Why All 5 'Shark Tank' Investors Were Fighting To Invest In This Startup

Lumio‘Shark Tank’/ABCMax Gunawan shows off his Lumio product on the set of ‘Shark Tank.’

With any given pitch, the “Shark Tank” investors are looking for a personality they trust, a product they can add value to, and an opportunity to make a ton of money.

In rare instances, all five Sharks see each of these requirements fulfilled, as they did with Max Gunawan, the San Francisco-based founder and inventor of Lumio.

In the latest episode of the sixth season, Gunawan enters the tank seeking $US250,000 for 8% of his company, which produces a sleek book that unfolds into a rechargeable, adjustable fanned lamp. The ends are magnetic, which means they can be linked to each other or attached to metal fixtures.

The investors all find the product delightful, interesting, and useful, but they are most impressed with Gunawan’s dedication and hustle.

He left a career in architecture to develop Lumio in 2013, raising an initial round of funding on Kickstarter. He sought only $US60,000 on the crowdfunding site but made almost $US580,000 by the time the campaign ended. By the end of 2013, he brought in $US1 million in sales without any traditional marketing campaign.

Gunawan says that his projected sales for 2014 range from $US2 million to $US2.5 million, due to distribution deals in art museums across the US and retailers in Tokyo. A healthy 15% of revenue is profit.

At this point, Gunawan says, demand surpasses supply and he wants the capital and strategic partner to scale his business.

Each Lumio book retails for $US190, and originally cost $US80 to produce. To lower production costs, Gunawan tells the Sharks, he traveled to the Chinese factory constructing his products and lived there for four months to help optimise the process. He was able to lower the cost to $US65 per book and is looking to reduce it to $US50.

“I don’t think we’ve ever had anybody come out here and say, ‘I got a factory in China, and I went and lived there for four months’!” investor Robert Herjavec says.

“And I know what that’s like, and that was not easy!” Lori Greiner adds.

Herjavec kicks off a round of offers in which all five Sharks — Mark Cuban, Daymond John, Kevin O’Leary, Lori Greiner, and Robert Herjavec himself — all explain to Gunawan why their background and expertise will be the key to Lumio’s continued success.

We’ve summarized the “Shark fight” that ensues, paraphrasing each of the investors’ positions:

RH: I like where you’re taking the company and your valuation is fair. $US250,000 for 10%.

KO: I’ll double the valuation of your company from $US3.1 million to $US6.2 million, so that you can sell equity for more in the future, if necessary. $US250,000 for 4% equity, with $US7 royalty/unit until I make $US500,000 on the deal.

MC: Demand on ecommerce will skyrocket once the episode airs; ecommerce is my specialty. I’ll provide capital to grow inventory to meet demand and will optimise your ecommerce system, in exchange for enough of the company to make it worth my time and energy. $US500,000 for 16%.

LG: I see presence in museum shops as crucial to success. I’d like to use my background in product development to help you create the next generation of products, which could include coloured lighting. $US250,000 for 12% and a $US250,000 line of credit.

DJ: Lori and I are the only Sharks who “eat, sleep product every day,” and I’m the better pick because I’ll use my network to licence the product out and secure distributors, and will provide enough money so that you won’t need to finance again. $US750,000 for 20% and a $US10 million line of credit.

RH: Will up offer. I think you’re already on the right path, and I don’t want to see you give up too much equity. $US350,000 for 10%.

Gunawan ends up making a deal with Herjavec. “He’s exactly who I wanted to partner with,” Gunawan says after he leaves the tank.

In his pitch, Gunawan shared the prototype of a portable Lumio book, which he wants customers to always keep in their bags as they travel. His Japanese distributors say their customers are eager to buy, and it’s now available for preorder on the Lumio website.

Herjavec told Business Insider last year that he seeks entrepreneurs that he wants to hang out with and guide to success, rather than those that require him to do their work for them. As he explained to Gunawan in the tank, he respects his vision and only wants to provide resources and advice along the way rather than charting a new path for Lumio.

After the episode premiered, Herjavec wrote about Gunawan on Twitter: “Success takes sacrifice and true commitment — living in the factory — such an incredible guy.”

Herjavec strikes a goofy pose with a Lumio book after making the deal:

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