Lumio Before Shark Tank
Lumio founder Max Gunawan, from San Francisco, was an ex-architect with an inventive streak and a big project in mind. He was attempting the tricky task of designing a modular home that was capable of being folded flat into a compact car. Max was more than equal to the task when it came to the engineering challenges involved, but the capital required to build the prototypes for the entire house was far beyond his budget.
He decided to take the concept and reduce the scale of it to a folding lamp alone, Max had a habit of jotting all his ideas in a notebook so it was a natural progression for him to give the lamp the form of a notebook. The idea behind Lumio was born, but in order to get the business up and running Max turned to the crowd funding site Kickstarter in February 2013. He was initially seeking $60,000 funding from Kickstarter, but his well-designed campaign perfectly highlighted the cool and stylish Lumio, and the campaign was a huge success. Within 48 hours $80,000 had been raised, and by the time the campaign came to a close, one month later, Max had achieved funding of $578,000.
The Lumio business was off to a flying start. Max used the funding to complete the manufacturing process, during which he even spent four months at the production facility in China in order to make sure everything was perfect. He was rewarded well for his efforts, sales in 2013 were $1 million, without any great expenditure on marketing, instead the simple beauty of Lumio sold itself, and word of mouth alone was sufficient to expand sales gradually. The follow year sales were on track to more than double, and demand was becoming greater than Max’s supply. In order to scale up the business Max needed more capital and a strategic partner, Shark Tank was an obvious next step and after a successful application process, he eventually got the opportunity to pitch to the sharks in late 2014.
Lumio On Shark Tank
When Max appeared in the tank, he was hoping to get a $250,000 investment in exchange for 8% equity in the Lumio business. The sharks looked a little dubious as Max mentioned the 8% equity figure, they are generally unfavorable to low equity deals, but within a few seconds they began to see the light.
Describing Lumio as an ‘Elegant Lighting Solution’ Max opened up the Lumio and his face was bathed in a majestic white light, the effect was almost magical.
Daymond John’s eyes widened in wonder and the other sharks were spellbound as Max continued. He demonstrated the ability to turn the book into a 360 degree light, and its directional lighting capabilities, while he pitched his unique product the sharks were as silent as a group of tired toddlers watching The Lion King. He ran through the super strong magnets that could attach to Lumio to any metallic surface, whether horizontal or vertical. Mark Cuban commented ‘It’s cool’ while Robert Herjavec thought the Lumio was ‘Beautiful’, the other sharks were silent, but they were just as impressed.
Kevin O’Leary inquired about the battery life of the product, Max told him the battery would last for up to 8 hours and could be charged via a USB lead. He explained about the million dollars worth of sales in the first year of business, all without any marketing and Daymond asked how that had been achieved. Max explained about his phenomenally successful Kickstarter campaign, and the large amount of sales he had achieved with it. When Max revealed that his target had been only $60,000, yet he had raised over half a million dollars from the campaign, the sharks were visibly impressed.
Robert asked about the retail price. Max told him that the Lumio sold for $190, yet cost only $65. He told the sharks about his four month stay in China, to oversee the production process at the manufacturing facility there, and explained that it had enabled him to lower the cost per unit from $80. He also informed them he was hopeful of lowering the cost per unit to $50 in the future, if he could get a deal with a shark.
Mark Cuban asked about the sales strategy of the business so far, and Max disclosed that he had primarily stuck to Museums, and smaller independent design stores so far, yet was still beginning to have problems keeping up with demand.
Lori Greiner asked the entrepreneur about his future plans. Max showed the sharks the prototype of the new ‘mini’ Lumio. It was small enough to be able to fit easily into a pocket, was ideal for outside and could also re-charge mobile devices, which hit a big note of approval from all the sharks.
Kevin O’Leary asked about the projected sales figures for the current year. Max told him that he expected to hit over $2 million in sales, as a conservative estimate, $2.5 million was a more likely figure.
Robert told Max that the Lumio was beautiful, it brought a smile to his face and he was impressed with Max’s commitment and drive, particularly as he had spent months overseeing the production in a Chinese factory. Robert asserted that he shared the vision, thought the valuation was fair and he had an offer to make. He would provide the required $250,000 investment, in exchange for 10% equity.
Max graciously thanked Robert for his offer, but there were more to come, a lot more.
