GrooveBook Update- What Happened After Shark Tank

GrooveBook Before Shark Tank

Archimedes’ discovery of the math behind water displacement was immortalized in “Eureka!” Isaac Asimov once said “The most exciting phrase to hear in science, the one that heralds new discoveries, is not ‘Eureka!’ but ‘That’s funny…’” While some of history’s pioneers have succeeded through prudence and perseverance, others have relied on a moment of brilliance. For Brian Whiteman, that moment followed a brutal murder.

Whiteman and his wife Julie owned a commercial print shop, but they wanted to expand their photo books into a subscription service. For a recurring fee, members of their service could upload one hundred pictures from their cell phones per month and receive their own custom photo books. Brian and Julie could offer these books for a great price because of their print shop business, but they struggled with the postage fees. The cost of shipping a single book of five by seven inches would be three to four dollars.

One night, while laboring over this problem, Brian took out his frustration on a prototype, beating it with a pen. Seeing the destroyed spine, Brian thought it fitting to wake up his sleeping wife, likely while cackling maniacally. Julie looked on in horror at this Jekyll and Hyde transformation.

But all of a sudden, he had the solution to his shipping problem. By cutting a semi-circular groove into the spine of each book, they were flexible enough to package and send for a reduced rate. The GrooveBook name was born, and Brian and Julie were in business. After growing their base of subscribers to eighteen thousand, they were ready to go on TV.

GrooveBook On Shark Tank

Brian launched his pitch by introducing himself and his “baby mama” to the sharks. They requested one hundred fifty thousand dollars of investment for twenty percent of the company. Julie brought up a problem experienced by many, the oversaturation of photos on our smartphones. We’re always eager to capture life’s precious moments, but despite being saved, these pictures fade into obscurity and are forgotten. The solution? GrooveBook.

By converting these digital photos into physical albums, families and friends of all generations can bond over memories the old-fashioned way. The photos are printed with a date and location, each perforated for easy removal. A new book comes every month, each bearing the familiar GrooveBook groove and a new cover design. Subscribers can feel free to upload duplicate photos and share them with their loved ones. During the presentation, Lori enjoyed fawning over a photo of Daymond as a kid. With hair.

The sharks were all amazed by the price point: only three dollars per book. How could Brian and Julie offer them for such a low price, when the average retail price of a photo book was thirty dollars? The answer was their commercial print shop. With their second business (and the cost-reducing groove), they could produce and ship a GrooveBook for two dollars and thirty cents.

Daymond asked if they had considered a different price. Brian responded that he felt three dollars a month made GrooveBook affordable for everyone in America. As Mark Cuban put it, this was a “delusion of grandeur.” No product or service will ever have a one hundred percent adoption rate. Robert was immediately skeptical of the business model. The print shop and GrooveBook were so symbiotic that investing in one meant total faith in the other. While this is often a fair point, in this case, their capital investment in printing equipment allowed them to keep prices low. There’s no reason they would have to continue serving other customers.

Julie shifted attention away from Robert’s skepticism by telling the story of GrooveBook’s name. The sharks sat back and listened to the tale of Brian’s homicide. Mark called the groove their “value proposition”. Their pending patent on the groove would put GrooveBook leaps and bounds ahead of any direct competition. Suddenly more interested, Kevin began probing Brian and Julie. “Can I ask you a question, as a potential investor? Would you consider raising your price by a dollar?”

Mark jumped in, offering his perspective on the brand. He thought GrooveBook’s value was as a middleman between websites like Shutterfly and end consumers. They could provide these established sites with an interface and the groove technology at a mark-up. In what would equate to a licensing deal, GrooveBook could be a one-off supplier for other photo services at a much higher profit margin.

Sometimes Mark is all talk. He’ll give advice to entrepreneurs and compliment them on what they’ve done right and then back out of the negotiations. Not this time. Mark offered Brian and Julie one hundred fifty thousand dollars for full licensing rights to the company. They would retain the subscription service, and he would have the rights for one-off applications. Robert and Daymond weren’t so confident. Both returned to the idea that GrooveBook’s value was reliant on their other business. Neither was comfortable with this idea, and both backed out.

Kevin struck back when things looked grim. “Would you consider selling me the whole thing?” The Whitemans had given the business a value of seven hundred fifty thousand dollars, so Kevin simply offered to buy it for this amount. They seemed immediately uncomfortable with this idea. Brian defiantly responded that the business was worth six million dollars, his price for completely selling out. All of the judges were appalled. For a lesser business, Kevin would have backed out here. He would have berated the entrepreneur for being a “greedy pig”. Not here. He tried to smooth the situation over and claimed that he only wanted to get to know the couple as business people. Did they want to sell out? Did they want majority control?

Brian reinforced that whatever the deal, they wanted some upside. They didn’t want a total buy-out, but they weren’t completely comfortable with the licensing deal, either. Lori tried to find a middle ground by offering half of Kevin’s offer, three hundred seventy-five thousand for fifty percent. Robert evidently had a change of heart and went in with Lori halfway, as long as they agreed not to license the service. However, the real spotlight was on Kevin and Mark, who stepped aside for a conversation. Lori tried to press the Whitemans to make a deal before Kevin and Mark’s return, but Brian wouldn’t have it. After all, Kevin and Mark were the first ones willing to put money on the table.

