurs. What a dream come true that was.
Ho: What about the Tank experience surprised you the most?
Edelstein and Ribner: The public reaction to our product. We were told that we wouldn’t sell more than 10,000 units during the first week after airing. But we sold eight times that amount within one week.
Ho: If you could do the show over, what would you do differently?
Edelstein and Ribner: We would have disregarded the information we were provided with sales statistics of similar companies that aired on Shark Tank, gone with our gut feeling and prepared more than 50,000 units of our product prior to the air date.
Ho: What misconceptions do you think viewers have about the show?
Edelstein and Ribner: The biggest misconception is that any company airing on Shark Tank should be 100% ready for the public reaction. The truth is, companies are only given two weeks’ notice of their air date. Up until that announcement, the network cannot guarantee that the episode will actually make it to air.
Almost every company experiences some form of setback after the show whether it’s a backorder, website crashing, or over preparation and the inability to sell enough inventory. That’s just the unpredictable nature of the “Shark Tank Effect.”
Ho: What could you teach others about your Shark Tank experience?
Edelstein and Ribner: Preparation is key. Know your business inside and out, particularly the numbers such as lifetime revenue, customer acquisition costs, re-order rate, margins, cost of production and anything else that applies to the company’s specific industry.
Also, entrepreneurs should research the show and its participants as much as possible. We researched the Sharks’ individual investment strategies, biographies and work history. We binged watched the show to understand the intricacies of negotiating a deal on Shark Tank versus a traditional investor meeting.
Ho: What do you hope Barbara Corcoran will do for your business?
Edelstein and Ribner: Barbara has been incredibly hands-on with our business. She’s made herself available for strategy meetings on a regular basis. She has connected us to her extensive network to help us source new contracts from major national retailers. And she’s been involved in planning our next product, the stick applicator version of PiperWai.
Ho: What kind of return have Sharks made from investing in your business?
Edelstein and Ribner: As of now, we haven’t completed the deal with our Shark. However, she made a lucrative deal at a $200,000 valuation, as our company has experienced 1,000% growth within the first four weeks after Shark Tank.
Sniffing Out Opportunity In A Personal Problem
Ho: How did you come up with the idea for your business?
Edelstein and Ribner: When Jess decided to switch to natural deodorant, like most people she couldn’t find one that stood up to an active lifestyle or didn’t cause allergic reactions. So she decided to make her own and give some to Sarah to try.
Sarah noticed the gap in the market for an effective natural deodorant that wouldn’t burn sensitive skin so we perfected the formula and went into business together as PiperWai.
Ho: How did you come up with the recipe? What’s in it?
Edelstein and Ribner: It took months of research into body odor and trial and error until we came up with a formula that worked and wouldn’t irritate sensitive skin. The most active ingredients in PiperWai are the super-absorbent activated charcoal, dietary magnesium, skin conditioning ingredients like shea butter and vitamin E, plus our proprietary blend of essential oils. It doesn’t just smell like a spa, it’s functional with antimicrobial properties.
Ho: What hardships did you face in developing your business? Did you ever have doubts that it wouldn’t work?
Edelstein and Ribner: The challenges and growing pains we experienced from our rapid and unexpected growth were predominantly related to supply-chain issues. The co-packer we worked with for six months, the same co-packer that always projected they could grow with us, finally admitted they could not keep up with demand and produce our product in larger quantities.
Unfortunately, they did not decide this until we were three weeks into a massive backorder resulting from Shark Tank. We had to manage expectations from approximately 70,000 customers that were either miffed or downright upset with our production delays.
We worked tirelessly to find a new co-packer that could 1) invest in machinery to produce our product in greater quantities 2) scale production while maintaining product quality and 3) miraculously complete this in less than a month when our first co-packer needed six months to get our product right.
Of course, we had our doubts as we were managing a massive supply chain failure in a very public setting. We worked around the clock to reach this new goal and to finally get our company back on track.
Ho: How much did you personally invest in your business? How did you get the money to start your business initially?
Edelstein and Ribner: Back in early 2014, Jess’s parents fronted a small loan (about $2,000) for initial start-up costs: incorporation fees, website, raw materials and packaging for our first batch, and rent for the community kitchen to handcraft the product.
We also won a pitch competition at Columbia Business School and were awarded a $7,000 grant 10 months after launching. We completed a successful crowdfunding campaign to scale production last summer and surpassed our $20,000 goal. Neither of us has invested personal funds into the company to date nor do we take a salary. Since inception, the company’s growth has been funded by reinvesting profits.
Ho: How did you go about making the product, sourcing the materials and finding a manufacturer?
Edelstein and Ribner: We established a solid rapport with a local cosmetics manufacturer way before we needed to actually contract with them, just so they’d be ready for us when we were ready for them. We handcrafted the product ourselves — 300 jars at a time — with materials sourced from carefully researched and reliable suppliers. This was the case up until the very last second when it was no longer a sustainable way to keep up with demand.
Sweating to a Business Plan
Ho: What are you doing now to move your business forward and expand?
Edelstein and Ribner: The challenges and growing pains we experienced from our rapid and unexpected growth provided a valuable learning opportunity. We learned that our previous contract manufacturer (a facility that completes all mixing, filling, labeling for our product) could not keep up with demand and that our shipping carrier was experiencing a high volume of lost or delayed packages.
We immediately found a new contract manufacturer with a higher capacity to produce our product in bulk while maintaining its quality, and we upgraded to a new shipping carrier. Overall, we overhauled our entire supply chain to take our business to the next level.
We also saw numerous opportunities to improve our website and to expand our product offerings. Our action plan includes a new and improved website launching soon, the development of our highly anticipated stick applicator packaging, and an expanded wholesale business so our customers can have greater access to PiperWai on store shelves nationwide.
Ho: What is your marketing strategy? How do you acquire new customers and what are your customer acquisition costs?
Edelstein and Ribner: We’ve always relied on organic marketing through bloggers, influencers, press and other earned media, and word of mouth from current customers. We plan to continue this strategy since the exposure from Shark Tank has opened us to thousands of new customers that can vouch for our product.
Ho: What are your favorite business books?
Edelstein and Ribner: 1) #GirlBoss by Sophia Amoruso: It has practical advice from a successful female entrepreneur (founder of Nasty Gal). Her personality comes across in the narrative, and the advice ranges from basic career advice to street smarts.
2) The Power of Habit by Charles Duhigg: Our main takeaway is the power of “baby steps.” Breaking bad habits and forming new ones that set you up for success doesn’t have to be an overwhelming process. You can break it down into smaller portions until you transform your life.
3) The Hard Thing About Hard Things by Ben Horowitz: I read this book during our post Shark Tank growing pains. It helped put things in perspective. Sometimes in business, there will be one roadblock or challenge after another. All you can do is stay resilient to weather the storm.