Decision Vision Episode 121: Should I Pitch on Shark Tank? – An Interview with Katy Mallory and Lou Childs, SlumberPod
Mother-daughter duo and Shark Tank contestants Katy Mallory and Lou Childs talked with host Mike Blake about why and how they invented the SlumberPod and what makes them a great business team. They also offered a behind the scenes perspective on the popular business reality television show, including what it takes to get on the show and how they prepared for their appearance. Decision Vision is presented by Brady Ware & Company.
The idea for SlumberPod started in December 2014 when Katy and her husband and baby were visiting Katy’s mother (Lou) for the winter holidays. Because it was a packed house, the three had to share a room. The baby woke up two nights in a row—seeing her parents across the room—and refused to go back to sleep. Sleep-deprived and frustrated, Katy and her family went home a day early. Thing was … their baby was rarely a bad sleeper at home.
Katy scoured the internet for something she could bring on trips to provide her baby a private, dark place to sleep. When she didn’t find anything that fit the bill, she (like many others) resorted to homemade solutions to provide a visual barrier between her and her baby. The homemade solution worked but wasn’t safe, especially private or easy to set up.
While Katy was on maternity leave with twins in the spring of 2016, she and Lou decided it was time to create a safe, easy and portable solution to help make vacations more restful and fun for everyone—and SlumberPod was born!
They’ve had a ton of support and encouragement by way of friends and family, product designers, fellow entrepreneurs, advisors, and are proud to bring SlumberPod to market.
Between the two of them, Katy and Lou have nine children and lots of experience traveling with them.
(You can find a clip of Katy and Lou’s Shark Tank pitch here.)
Mike Blake, Brady Ware & Company
Michael Blake is the host of the Decision Vision podcast series and a Director of Brady Ware & Company. Mike specializes in the valuation of intellectual property-driven firms, such as software firms, aerospace firms, and professional services firms, most frequently in the capacity as a transaction advisor, helping clients obtain great outcomes from complex transaction opportunities. He is also a specialist in the appraisal of intellectual properties as stand-alone assets, such as software, trade secrets, and patents.
Mike has been a full-time business appraiser for 13 years with public accounting firms, boutique business appraisal firms, and an owner of his own firm. Prior to that, he spent 8 years in venture capital and investment banking, including transactions in the U.S., Israel, Russia, Ukraine, and Belarus.
Brady Ware & Company
Brady Ware & Company is a regional full-service accounting and advisory firm which helps businesses and entrepreneurs make visions a reality. Brady Ware services clients nationally from its offices in Alpharetta, GA; Columbus and Dayton, OH; and Richmond, IN. The firm is growth-minded, committed to the regions in which they operate, and most importantly, they make significant investments in their people and service offerings to meet the changing financial needs of those they are privileged to serve. The firm is dedicated to providing results that make a difference for its clients.
Decision Vision Podcast Series
Decision Vision is a podcast covering topics and issues facing small business owners and connecting them with solutions from leading experts. This series is presented by Brady Ware & Company. If you are a decision-maker for a small business, we’d love to hear from you. Contact us at email@example.com and make sure to listen to every Thursday to the Decision Vision podcast.
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Intro: [00:00:02] Welcome to Decision Vision, a podcast series focusing on critical business decisions. Brought to you by Brady Ware & Company. Brady Ware is a regional, full-service accounting and advisory firm that helps businesses and entrepreneurs make vision a reality.
Mike Blake: [00:00:21] Welcome to Decision Vision, a podcast giving you, the listener, a clear vision to make great decisions. In each episode, we discuss the process of decision making on a different topic from the business owners’ or executives’ perspective. We aren’t necessarily telling you what to do, but we can put you in a position to make an informed decision on your own and understand when you might need help along the way.
Mike Blake: [00:00:39] My name is Mike Blake, and I’m your host for today’s program. I’m a director at Brady Ware & Company, a full-service accounting firm based in Dayton, Ohio, with offices in Dayton; Columbus, Ohio; Richmond, Indiana; and Alpharetta, Georgia. Brady Ware are sponsoring this podcast, which is being recorded in Atlanta per social distancing protocols. If you like to engage with me on social media with my chart of the day and other content, I’m on LinkedIn as myself and @unblakeable on Facebook, Twitter, Clubhouse and Instagram. If you like this podcast, please subscribe to your favorite podcast aggregator and please consider leaving a review of the podcast as well.
Mike Blake: [00:01:13] Today’s topic is, should I pitch on Shark Tank? And this is a cool episode to do for a lot of reasons. Obviously, Shark Tank is a fascinating phenomenon. It’s an attempt to put the American entrepreneurial dream on stage in a microcosm in sort of a miniaturized format. And I’m going to speak very vaguely about that because I’ve actually never watched the show start to finish. Maybe I watched five minutes or so, and I’ve watched the recording of the pitch of our guests that are coming on today.
