Simple Sugars Before Shark Tank
Lani Lazzari, an eighteen-year-old from Pittsburgh, has business in her blood. Her hustle can be traced back to the third grade, when she sold hair scrunchies out of her backpack. As lucrative as this was, a few years later, she stumbled upon the business where she would truly make her mark. Throughout her childhood, Lani had suffered from terrible eczema, a skin condition that causes excessive dryness. Eventually, enough was enough. She was fed up with her constantly dry skin, as well as dermatologist appointments where she was always prescribed medications that never worked. It was time to hit the lab.
After untold hours of experimentation, Lani came up with a formula that worked wonders for her, which she called Simple Sugars. It not only cleared up her eczema, but it also helped her aunt’s psoriasis. Its all-natural blend of oils and exfoliating sugar crystals was perfect for their sensitive skin. Since the age of eleven, Lani ran her own business, held her own meetings, and served as the CEO of Simple Sugars. Her family supported her when they could, but as a fresh high school graduate, Lani was ready to strike out on her own. To do so, she would need to earn a shark’s confidence. While this is never an easy task, she seemed confident in her abilities.
Simple Sugars During Shark Tank
Lani entered the tank and made her offer: ten percent equity in Simple Sugars in exchange for one hundred thousand dollars. She told the sharks about her humble beginnings, about how Simple Sugars began. When her friends and family saw the effects of her natural skin care formula, they begged to buy some. Ever the businesswoman, Lani couldn’t turn them down. Now a high school graduate, she wouldn’t have to split her time between high school and Simple Sugars anymore. After spending nearly half her life running the business, she was ready to fully dedicate her time to make it grow.
Lani led a live demonstration with Lori’s help. She coached the shark to gently massage the scrub into her hands until she could feel the sugar crystals melting. The lightly abrasive crystals served to remove the outer layer of dead skin, while the oils softened the layers below. Lori was impressed with the feeling and the smell. She couldn’t stop remarking on the sweet strawberry aroma.
Daymond got right down to details. He wondered how far along the business was. Lani answered that Simple Sugars did sixty percent of its sales online, but also had wholesale presence, particularly with a local high end grocery store. So far in 2012, she had sales of fifty-five thousand dollars, with one hundred thousand dollars in total sales projected by the end of the year. Despite meager sales, profit margins were high at seventy-five to eighty percent. Lani took a primarily hands-off approach with revenue from her business, although she admitted to paying herself about four hundred dollars a month, on occasion.
Robert didn’t think the numbers were the most important part of the conversation. Often, he is much more concerned with unquantifiable elements of businesses, like potential, hard work, and a good story. Lani characterized the experimentation process as an obsession. Since she had no formal training in product development or the “chemistry” behind skin care products, she used herself as a guinea pig. Her formula was developed over time, through trial and error.
Kevin thought that, frankly, she should get real. She was only expecting one hundred thousand dollars in annual sales, mostly online. How could Simple Sugars possibly be worth a million dollars? Lani was reasonable, but she stood her ground. She preached the story of her momentum. After making only a pittance in her sophomore year of high school, she decided to give the business her all and increased sales by nearly two hundred percent in the next year. In the three months since graduating high school, she had taken Simple Sugars from six to twenty stores. She was even in the process of negotiating a one hundred fifty thousand to four hundred thousand dollar two-year contract with an online retailer. She had drive, to put it lightly.
Lori was concerned with the legality of the claims she though Lani was making. Was Simple Sugars being marketed as an actual cure for eczema or psoriasis? On the contrary, Lani was specifically avoiding these claims. She could, however, bring up the benefits of each individual ingredient. She also noted that her dermatologist had tried Simple Sugars and began promoting it herself. Mark praised Lani for her work in combatting skin problems. His son had eczema, so he was ready to do anything to help stop the itching. Lani agreed with the scope of the problem. About ten percent of Americans had eczema, and over half self-identified as having “sensitive skin”. Simple Sugars had a market that was both deep and wide.
Robert could tell Lani was motivated. But what was spurring her on? Why did she decide to be an entrepreneur? Lani told the story of her mother, many years ago. She went on maternity leave to take care of her newborn, but while away on leave, her job rescinded an offer of a promotion. As sad as the situation was, Lani knew she couldn’t take the same risk. From that moment, she decided to forgo the corporate world, in favor of entrepreneurial freedom. She would take responsibility for her own success. Lori was on the same page. She spoke to a desire within most entrepreneurs to control their own destinies.
Apparently, the mood was getting a little too sappy for Daymond. Back to details. Simple Sugars was growing quickly. Why did Lani need the money? She answered that hiring new salespeople was her primary goal. She was spending too much time personally managing accounts, instead of seeking out new ones. Although she had three employees and a manufacturing facility in Pittsburgh, she still needed all the help she could get. It still didn’t seem right for Daymond. He thought the current growth of Simple Sugars was impressive and wondered what he would be able to add, especially without any expertise in skin care. With that respectfully said, he was out.
Lori had nothing but good things to say. “Lani, I love you. I think you are amazing,” she gushed. The quality and smell were top notch. However, she was uncomfortable with the level of competition from other scrubs. She would be a customer but not an investor. Lori stepped out. Kevin was the next shark with bad news. He drove home a concern he has with any product sold through retail stores: shelf space. With such high margins in the cosmetics industry, companies fight mercilessly over share in retail stores. Furthermore, there was nothing proprietary about Simple Sugars to help her break through. At a million dollar valuation, he refused to invest in an idea “So simple an eleven-year-old could do it – and apparently has.” He was out.
