Groove Book Owners receive Two COMPLETELY Different Offers | Shark Tank US

Summary

Brian and Julie Whiteman pitch their company, Groovebook, to the Sharks, seeking $150,000 for 20% equity. Groovebook offers an affordable solution for turning smartphone photos into bound photo books for just $2.99 a month, including shipping. Despite initial success with 18,000 paid subscribers, they struggle to break even due to high overhead costs. The Sharks debate the viability of the business, with some investors proposing licensing deals, while others want to buy the company outright. In the end, the Whitemans counter an offer, opting to partner with Mark and Kevin for a 100% licensing agreement and a share of the profits.

Takeaways

• 😀 Brian and Julie Whiteman, from Chatsworth, California, are seeking $150,000 for 20% of their company, GrooveBook.
• 😀 GrooveBook allows customers to create photo books from their smartphones, with up to 100 photos printed each month for only $2.99, including shipping.
• 😀 The company has 18,000 paid subscribers and is seeking 30,000 subscribers to break even. They currently make only 70 cents per book due to high overhead costs.
• 😀 GrooveBook's business model is based on low-cost, flexible photo books made possible by their patented binding technique that allows cheaper shipping costs.
• 😀 The cost to produce each GrooveBook is $2.30, and the price point of $2.99 is intended to keep the product affordable for all Americans.
• 😀 The company faced challenges due to their overhead costs ($21,000/month) and is looking for a way to scale while maintaining a low price.
• 😀 One unique feature of GrooveBook is its perforated design, which makes it easy to remove photos for framing or sharing.
• 😀 The business has potential competition from larger photo book companies like Shutterfly, but GrooveBook's low-cost shipping and flexible binding give it a competitive advantage.
• 😀 Mark Cuban suggests increasing the price of the GrooveBook by $1 to improve margins, but Brian and Julie are committed to keeping it affordable.
• 😀 After considering two offers, Brian and Julie are leaning towards Mark Cuban and Kevin O'Leary's offer of $150,000 for licensing GrooveBook as a service, which includes a 20% stake in the company.

Q & A

What is the business model of Groove Book?

Groove Book is a subscription-based service where customers pay $2.99 per month to receive a photo book with up to 100 photos. The photos are selected from their smartphones and printed into a book with a unique binding that allows for cheaper shipping.

How much does it cost to produce each Groove Book?

The production cost of each Groove Book is $2.30, leaving a slim profit margin of 70 cents per book at the current subscription price of $2.99.

What makes Groove Book's shipping costs unique?

Groove Book has developed a patented groove in the book’s binding that allows it to be mailed for only 82 cents, which is significantly lower than typical photo book shipping costs.

How many paid subscribers does Groove Book currently have, and how many are needed to break even?

Groove Book has 18,000 paid subscribers but needs 30,000 subscribers to break even due to high overhead costs of $21,000 per month.

Why is Groove Book’s pricing considered low?

The pricing is low ($2.99 per month) because Groove Book benefits from its in-house printing operation, which reduces production costs. However, the company has a very small profit margin of just 70 cents per book.

What role does Groove Book’s in-house printing business play in its success?

The in-house printing business is critical to Groove Book's low production costs. Without it, the company would not be able to offer such a low subscription price, and its business model would be unsustainable.

Why did the founders, Brian and Julie, emphasize the groove in the book’s design?

The groove in the book’s binding is a patented feature that makes the book flexible enough to be shipped inexpensively. This innovation allows Groove Book to reduce shipping costs significantly, which is a key advantage in their business model.

What was the initial offer from Mark Cuban and Kevin O’Leary?

Mark Cuban and Kevin O’Leary offered $150,000 for 80% of the non-subscription part of the business, focusing on the licensing rights to the technology and allowing Groove Book to maintain its subscription service.

Why did the founders counter the $750,000 offer for 100% of the business?

The founders countered with a $6 million valuation because they wanted to retain more ownership and control of the company, while still benefiting from the upside potential of future growth.

What was the final decision made by the founders regarding the offers?

The founders ultimately decided to go with the licensing deal offered by Mark Cuban and Kevin O’Leary, accepting $150,000 for 80% of the non-subscription part of the business, allowing them to retain ownership of the subscription service.