Bits and Pieces: Riches Found In Shark TankFebruary 2014 By Erik Cagle
A California printer recently went swimming with sharks, and not only did he live to tell about it, the experience could prove to be highly profitable.
Brian Whiteman, owner of Dot Graphics, a Los Angeles-area firm that provides custom in-house design, printing, bindery and fulfillment services for clients throughout California, appeared with his wife, Julie, on the Jan. 10 episode of ABC-TV's "Shark Tank."
For those unfamiliar with the program, the reality show pairs businesspeople, entrepreneurs and would-be purveyors of the next great product or service with a panel of "sharks"—businessmen and women who have secured their own fortunes in various industries and who are looking to make sound investments in other projects. The object: to pitch your product or service to the sharks in order to secure an investment or a deal that can take an idea from potential to profitable.
Perhaps the most well-known shark is Mark Cuban, owner of the NBA's Dallas Mavericks, but the other sharks have crafted their own niches in fashion, technology and real estate, to name a few. The shark panel listens to the pitch and either makes an offer—for example, a $150,000 investment for a 25 percent stake in the company—or passes on it with the catch phrase, "I'm out."
The Whitemans certainly dropped blood in the shark tank with their GrooveBook pitch. The couple sought a $150,000 investment for a 20 percent stake in the app, which allows users to take their smart phone pictures and convert them into printed 4.5x6.5˝ photo books. For a $2.99 per month subscription, which includes shipping, users can have 100 of their images converted into hard copy photos. The photos are stamped, dated and perforated for easy removal.
The secret to the Whitemans' product is the patent-pending, grooved spine. The flexibility allows the GrooveBook to be mailed bulk through the USPS for a mere 82 cents.
At the time the episode aired, GrooveBook had yet to become profitable. The company picked up 18,000 subscribers in the previous eight months, but needed 30,000 subscribers in order to break even and then reap the 69 cents per book profit. Brian Whiteman, who has invested $400,000 in GrooveBook, admitted to shark Robert Herjovec that costs would be higher if the book was printed and bound by another commercial printer.
One of the concerns expressed by several sharks was the ongoing viability of GrooveBook being tied to the survival of the commercial printing business (Dot Graphics). Because of that, sharks Herjovec (at first) and Daymond John passed on GrooveBook.
However, the Whitemans reaped a pair of offers from two sets of sharks. In one offer, sharks Lori Greiner (of QVC home shopping fame) and Herjovec (now back in) offered the Whitemans $750,000 to buy GrooveBook outright, but Brian Whiteman said he wanted some "skin in the game." So Greiner/Herjovec countered with $375,000/50 percent stake.
In the other offer, Cuban and venture capitalist Kevin O'Leary proposed $150,000 for an 80 percent share for the ability to license GrooveBook and offer it as a service, with the Whitemans maintaining their subscription-based holdings. That way, it could be offered to other online photo book companies that cannot provide it as cheaply to their own clients due to mailing costs—companies that would sell them as one-off products.
Although Herjovec argued that end users buying their pictures in one-off fashion from licensees could cannibalize the Whitemans' subscription-based model, Brian Whiteman opted to go with Cuban and O'Leary. Whiteman called the opportunity to double dip a "win-win situation."
It would be interesting to check back with Whiteman in a year's time to see how GrooveBook is faring. PI