Vengo Before Shark Tank
Vengo has come up with a high-tech version of a retail method that’s been around for decades, the vending machine. Vengo Labs co-founders Brian Shimmerlik and Steve Bofill took the old, bulky and not particularly attractive traditional vending machine, and turned it into a far sleeker, and far more profitable digital billboard.
New York based Vengo Labs developed the mini vending machines to be part point-of-purchase, but more importantly, to be a high-tech advertisement platform targeted directly towards customers as they waited for their item. The digital marketing can be controlled from a central point and the cashless Vengo machines, which allow customers to use their handsets to pay for items, can feed valuable data on consumer buying habits back to Vengo Headquarters.
The Vengo machine not only takes a percentage from the sales of goods within it, but it also cashes in from the advertising revenue. In 2014 Vengo Labs went through a round of Series A funding in order to develop the Vengo vending machine and by 2015 the machines were used in over sixty locations across New York city, but in order to scale the business up even further, Brian and Steve required not only a large injection of funds, but the valuable contacts that a shark partner would bring, and with that aim in mind they appeared on Shark Tank in March 2016.
Vengo On Shark Tank
When Brian and Steve appeared on the tank everything seemed normal, the sharks smiled at them and nothing seemed amiss, until the entrepreneurs announced that they were seeking a $2 million investment in exchange for just 12.5% equity in the Vengo business.
The sharks exchanged a few looks, this was no small scale business proposal. Brian continued by announcing that Vengo had taken vending machines away from the traditional image of big clumsy machines stuck in the dusty corner of a basement, and instead created a stylish slimline alternative, and with that Steve finally pulled back a curtain to reveal the Vengo vending machine.
The sharks were listening intently, but they didn’t react with obvious enthusiasm to the sight of the future of vending machines. Steve continued the pitch by explaining that the Vengo machine had a slim-line form, digital advertising, and also took up no floor space. Brian jumped in to explain that the machine could provide video content to the customer, he went through a quick demo and revealed that the machine was totally cashless, while Steve explained that the purchase details could be instantly fed back to Vengo headquarters, which was only the tip of the iceberg in terms of the potential for valuable data gathering.
The sharks were interested, it seemed an original proposal, but they didn’t appear that impressed just yet. Lori asked if the machine could only supply small items, because of its own small dimensions. Brian admitted that was a limitation, but revealed that the machine could supply over one hundred products, mainly due to the company’s design team who were former aerospace engineers.
At last the sharks seemed impressed. ‘Were you an aerospace engineer?’ Robert asked Steve, and Steve confirmed he had been previously for nineteen years’. ‘And now you’re making vending machines’ joked Daymond John, but Steve kept on smiling.
Brian explained that Vengo were not a vending company, or out to replace traditional vending, instead they were a software media company that managed the Vengo digital network from ‘the cloud’. The sharks digested this as Brian elaborated further. The business plan was to sell the machines to vending companies, and all of a sudden the sharks got the idea, several of them exploded in questions.
Mark Cuban got in first, he asked Brian what the cost of a machine to a vending company would be. ‘You’re not going to like this’ Brian admitted, and went on to explain that the company sold the machines for $2,500, which was also the exact cost price. Kevin O’Leary instantly booed this curious strategy that made no profit at all, but Brian explained that Vengo also charged a monthly rental charge for each machine used, in exchange for which Vengo would provide the software that controlled the machine.
The sharks were looking a little out of their depth, Mark Cuban brought the subject of sales up. Brian disclosed that sales for the last year were projected to exceed $1 million and the sharks were impressed again, but they still didn’t entirely get the business concept, and what made it so unique.
Robert Herjavec saw Vengo as an advertising company, but Brian explained that he saw Vengo as ‘changing the game’ when it came to retailing and marketing physical products, Mark Cuban thought that opinion was ‘A stretch’.
Robert inquired how much Vengo charged advertisers. Brian explained that they were charged $200, per machine, per item, per month. That sunk in for a moment before Kevin realised ‘That’s a lot’, he looked much more interested now that he could see where the profit was.
The unique advertising/retail mix of Vengo was clear to the sharks now, Mark Cuban got the idea completely, but he also had some bad news for Brian and Steve. He was already involved with a company called ‘Oasis’ which specialized in feminine vending products. Mark believed there was a conflict of interest for him, and he was out.
Kevin O’Leary was interested, but the $16 million valuation for Vengo was far too high in his opinion. He asked Brian why the business was worth so much. Brian spoke about the three years already spent building up the platform and locations where Vengo was used, he told Kevin that he had negotiated contracts with the biggest vending company, and the biggest chocolate company, although he didn’t mention any names. Finally he emphasized how much potential profit could be gained from the data that Vengo could gather from customers buying habits.
Kevin and Lori were interested, but they still didn’t share Brian’s passion for the Vengo business. Daymond John had seemed unsure of the whole Vengo concept throughout the pitch, and he announced that in his opinion the valuation was ‘insane’, and Daymond dropped out too.