Robert, sadly, declared his departure as well. He admired what Lani was doing, but he felt that she didn’t understand all the difficulties of running this sort of business, at least not yet. In order to invest, with such a high degree of risk, he would have to ask for far more equity, a deal neither was willing to strike. Since he knew there would never be a way to compromise, he backed out.
Mark, rather unsurprisingly, remained. On Shark Tank, he is known for unorthodox negotiation tactics and investments. Sometimes, he’ll take a chance on untested entrepreneurs, and in others, he’ll be the first one out on a rock-solid pitch. Mark Cuban once backed out just because a man giving a pitch called him “Cubes”. In the present, Mark grinned, knowing all eyes were on him. He decided to make the product personal again. He wanted to make sure that Lani was really an evangelist of Simple Sugars. What could Mark’s son do about his eczema?
Lani claimed why the mix of exfoliating sugars and oils in products like Simple Sugars was a perfect answer to his son’s condition. Mark ceded that point, but Lani still had the floor. “Who is your competition?” he fired off next. “Fresh,” she answered. Fresh offered a comparable product through an online retail distribution model. However, Fresh’s products were almost five times the cost. Despite these low prices, Simple Sugars’ margins were still through the roof. Lani claimed she could cut production costs in half by scaling production. Robert could sense it: Lani nearly had Mark convinced.
Mark was prepared to make an offer, but a steep one. For one hundred thousand dollars, he would need thirty-three percent of the company, putting Simple Sugars’ value at less than a third of Lani’s number. He said that this reflected the amount of personal time he would need to spend on the project. Because Simple Sugars was an early stage company, it was still a risky investment, so Mark wanted to be active in its growth. The extra twenty-three percent was the value he placed on his time.
Lani acknowledged this offer in earnest but was not quick to accept. She still felt like the seven years she had put into the business were worth more than he was offering. She countered at one hundred thousand dollars for twenty-five percent, still less than half of what she initially asked. Mark called her bluff and rejected the counter-offer. It was one hundred thousand for thirty-three percent, take-it-or-leave-it.
At long last, Lani accepted. Mark was her only friend among the sharks, even if he was asking for a high amount of equity. In the end, getting a deal was the important thing. Her business would succeed, or it wouldn’t. She would become wealthy, or she wouldn’t. There’s rarely a middle ground. While leaving Shark Tank without a deal still leads to a temporary spike in popularity after the initial air date, these businesses rarely continue to see the same success. Without the insight of an experienced investor, many entrepreneurs are just fish out of water.
Despite Mark’s tendency to drive a hard bargain, he and Lani were in for a productive partnership. “I’m very excited to work together. And please take some home to your kids!” she exclaimed. Although the other four sharks weren’t ready to invest in Simple Sugars, they were excited that she landed a deal. “She’s only eighteen!” Daymond proclaimed. “If that’s our future, we are in good hands.” Lani’s wish was to become a role model for other young entrepreneurs, who she was confident could find success against all odds.
Simple Sugars Now in 2018 – After Shark Tank
The first Shark Tank update found Lani about six months down the road. In this short period of time, she achieved massive growth. Before Shark Tank, Simple Sugars’ sales for the year were only fifty thousand dollars. In the first six weeks after airing, they climbed to a million dollars. She also grew the business from three part-time employees to two dozen, as well as eight interns. During the update, Lani took a call from Mark Cuban, who congratulated her for hitting a million dollars in sales. So far, their relationship was equitable and fair. Even though she was a fresh high school graduate, Mark was never patronizing. He treated her as a “true colleague”.
Lani was excited for the positive impact that was already emerging. This six months was simply her next step toward an ultimate goal of empowering women in the workplace, person by person. For Lani, seeing Simple Sugars on store shelves was self-validation. It was the culmination of nearly a decade of hard work on the product. She attributed her success so far to three factors: hard work, persistence, and Shark Tank. With a toss of glitter, Lani and her employees urged millions of viewers around the world to “stay smooth”.
Of course, Lani wasn’t finished just yet. About a year later, or a year-and-a-half since the deal, Shark Tank caught up with her again. As luck would have it, she was just preparing to train a new sales team on her products. Since we last saw Lani, she managed to land a deal with Destination Maternity, the largest brand in its category. Simple Sugars would launch simultaneously in all five hundred seventy-five of their locations. This account and others added up to three million dollars in sales to date, with an additional four million expected in the next twelve months.
Mark could smell money from anywhere. He took Simple Sugars’ growing sales as an opportunity for a visit. Lani said that proving herself to Mark was one of her greatest motivators. Thankfully, the love wasn’t one-sided. Mark believed that Lani had what it took to make Simple Sugars a twenty million dollar company. As the theme music was fading in, Lani ended on a positive note. She expressed how lucky she was to have a real Shark Tank experience. She was grateful for all good it had brought her business. Needless to say, she wouldn’t be stopping any time soon. No, the Simple Sugars train has no breaks.
Simple Sugars Summary
Initial valuation and offer:
$1,000,000; 10% for $100,000
Offers from sharks:
Mark: $100,000 for 33% (accepted)
2012 (year-to-date at time of filming): $55,000
2012 (total projected): $100,000
Total after March 30th, 2013 (first 24 hours after Shark Tank episode): $220,000
Total six weeks following Shark Tank episode: $1,000,000
Total as of the final update (a year-and-a-half since Simple Sugars’ deal): $3,000,000
Projected additional sales in twelve months following final update: $4,000,000
Simple Sugars is available for purchase, starting at $14.00 per container, online. It is also available in various retail locations, including Destination Maternity, Beauty Brand, and Rite Aid.