Kevin was interested, and he had one of his characteristically unusual offers for the entrepreneur. He would give Max the $250,000 as a loan. He would take a $7 per unit royalty until $500,000 had been repaid, and then take just 4% equity. As an afterthought he offered to finance purchase orders for Lumio too. Kevin announced the other sharks were brain-dead while he was creative, he emphasized his offer valued Lumio at over $6 million, yet Max’s own valuation had only been $3.1 million.
Mark Cuban inquired what sales channels Max wanted to focus on. Max confirmed that E-commerce sales were his priority, as they had the greatest profit margin. Mark Cuban admitted he was glad to hear that, his own strength was E-commerce and he had a third offer for Max to consider, he would offer $500,000 in exchange for 16% equity.
Max considered his options briefly before Lori announced that she too had an offer for him. She admired the strategy of placing Lumio in museums and independent design stores, she had visions of the next Lumio with colored lights, rather than just white light, and she wanted to help Max produce that as the next generation of Lumio products. She would supply $250,000 for 12% equity, but she would also offer Lumio a $250,000 line of credit.
Daymond wasn’t going to be left behind, Max became that rare breed of entrepreneur who had all five sharks vying for his approval as the FUBU guru added his own deal to the pile. Daymond would offer $750,000 investment in Lumio, but in exchange for 20% equity in the business. He would pursue a licencing agreement for Lumio and the deal included a $10 million line of credit.
Max was a little overwhelmed by the number of offers open to him. Kevin O’Leary helped him out a little by running through the deals on the table. Kevin also once again emphasized the low equity figure involved in his own deal, and mentioned that Max could walk out of the tank to finance again with only 4% equity surrendered.
Daymond was quick to object to Kevin’s not-so-subtle manipulation, he pointed out that Max would not need another round of fund raising with his $10 million line of credit. Daymond and Kevin battled it out briefly, with Daymond asserting that only he and Lori really knew products.
The tension settled down between the two sharks and Kevin once again ran through the offers, but this time he was interrupted by Robert, who announced he would improve his offer. He told Max once again that he shared his vision, and was prepared to offer $350,000 for the same 10% equity.
Max considered his options briefly, but with such a large number of avenues open to him, Robert’s improved offer was the one he chose. ‘Robert, you’ve got a deal’ he announced, and his new partner got up to shake on it.
Lumio Now in 2017 – The After Shark Tank Update
Immediately afterwards, Max was pleased to have received interest from all five sharks, but was delighted to have Robert Herjavec as his shark investor, claiming that Robert had been his number one choice of new partner all along. He thought the deal he had been offered was great’ and he was excited about the future of the business. Robert Herjavec appeared to be equally positive about the new partnership, he tweeted after the segment was aired, speaking about his admiration of Max’s attitude and commitment, calling him an ‘incredible guy’.
The response to the elegant design of Lumio and Max’s well thought out pitch was as positive from the viewers of Shark Tank as the response from the sharks had been. Within ten minutes of the segment being aired 3,000 orders were received. Max soon found that the appeal of the show spread far further than America alone, he was walking through a shopping mall in Jakarka a few weeks later and someone recognized him as ‘Max from Shark Tank’.
The publicity for Lumio has continued after shark tank, it has now been featured a variety of publications, including GQ magazine and the Wall Street Journal. The Kickstarter campaign gained Lumio a mention in Entrepreneur magazine’s list of the 10 most innovative crowd-funded companies.
Helped by the funding he had received from Robert, Max launched The mini Lumio+ in November 2015, it retails for $125 and can be found on the Lumio website, Amazon and a variety of other online outlets. The Lumio brand has also become available in a variety of locations throughout the World since the show aired, and can now be found in Asia, Australia and Europe, as well as throughout North America.
Max has spoken about his strategy when launching Lumio. Knowing that there would always be demand for his stylish invention, he looked to form partnerships with companies that reflected the quality of the product. He avoided dealing with big distributors and instead concentrated on businesses that he believed maintained integrity, such as museums and smaller design stores.
Many former applicants have spoken about the rigorous preparation they undertake before appearing in front of the sharks, but Max revealed that he was unable to do so. He had flown in from the launch of Lumio at the Pompidou center, in Paris, just before his appearance and was still jet-lagged, but he did not let his lack of rehearsal affect his chances in the tank. Max knew his product inside out and came straight to the point with the sharks. He advises other potential applicants to be themselves in the tank and to work to their strengths.