SharkTank thoughts ~ Element Bars
Dealing with Venture Capitalists
When going into a deal with Venture Capitalists you need to understand regardless of how great they think your idea is, they will talk it into the ground in order to secure a better price for their investment. Jonathan the proveyer of Element Bars was prettty good about reiterating his value position. However, he missed a lot of opportunities by focusing back on the fundamentals, the sales results, the growth rate, the potential to expand the offering with seed money.
What is the value of Element Bars?
Lets look at their business and the various intellectual properties which they may own.
Business model: Deliver high quality customizable energy bars that meet your nutritional needs and taste.
Slogan: We’ve raised the bar! <—– really thought this was a terrible slogan.
Messaging: Our made-to-order energy bars are chockfull of tasty, whole ingredients and nothing you can’t pronounce. Guarranteed to put fuel in your tank and keep you smiling. <—- Think they bit off a bit more than they needed to and missed having a concise easy to get behind message.
Recipes: Curious whether they even own the recipes for these bars as they’re crowd-sourced. What happens if they wanted to expand into retailers, if they select a user created bar does the user or the company maintain the rights to the recipe?
The Website: Great URL name, very professional, well put together portal. Not much room to move beyond the current product though, no ability to scale out into complementary goods unless you use Element Bars branding in them.
The Process: Having built a process to deliver thousands of customizable orders on demand is a useful skill. That know-how or “trade secret” could be very valuable to bigger players who are looking to move down into customizable product niches.
The ordering Process: This to me is probably the most amazing piece of intellectual property I saw in the product. The idea that i could customize across 5 variables, and then have the nutritional information and bar power key change is very cool. I could see this technology being applicable for anything from recipe sites, to corporate restaurants detailing their menu.
We’ve talked Value now lets talk Challenges
Scaling ~ The most concerning thing about this business for me (and one which the sharks seemed to neglect) is how are you going to scale the product line given the reliance on customization. Its great you build 1 bar specific to 1 person but if you have 10,000 people waiting on their unique bars can you deliver? This really is the difference between small restaurants and fast food chains, there’s a certain adjustment that the product ofering must undergo to scale out to large audiences.
Is the product offering too narrow? ~ Next we’re talking about a niche product, or rather 3 niches coming together to create an even smaller niche.
Pretty narrow niche to fill
Competition ~ If you walk into a grocery store you’ll already see a glut of these bars, most of which claim many of the same benefits of Element Bars. How does Jonathan plan to compete with the Power Bars, Cliff Bars, and Luna Bars of the world? How is he going to fight them when he’s not even on the shelves next to them in stores, where the majority of people still do their shopping?
Marketing and growing customer base ~ I’m very concerned about this one, your product is online meaning there isn’t a ton of product placement opportunities for you. You’re relying on people who are dissatisfied with the offerings they see on a daily basis to seek out this product. I see this as a major blocker to expansion.
Suggestions
Hit the Gym ~ If I was Jonathan I would focus on a primary audience to act as my distribution channel: Sports Clubs, Gyms, and nutritionists. His problem is scaling with a customizable product, these businesses are centered around creating health plans for their members. They could order his product customized but paired down to just a few options and keep them onhand as a recommendation to go into their excercise and diet plans.
Force feed them ~ This is probably going to be about as well recieved as Howard Schultz telling Starbucks they should move into preperation of coffee drinks instead of sticking with just whole bean sales (and we saw how well that worked out). I love you customized story, but you need an offering into stores to get the visibility. You could even use it as a trojan horse to drive people to the website for the customized product.
White label ~ Go after companies that want to use your product as a complement to their offering. His process already supports this but make it a priority.
Take Away: Ok this was an incredibly long post. I was pretty dissapointed on both sides of the negotiating table. In the end Jonathan did make a deal (it was unclear whether he got to keep the 4% royalty or whether it went off the table when he negotiated to 30% stake). In the end its a reality TV show so anything you see, you have to be sceptical of. For me I’d probably have invested on the condition I be granted the IP for the customization on the website for use outside of the energy bar marketplace.
Most people don’t understand intellectual Property or how to value it, use this to your advantage.