Robert Herjavec was perhaps the shark most suited to the Vengo concept. As the founder of one of Canada’s biggest technology companies his opinion was vital to Brian and Steve’s success in the tank, but he was not impressed. ‘I don’t like it’ he admitted. Robert told the entrepreneurs that their business model was confusing and unfocused, he saw lots of competition in the display advertising market and was unsure exactly how the company would gain a larger presence, and with that Robert was out too.
Brian and Steve stayed focused, and things were about to get much more promising for them in the tank. Kevin O’Leary asked if the business had debt, Brian revealed that it didn’t. ‘Would you like some?’ Kevin asked, and Brian admitted he was open to the idea.
Kevin offered to lend Vengo the $2 million investment for 36 months. That would be long enough to test the proof on concept, but he would charge 7% interest on the loan, and also take 6% equity when it was repaid, in exchange for providing the loan.
‘Horrible’ remarked Mark Cuban with a groan. Kevin replied with ‘Here’s Mr Advice with no checkbook’ but Mark Cuban again repeated that the deal was horrible, and told Brian that he knew how bad it was.
Mark Cuban and Kevin argued briefly before Lori Greiner jumped in. She told Brian that the Vengo strategy was confusing, and did need some work in order to optimize it. Brian asked her if she would be prepared to join Kevin’s deal, to which Kevin seemed agreeable. Lori was still unsure but Brian pushed a little harder. He reminded her that the vending market was worth $7 billion annually, and assured her that Vengo was entering a market with a huge amount of opportunities.
Lori tentatively agreed that she would consider joining the loan deal with Kevin, but Brian then announced that giving away 6% of the business was too generous. Kevin invited a counter offer and Brian suggested 1% between both sharks.
That didn’t go down well, ‘I dont get out of bed for that’ replied Kevin and Lori confirmed that 1% was not enough. ‘We work hard for our money’ she told Brian but he replied with ‘And we work hard for ours’, when it came to negotiations, it was quickly becoming clear that Brian was as tough as any of the sharks.
Kevin made another counter offer, suggesting 3% equity on the loan deal and assuring Brian that he had to pay something for a partnership with two sharks. Lori disagreed with the 3% figure, instead insisting on 4%. Kevin made an impassioned plea to Brian to accept the offer, ‘Say yes and it’s a done deal’, he urged, but Brian wasn’t going to give up that easily.
The entrepreneur insisted that his absolute final counter offer was 2.5% equity. Kevin O’Leary, who seemed to be enjoying the negotiations immensely, conferred with Lori, and they eventually suggested 3.5% in return. Brian once again refused to give away more than he had to and would not accept the offer. Eventually Kevin and Lori suggested 3% equity when it finally became clear that Brian would leave the tank without a deal if he didn’t get the offer he wanted. Brian thought for just a moment and confirmed ‘You’ve got a deal’. The exchange was a master-class in haggling, and for once the sharks had met their match when it came to negotiating skills.
Vengo Now In 2022 – The After Shark Tank Update
Brian and Steve landed one of the biggest deals in Shark Tank history. Not long after the episode aired, the deal was finalized and they used the funding to expand the number of installed machines. Within a few months, they were installed at 45 campuses across the U.S. including the University of Central Florida and New York University, Syracuse. This allowed students to buy items such as snacks, tech accessories, and personal care items.
Not only that, but they also placed Vengo machines in Hyatt Hotels and other locations across New York City, with more than 280,000 customer engagements per month. They also showcased their machines at a meeting hosted by the Long Island Inventors and Entrepreneurs Club. That’s not all, the company also moved from Queens into a 4,000 square foot space in Bethpage, New York; it was later expanded with 2,000 square feet of adjacent space.
By 2018, they had installed more than 500 machines in hotels, gyms, and college campuses across 24 states. They also partnered with Viatouch Media, a retail technology company, to help advertisers better target potential customers.
And in 2019, they successfully raised $7 million in equity funding, which brought the company’s total funding to $12 million. Some of their past investors include David Tisch, Tony Hsieh, Brad Feld, Joanna Wilson, and Gary Vaynerchuk, among others.
As of 2022, Vengo is still in business. If anything, their sales have grown tremendously. In 2021, they had a total of 1425 machines installed in colleges, gyms, malls, department stores, beauty boutiques, pharmacies, grocery stores, and residential buildings across the country and were making $15 to $25 million in revenue. According to their official website, they have over 1,600 screens and receive more than 13,000 transactions each month, each of which lasts for around 33 seconds. For those who are interested, you can learn more here.
And there’s more than one type of Vengo machine. For example, there’s the touchless machine that you can control with your mobile phone and the DOOH Media, which transforms any device into an IoT screen. Not only that but there’s also the VengoXL, which has five times the capacity despite its small size. The company also offers digital out-of-home screens (DOOH), which are powered by their media platform. The best part is that they’re all customizable.