OrigAudio Before Shark Tank
Michael Szymczak and Jason Lucash are business partners and co-owners of OrigAudio. Their line of novelty, portable audio equipment combines their two passions: travel and music. Although the two have high sales for their first year in business, they’re still in debt and unable to pay themselves. Their days are largely order fulfillment in the garage and peanut butter and jelly sandwiches on paper plates. With some help from the sharks, they hope to grow beyond Michael’s house and take their business to the next level. Let’s see if Michael and Jason can move past the PB and J.
OrigAudio During Shark Tank
The OrigAudio team looked confident and ambitious in the tank. After a quick introduction, Michael offered the sharks a fifteen percent stake in OrigAudio for one hundred fifty thousand dollars, a million dollar valuation. Lamenting the struggles of the traveling audiophile, the two claimed their line of products was the solution. They called their newest addition the Rock-It. The Rock-It uses a transducer to turn any surface into a speaker. The sharks were amazed by the Rock-It, as well as the follow-up. Michael and Jason also showed off their first product, the OrigAudio Fold and Play Recycled Speakers. This collapsible and environmentally friendly device inspired the name of the business. “Origami audio” became OrigAudio. Most of the sharks looked like children in a toy store.
However, awe gave way to figures, and most of the sharks had questions about the details of the business. Robert asked the most important question – what were their sales? Jason maintained OrigAudio’s strong first impression and answered that one year in business brought the company seven hundred fifty thousand dollars. Kevin was impressed but wanted the breakdown, product by product. The Fold and Play Recycled Speakers brought OrigAudio its first five hundred thousand, and the remaining two hundred fifty came from the Rock-It. Daymond wondered about the Rock-It’s price point, probably envisioning how he would market the product. Fifty dollars was affordable, but perhaps it ruled out shelf position at the registers of large electronics retailers. Robert wanted the reason for an investment. Weren’t they already successful enough on their own? Jason cited new hires, mass order fulfillment, and outsourcing accounting as reasons for seeking capital.
Things got a little rocky when Daymond called their success into question. He differentiated between gross sales and net income. On seven hundred fifty thousand in sales, the pair netted only one hundred fifty thousand, and that was without paying themselves. Taking salaries into account, the company was revenue-neutral. Also, it became clear that Michael and Jason didn’t develop or own the patents to their products. Specifically, the Rock-It was patented in China and distributed from a factory overseas. Although Jason was confident that the factory would renew their five-year licensing deal, the sharks weren’t so sure. Daymond and Kevin were worried that OrigAudio would have the difficult job of marketing its products for the first five years. After their contract, a large company could swoop in and pay more for distribution of the products.
Barbara changed the subject to their investment numbers so far. Thankfully, including a ten thousand dollar loan from Jason’s mother, the two had only sunk forty thousand dollars into the business. Kevin, evidently fed up with good news, wanted to get back to business. With many similar players in the portable audio environment, as well as zero net income, why was OrigAudio worth a million dollars? Jason tried to reiterate the company’s sales and profits, but Kevin and Robert objected that this meant nothing if they couldn’t support themselves. Kevin also drove home his reservations about the licensing deal, claiming “They’re gonna throw you under a bus in two seconds for more money.” Considering the competitive business of consumer electronics and the valuation, Kevin dropped out.
Barbara took the marketing angle, asking how they planned to explain OrigAudio to consumers. They wanted to use some of the investment capital to establish point of sale marketing in their retail locations. The pair was confident in this model. It turned out that much of their business came from a previously unmentioned television deal, through QVC, no less! Between Mark’s television networks and their experience with giants of TV, Lori and Kevin Harrington, the sharks couldn’t deny the value of TV marketing. Robert was taken aback at the news, but Jason joked that he was waiting until Kevin backed out to make the big reveal. They even brought up that representatives from QVC pursued OrigAudio directly, which is highly unusual. The company instantly seemed more appealing.
Mark tried his hand first. Known for his creative and persuasive offers, he asked Michael and Jason to set their own, better price. He didn’t want them to negotiate with the other sharks, so exclusive bargaining rights were a condition. If Mark liked the new equity figure, he would accept it on the spot. They didn’t know what to do with this. They risked offering more equity than the minimum that Mark would accept, and they wouldn’t have the chance to hear from Robert, who seemed very interested. Mark set a twenty-four second clock, and they froze. Robert played the mean-rich-guy card, chastising Mark’s bullying and willingness to screw over the competition, but like Mark said, business was business.
