Shark Tank US | Coldest's Entrepreneurs Are 'Terrible Pitchers' According To The Sharks

Summary

In this pitch, entrepreneurs Dave and Joe present their company, CEST, which specializes in creating ultra-cold products. They highlight their range of items like a water bottle that keeps drinks cold for over 36 hours, a cold pillow, dog bed, and dog bowl. With impressive sales growth, they are seeking $600,000 for a 2% equity stake to scale further. Despite their rapid growth, they face challenges with inventory management, advertising costs, and profitability. Sharks raise concerns about their business model and high inventory levels, but they still receive offers with varying terms, including royalty deals and equity stakes.

Takeaways

• 😀 The entrepreneurs, Dave and Joe, founded CEST, a company focused on creating the coldest products to help people stay cooler longer.
• 😀 They designed products such as a water bottle, pillow, dog bed, and dog bowl, all meant to stay cold for extended periods of time.
• 😀 CEST's water bottle was tested against 50+ large hydration brands and is designed to keep liquids cold for up to 36+ hours.
• 😀 The company is seeking $600,000 for 2% equity to expand their business and offer cold-related products.
• 😀 Dave and Joe come from immigrant backgrounds; their parents were engineers, which influenced their pursuit of engineering and business.
• 😀 The company initially struggled with side hustles, but after launching CEST, they reached significant sales milestones, including $900k in 2017 and $15.1 million in 2024.
• 😀 Despite growing sales, CEST faced issues with inventory and advertising expenses, losing $400k in the previous year.
• 😀 CEST has a substantial inventory, valued at $2.5 million, but struggles with managing over 350 SKUs and maintaining profitability.
• 😀 The company heavily invests in advertising, spending nearly $3.3 million in the previous year, but lacks sophisticated analytics to optimize the marketing spend.
• 😀 While the business has shown impressive growth, investors express concern over profitability and inventory management, with many backing out of the deal.
• 😀 Kevin O'Leary offers a deal of $600,000 for 5% equity with additional royalty terms, but the entrepreneurs prefer a cash offer with no royalty.

Q & A

What is the core product offered by CEST?

The core product offered by CEST is a water bottle designed to stay cold for up to 36 hours, alongside other products like pillows, dog beds, and dog bowls, all focused on maintaining coolness.

How did the entrepreneurs get started with CEST?

Dave and Joe started CEST with $14,000 in savings. They initially focused on creating cold-related products, beginning with the coldest water bottle. Despite skepticism from Dave’s older brother, they persevered and achieved significant growth.

What has been the revenue growth of CEST since its inception?

CEST's revenue grew from $900,000 in 2017 to $15.1 million in 2024, demonstrating rapid growth despite challenges with profitability.

What were the key challenges faced by CEST during its growth?

Key challenges included inventory management, with over $2.5 million in stock, and high advertising costs, with $3.3 million spent in one year. These factors contributed to the company losing $400,000 in profits despite strong sales.

How does CEST differentiate itself from other hydration product companies?

CEST differentiates itself by focusing not only on hydration products but also expanding into other categories like pillows and pet products, all designed to stay cold for extended periods, addressing a broader customer base.

What were the sharks’ primary concerns about CEST's business model?

The sharks were concerned about CEST’s lack of profitability, high inventory levels, excessive advertising spend, and the company's heavy reliance on sales growth without sufficient focus on efficient operations and profitability.

What was Kevin O'Leary’s offer to the entrepreneurs?

Kevin O'Leary offered $600,000 for 5-7% equity in the business, along with a royalty agreement that would allow him to recoup $3 million before the royalty ended.

Why were the entrepreneurs not interested in Kevin O'Leary's offer?

The entrepreneurs were not interested in Kevin’s royalty deal, as they were looking for a more straightforward investment without the conditions of royalty payments.

How much did CEST spend on advertising in the last year, and how does that impact their profitability?

CEST spent $3.3 million on advertising last year. While this helped drive sales, the high advertising cost combined with inventory issues contributed to the company's lack of profitability, leading to a $400,000 loss.

What was the counteroffer made by the entrepreneurs to Kevin O'Leary?

The entrepreneurs counteroffered by proposing $1.5 million for 5% equity, with the condition that after three years, they could buy back the equity at 1.5 times the initial investment.