Walking into ABC’s “Shark Tank” last September, Lumi CEO Jesse Genet asked for $US250,000 for 5% of her company.
Lumi was a 3-year old startup selling photo printing kits online. It would allow users to print any type of logos or graphics — using natural sunlight — on things like a t-shirt, a wall, or even a car. It only had about $US1 million in annual sales, but Genet valued her company at $US5 million.
The “Sharks,” or the show’s panel of investors, weren’t too nice about it.
“I like you, but I don’t like the valuation — it’s a very rich valuation,” Laurie Greiner, the star QVC host told her.
Kevin O’Leary, the sharp-tongued dealmaker, was more direct: “That’s 50 times your free cash flow — It’s ridiculous.”
Under O’Leary’s estimation, Lumi’s $US1 million sales would only translate to about $US100,000 in after-tax profit, and he was only willing to value the company at $US500,000. The sharks instead made a loan offer at a much lower valuation.
Genet left without a deal.
“[The comments] were dicey, but I can handle that,” Genet told Business Insider. “[Shark Tank] helped us realise what was really big about our business and what was not scalable.”
But that didn’t stop her from seeking other fund-raising opportunities. Shortly after recording the show (her episode aired in February), Genet applied for Y Combinator, the preeminent startup incubator in Silicon Valley.
YC liked her story: She once had to track down the person who owned the proprietary technology behind her product for two years to buy it out for $US50,000, and had raised over $US270,000 on Kickstarter to get it off the ground. Lumi was already selling in over 1,500 retailers like Urban Outfitters and Michael’s at that point.
So in December, Lumi joined YC, and during the three months there, it expanded its product line, revamped its website, and grew its overall revenue. Genet says it now has $US2.5 million in sales, with customers from all 50 states and 20 countries worldwide. On Tuesday, Genet was on stage, presenting her product in front of thousands of potential investors at YC’s biannual Demo Day.
“What you just watched at our new YC presentation is a whole new set of products that we didn’t show the sharks,” Genet tells us.
Lumi is small compared to the outsized billion-dollar valuations of recent startups in the valley. But there are always one or two YC alums every year that go on to become the next big thing, such as Dropbox or Airbnb, and Lumi may well get there one day. But Genet thinks it’s still a long-term process.
“One key thing is not to rush your own business,” Genet says. “I’ve been working on these ideas since high school. Even if you’re not making a ton of money, that experience of just living the company day-in and day-out, getting that feedback and experience, is something you can never replace. You’ll have an authentic story to tell and a much better success.”
Here’s Lumi on “Shark Tank”: