Buzzy on Shark Tank
Amy Baxter from Atlanta, Georgia, is the creator of Buzzy. She is asking for $500,000 in exchange for 5% of her company. As a pediatrician, Amy was ready to block her son’s shot – she had numbing cream on an hour in advance, but when the lady with the threatening needle came in, she said, “Sit still or else this is really gonna hurt.” And thus, it did! And just like 63% of children today, he developed needle phobia, a problem that can last a life time. As Amy was driving home from an overnight emergency room shift, her steering wheel was vibrating because the tires were unbalanced, and her hands were numb because of this. As a result, she burst into her house and thought, “Vibration is the answer!” She took a vibrating back-rubber and frozen peas and put it against her child’s hands, and it worked – they felt nothing and no pain. So, Buzzy was born on that day.
Buzzy is a medical device that combines cold and vibration in order to create a proper numbness, and putting the two together numbs needle pain – there’s even been medical trials done to back up this claim. Robert asks how Buzzy works, and Amy gives an example – simply put the Buzzy on your shoulder, if that is where the shot is going, and run it for 15 or 30 seconds and it will numb it. However, Amy says she cannot guarantee that you will not feel the needle, but Amy can guarantee that it reduces pain from about 15 to 80%, depending on the person’s fatty content, and they are in over 1500 hospitals now. Buzzy has two patents, four applications on file, two international patents that are in progress.
Robert then asks about sales of the Buzzy. Since launching in 2009, Buzzy is on target for $1 million in sales, and next year is a projected $2.5 million in sales. They have sold 33,000 buzzies, of which 13,000 were sold in the past year. As of right now, Buzzy does not have any reps, so the product is not actually being advertised from door-to-door or showcased. Lori asks if Amy is even attempting to sell them, but Amy admits she’s a full-time doctor, which causes the shark’s eyes to all light up. So far, Amy has six moms who work for her from between 20 to 30 hours per week. Robert asks about the gross and profit, assuming that Amy’s figure of $1 million is correct. Out of the million dollars in sales, $60,000 will be gross profit, and $270,000 will be net profit. The margin is 70%, which is a huge margin – the lowest cost Buzzy is $39.95, which is the home version.
Robert asks where they are made, and the Buzzy started in China; Amy says the first batch she received, of production, was fantastic, but the second batch was awful, and she spent too much time that she cut ties with the production company. The product was initially cheaper to make in China, but since the prices have risen so much over time, her last negotiated price per piece at the U.S. manufacturing facility was exactly the same as China’s last price per piece (hooray for U.S. manufacturing!)
Kevin brings up the reality, saying that Amy is asking him to pay 27 times next year’s pre-tax earnings, and asks if Amy sees anything wrong with this figure. However, Amy points out that if Kevin were to invest in any consumer-grade medical device, such as the Ava the Elephant that helps children take medicine, Barbara invested $55,000 and now has $100,000. However, Barbara interrupts and says that while her initial investment was only $55,000, by the time the product got to market, she had invested more than $285,000 in moving the product. The market is a very, very difficult space, and Amy says that she is here because Barbara has already been down that road and has experience she can call on. However, Barbara says that she has had the experience of climbing a mountain and spending way more money than she envisioned, and she sees the Buzzy as the same thing – the Buzzy is going to take a lot of money in order to bring to the market and make available for everyone. Barbara is the first Shark out.
Kevin says he has two issues with the Buzzy, and the first is that it is not clear what the Buzzy’s distribution strategy is going to be in order to make the Buzzy a reality. The second one, and this is the one that is really killing it for Kevin, is that Barbara’s evaluation is insanely high.
She is asking him to pay a premium for a medical supply company, and it doesn’t make sense to him. Kevin says he honestly values Amy’s company at only $3 million, while she values it at $10, which is a huge difference. If he is looking at other opportunities for a half million dollars, he wouldn’t overpay – it is that simple. Robert steps in, asking why Amy needs the $500,000. With the investment from the Sharks, she is looking to begin her scaling process; if she is even in one big box chain, they will order up to 24,000 of them, so she needs the extra money to meet that demand. She still needs packaging and a public relations (PR) firm, but Mark interrupts and says that is a canned answer. Mark asks if she can honestly expect to be in such a retailer for this, and Amy says yes, she truthfully is – Mark asks who can manage all that, but Amy just replies that she needs to build up a management team and hire on a COO. Mark, however, says it is a huge mistake to go into big box stores because in order to sell your product, you have to educate them and get them to buy the product.
Kevin says that she doesn’t need to reinvent the distribution strategy for medical supplies, and that Amy isn’t getting it fully; Mark also steps in and says that’s why Amy’s valuation is wrong, since she is trying to sell it to the wrong markets. She’s trying to sell it to people who don’t fully understand. Lori says that while it is a clever idea, and she sees merit in it being a personal device that might successfully sell in a drug store, it would be an easier path to go to the doctor/hospital route. Lori does not feel that the deal is right for her, and is the second Shark out.
Mark, Kevin, and Robert are the three remaining Sharks, and Kevin starts by saying that he’s probably going to exit since he isn’t happy with the valuation. What Kevin is looking at is a deal for $500,000 in exchange for a 20% equity, and is a confirmed offer upon being prompted by Robert; Amy says that she has had other people offer her $500,000, but Kevin simply replies, “They aren’t me.” Robert then agrees with Kevin, and says that Kevin’s offer is the right valuation for where Amy is today. For Amy to get to that next step is executional; Robert then asks for Kevin to go in half with him, and he will go in on half of the offer. Kevin agrees, and the offer is a split of $250,000 for 10% for both Kevin and Robert.
Amy replies flatly, ‘no.’
The valuation of $5 million may not be there today, but in 2 weeks she could possibly have a contract that brings up her sales. Lori looks to Mark to give an answer, interrupting Amy. Mark says that while Amy very well may be able to get to her valuation, the real question is how long will it take for her to reach that valuation? While Amy thinks she can just hire on a chief operating officer (COO), it really isn’t as easy as it sounds. Mark feels that Amy has an enormous level of execution and timing risk that she isn’t taking into consideration, but Mark is still interested. In exchange, Mark makes an offer of $500,000 in exchange for 20%, which is the same offer as Kevin and Robert but with a different approach. Mark says that he feels that he could advertise the product for mothers.
Robert then steps in and that despite the three offers, all the valuations are the same of a $3 million evaluation. Robert asks how she wants to address that, but Amy says that she feels there are multiple medical device companies that come from where she is, and scale very quickly. Mark says that he sees the opportunity, but no infrastructure, and Barbara says what is on everyone’s mind; Amy is a fool to not weigh in on the expertise that is being offered to her by the Sharks. She begs for Amy to think about it, and says that her arrogance can cost her a great opportunity.
Amy says that while she is grateful for the offers, and consideration and time, but ultimately she has to stick to her valuation of $10 million. Kevin says what I am personally thinking at this point, “You’re dead to me, get out of here.” I agree, Amy just passed up on a fantastic deal due to her arrogance.
Buzzy Now in 2018 – The After Shark Tank Update
Buzzy is still for sale, but sadly, it does not look like a whole lot has changed since Amy’s appearance on Shark Tank. Buzzy retails for the same price of $39.99 and has three colors to choose from now; the first is the bee-colored buzzy that made its appearance on Shark Tank, consisting of a yellow-and-black striped pattern, a ladybug-looking Buzzy with black polka dots against a red field, and a simple, plain, black Buzzy. There is now an additional “Buzzy Mini,” but the Mini model is only rated with a 1 star rating on Amazon, while the traditional Buzzy line is rated at 4 stars. However, Buzzy’s website has been redefined, even including a list of medical conditions or scenarios that Buzzy can help with.