They came back with a modified version of Mark’s deal. Brian and Julie were passionate about the subscription service and growing their business, so the licensing deal was a better fit. Now, Mark and Kevin were willing to offer the licensing deal but leave the Whitemans with both one hundred fifty thousand dollars up-front and twenty percent of the revenue. The deal seemed to be closing, but Robert brought up a good point. Licensing out GrooveBook would offer an alternative to the subscription service. Potential customers could get the same product for a single purchase instead of subscribing, which would cut into subscription numbers. Daymond made a comparison to There Will Be Blood, in which Daniel Plainview siphoned off the oil deposits underneath William Bandy’s property.

Two amended offers were now on the table, a partial licensing deal and a fifty percent equity investment. Citing their ability to grow the business so far, after a moment of suspense, Brian decided on the licensing deal. The entrepreneurs and their new investors took only a moment to celebrate before Brian took Julie into his arms and carried her off the set. Kevin put it well: “They’re still in love.” Despite a tense refusal of a total buy-out and concerns over GrooveBook’s artificially low prices, the negotiations ended smoothly.

GrooveBook Now in 2018- The After Shark Tank Update

Things moved quickly after GrooveBook’s Shark Tank appearance. In the four months between their appearance and the air date, the number of GrooveBook subscribers doubled, from eighteen thousand to thirty-five thousand. With a break-even point of thirty thousand subscribers, they were now making a tidy annual profit of about forty-two thousand dollars per year. However, after the episode aired, subscriber numbers jumped to eighty-five thousand almost overnight, turning a respectable side business into a small fortune of nearly five hundred thousand dollars annually. This didn’t even consider the revenue the Whitemans were grossing from their licensing deal.

While the numbers on this part of the company weren’t public, Kevin seemed happy enough. As he does with his most profitable and brand-defining investments, he personally toured the GrooveBook facilities and celebrated the company’s explosive success. Never one to miss an opportunity, he brought up the business during an appearance on Jimmy Kimmel Live as an example of Shark Tank’s empowering effects. This was a couple who were almost half a million dollars in the hole, who now were making that much every year, with nowhere to go but up. “You’re making a lot of money in a very unusual way,” Kimmel said. Kevin responded with a smile. “That’s the part I like the best.”

The story doesn’t end here for Brian and Julie Whiteman. A second update returns to the family about a year later. Since airing on Shark Tank, Julie claims the subscriber base has grown over fifteen times, coming out to about five hundred thousand subscribers and four million dollars in annual profit. We also see them walking into an office emblazoned with the Shutterfly logo. On camera, a Shutterfly executive offers fourteen-and-a-half million dollars to buy the company. Without much hesitation, the couple accepts, and everyone in the conference room looks excited. As Kevin puts it, “It’s a perfect marriage.”

Every rose has its thorn, of course. After seeing that a one hundred-page, perforated, stamped, and customized photo book could be created and shipped for only three dollars a month, one wonders if it’s too good to be true. While many are happy with the service (at an average of 3.9 stars on the Google Play store after over eight thousand ratings), a vocal minority cannot begin to express their hatred. Negative comments flood GrooveBook’s social media accounts, and the comment section on every article about the service is rife with warnings.

The most frequent complaints involve failure to stop charging credit cards after account cancelation. Also, there’s been an anecdotal drop in quality since the Shutterfly acquisition. Some once-loyal customers now claim that the picture quality has changed for the worse. They don’t have a customer support phone line and handle all customer service through private messages and email. Still, for three dollars a month, it’s a risk many are willing to take for an innovative product.

Since Kevin and Mark owned no equity in GrooveBook itself and just secured a licensing deal, it is unclear how the fourteen-and-a-half million was divided between Kevin, Mark, and the Whitemans. Nevertheless, what ended up being the biggest deal in Shark Tank history couldn’t be a raw one for anyone involved. It was at least lucrative enough for Kevin to return to the talk show circuit and evangelize GrooveBook to millions on Good Morning America.

Julie seems excited to use this good fortune to travel the world with her family. At first glance, Brian and Julie Whiteman, a middle class family with an already-successful business, may not seem relatable. However, all entrepreneurs can relate to Brian’s sense of frustration at staying up all night, laboring over a problem with no solution. In his case, all the hard work paid off. While becoming multi-millionaires in the span of less than two years may seem beyond one’s reach, the question “They did it; why not me?” should propel entrepreneurs forward.

GrooveBook Summary

Episodes:

Season 5 Episode 13, Season 5 Episode 27, Season 6 Episode 16

Initial valuation and offer:

$750,000; 20% for $150,000

Offers from sharks:

1. Mark: $150,000 for full licensing rights
2. Kevin: $750,000 for 100% of the business
3. Lori and Robert: $375,000 for 50% of the business
4. Mark and Kevin: $150,000 and 20% of licensing revenue for full licensing rights (accepted)

Subscriber numbers:

1. At filming of first episode: 18,000
2. At air date of first episode: 35,000
3. Five days days after air date of first episode: 85,000
4. At air date of third episode: 500,000

Buy-out:

$14,500,000 from Shutterfly

You can still subscribe to GrooveBook for $2.99 per month + tax through their app on iTunes and the Google Play Store. Visit https://groovebook.com for more information.