The tension was palpable. Luckily, Michael and Jason decided to hear out their other offers. Daymond had a steep deal for the pair, a total buy-out for three hundred thousand dollars. Sometimes, this strategy plays, and Daymond makes a lot of money on entrepreneurs with a weak pitch but high potential. However, with likely offers from other sharks, it wasn’t very enticing. Even Mark piped in with “You’re not that crazy.” Barbara and Robert followed Daymond, each with a deal better than the last. Barbara offered one hundred fifty thousand for twenty-five percent of the company, and Robert followed with the same amount for fifteen percent, their initial offer. However, the decision wasn’t completely clear, as Barbara offered a strategic relationship with her business partner who owns As Seen on TV. Robert positioned himself as a strategic financial partner, offering to continue funding the company in the future for more equity.
While the OrigAudio team discussed these offers in the hall, Robert and Barbara continued to berate Mark for his ruthlessness. Robert wondered if he, too, could use these negotiating tactics when he became a billionaire, and Barbara agreed. “What’s that about, Mark?” The rivalry between Mark and Robert is interesting, given that they are both well-liked and positive in later episodes. Maybe the other sharks became more accepting of Mark after he signed on as a regular member. At the same time, Michael and Jason had the same feelings about Mark. They also quickly tossed aside Daymond’s deal, not ready for a buy-out. However, they were still unsure whether siding with Barbara or Robert was the best move.
After some time to mull things over, Kevin wanted their final answer. At long last, the pair decided to have “Uncle Rob” in their court, appreciating his enthusiasm for the business. Barbara was uncharacteristically resentful, firing off a “Damn! Man, I’m disappointed, guys.” However, Mark summed it up in his characteristically cheesy fashion. “Sometimes you gotta take the bite, and sometimes you’re the chum!”
Although OrigAudio’s pitch began to go south when it came to profit margins and their licensing deal, Michael and Jason stuck it out, and prior success spoke for them in the end. No shark was willing to turn down a deal with a QVC-partnered business; the legwork was already done. Throughout their appearance on the show, Michael and Jason played to their strengths. They emphasized their strong sales, business relationships, and innovative line of products while downplaying the complicating factor of the licensing deal. Poorer salesmen could have walked out with no deal at all.
After Shark Tank – OrigAudio Now in 2018
The days of peanut butter and jelly are over! In a Shark Tank Update section from the first episode of season three, Michael and Jason give the scoop on how OrigAudio has grown. Most importantly, they’re out of Michael’s garage and are now fulfilling orders from a warehouse in their new base of operations, southern California. They’ve hired nine employees to work in their office and made deals with distributors around the world, following OrigAudio’s Shark Tank appearance. In about a year, the company’s sales have grown three hundred percent, now breaking two million dollars annually, and their company has been evaluated at over four million dollars. With their products in four thousand U.S. stores and thirty-eight countries, OrigAudio shows no signs of slowing down.
Over the years, it looks like their product lineup has undergone some dynamic changes. According to the company’s website, the Rock-It is still being sold, albeit at a lower price point of twenty dollars. By doing so, the company can market its products more effectively as accessories, leading to impulse buys and purchases along with other, pricier consumer electronics. In addition, OrigAudio has expanded into the portable charging space, offering high capacity batteries with customization options, as well as charging cables certified by Apple. The plan seems to be working, given that OrigAudio was named as one of Inc. Magazine’s “500 Fastest Growing Companies in America” in 2014.
In fact, customization and marketing have been the greatest steps forward for OrigAudio. The website offers a variety of headphones, portable speakers, and even USB flash drives, all customizable. This caters to the consumer looking to represent their favorite bands or sports teams, but it also has potential in business to business sales. Earlier this month, the company shared a customized Jelly Box, a portable Bluetooth speaker, designed specifically for Bank of the West. In retrospect, it seems obvious that businesses would purchase these affordable products wholesale for use in marketing and branding through events like career fairs and business retreats. Essentially, Michael and Jason had a completely new idea in consumer electronics and decided to incorporate it into their current line, rather than starting over.
Through the present day, OrigAudio has gotten a ton of press for its wide variety of products. With credits like Fox Business, Time Magazine, and CNET, they’re no strangers to attention. One highlight is coverage of their Beets headphones. Lampooning the fashion-forward and expensive Beats by Dre brand, Beets retail for twenty-five dollars, have a similar design, and even come with a free case. Whether success is owed to OrigAudio’s social media presence, the addition of affordable and useful products (everyone needs a phone charger), or its new marketing opportunities through customization, the minds behind the company have stumbled upon a gold mine.
Unfortunately, the same can’t be said for Robert Herjavec. OrigAudio was growing so quickly when Michael and Jason entered the tank that its value had already doubled by the time the episode aired. Entrepreneurs appearing on the show are given a ninety day grace period after the first broadcast to back out of a deal. With the new valuation, they no longer felt that giving up fifteen percent equity made sense. Given the company’s expansion, it may have been for the best. Of course, as marketing geniuses themselves, the OrigAudio team knows it couldn’t have asked for better PR. Even if they didn’t take a deal, appearing on Shark Tank skyrocketed the business to its position as a major player in the consumer electronics industry.