Geek Chic, makers of drool-worthy gamer furniture, appeared on ABC’s Shark Tank this past Friday. Founder, Robert Gifford, walked away with a $300,000 investment from shark, Robert Herjavec, in return for 25 percent of the company.
Gifford revealed during the show that Geek Chic did $2 million in business during 2012 but was in the red by $100,000.
From comments made by Herjavec, you can expect him to push the company to raise its prices.
I watched this episode…I dont think it’s 100% obvious that he’ll have to raise prices.
In fact, Gifford said he asked for the investment to support better manufacturing capabilities.
This indicates an effort to lower costs rather than raise prices.
I’m surprised they are in the red. Given the small nature of the business, I would’ve expected that pricing could easily incorporate all costs. Also, the furniture and delivery costs are anything but too low.
Increased manufacturing capability to allow for a higher volume of product (for which there is demand) and a lower cost per unit would benefit them tremendously and allow more product to be provided.
Also note that a small company running in the Red can often be due to the owners/investors pulling their own salaries / compensation out of the company before communicating the bottom line. It could be that the company is losing $, but the owners are making $. So this might actually be a fairly profitable business……or not. We really don’t know.
Interesting valuation. 25% of company for $300k doesn’t seem like a $2M valuation. Although I have to admit I don’t know what exact formula the sharks use to calculate that.
I saw the episode and was surprised GC was in the red as well. I wonder if its because of the long lead time and that their business model takes so long from order to delivery that you can’t get the full financial picture in one year.
It’ll be interesting to see how this changes GC. I think Herjavec will be good for the company, especially if they are in the red due to poor business practices. The extra cash influx and leadership should help create efficiencies in production and manufacturing but I would be very surprised if their cost structure doesn’t change significantly. I see their pricing going up but also, their quality and design going up as well. Herjavec knows this is a niche market and hopefully the two can come to agreement on how best to push the company to that end.
Lastly, I see them ditching some of the random products that aren’t contributing to their main production goal. Things like wooden swords, mustache’s, card holders, really don’t belong in this companies vision and wouldn’t surprise me if they are a contributing factor to their financial situation.
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