Mike Blake: [00:01:51] But searching around, I looked it up, and Shark Tank has been around since 2009, which is a remarkable run for a television show and a remarkable run for a television show of the type that it is. But I think one of the things that really gives it its legs, if you will, is the fact that it does encapsulate something that we, as Americans, really romanticize, which is the one big shot, right? It’s Hollywood meets Silicon Valley. And just as entertainers want to be discovered, so do entrepreneurs want to be discovered.
Mike Blake: [00:02:30] And it’s an interesting form in the respect that most companies that get funded with venture capital are either software-based or they’re trying to cure a disease, for the most part. And neither of those things is bad, I’m not going to criticize either one, but the fact of the matter is, then, if you have a business where somebody has, for example, a consumer product, as we’re going to talk about today, the channels to go find that investment are frankly less clear. And so, it’s a fascinating phenomenon.
Mike Blake: [00:03:10] And our guests are a couple of folks I’ve known for a number of years. They’ve come to my office hours back in the days when we had office hours in person. I think I’m going to resume those back in August or so. And they ultimately took it all the way, which is just fantastic. And they’re such nice, humble people. You never know that they’ve produced the success that they have, but you’re going to feel the same way after you hear them. As I do, you’re going to be thrilled for every bit of success that they have.
Mike Blake: [00:03:46] And joining us today are Kate Mallory and Lou Childs, who are a mother-daughter team, who are co-founders of SlumberPod. They appeared on Shark Tank in 2020 – this is last year – and received an investment offer. And I’m putting it that way for a reason because I know a little bit about how the show works and we’ll learn more about that. But SlumberPod is the first portable privacy sleep nook that allows babies to sleep in their safe and familiar play yard or travel crib with room to sit up or stand up inside.
Mike Blake: [00:04:12] The patent-pending SlumberPod solves the age-old problem of getting a good night’s sleep while sharing a room with your little one. And I’ve been there. We’ve had two little ones, and we had some bloodshot eyes in those days. Babies and toddlers can easily nap in bright or distracting conditions approved for indoor use only.
Mike Blake: [00:04:28] Now, the other interesting thing is this is almost, really, if we’re honest about it, a kind of a side gig. Katy is also Director of Internal Communications, and Sales and Marketing at Cox Automotive here in Atlanta, and Lou is an adjunct professor of marketing at La Grange College. Kate and Lou, welcome to the program.
Lou Childs: [00:04:47] Thank you, Mike.
Kate Mallory: [00:04:49] Thank you, Mike.
Lou Childs: [00:04:49] So good to be here.
Mike Blake: [00:04:51] Yeah. And thanks for coming on. I know you have a lot of demands on your time. And also, I’m sure a lot of people want to talk to you because you’re, now, big stars. So, for the audience that has not heard of SlumberPod, what exactly is it beyond what I said? And how did you come up with the idea?
Kate Mallory: [00:05:12] Sure. So, you talked a little bit about the challenge we solve for, and that is the story of our product’s inception. So, my husband, Dan – who Mike happens to know, which is how Mike and I originally met – and I were visiting my mom for Christmas – what would that be – seven years ago? And our daughter, who was a great sleeper at home in her own private room with blackout shades, she slept so well at home, but we had to share a room at my mom’s house because it was filled with a lot of other family members, and there were blinds on the windows, but they didn’t really keep out the flood light that was right outside the window. And our daughter kept waking up, and seeing us across the room, and not being able to go back to sleep. So, we were thinking this would be a magical time of being together with family with our year-and-a-half-old daughter, and it turned out to be anything but that because we were miserable, and sleep-deprived, and we ended up going home a day early because we slept for two or three hours a night for those two nights that we were there.
Kate Mallory: [00:06:19] And as we were leaving and swearing off traveling any time soon, my mom said, “Gosh, there’s got to be something out there that you could buy that would help with this problem. Surely, you’re not the only one who deals with this.” So, I looked online for some kind of privacy barrier that goes over a crib, or a pack and play, or a play yard, and I couldn’t find anything. So, for a little while, when we finally were comfortable traveling again, we started bringing to cheap camera tripods with us, and a sheet, and ponytail holders or twist ties to attach the sheet to the tripods. And that created a temporary wall that kept our daughter from being able to see us and hotel rooms, but it didn’t solve for keeping her entire sleeping space dark. So, light was coming in through the shades or the curtains. She was still up at 5:30 or 6:00 in the morning. If she had to take a nap, it wasn’t dark in there. We were still tiptoeing around, looking at our phones under our covers or hiding in the bathroom. So, that certainly helped, but it was cumbersome to set up. It didn’t solve all the problems.
Kate Mallory: [00:07:27] So, flash forward to summer of 2016, when I was on maternity leave with twins, my mom very generously offered to spend a few months with us, helping us get on our feet as a family of five. And it was during that time that she said, “Katy, we’ve got this time together. You and I are both really industrious. We’re going to be watching these babies take naps. Why don’t we get serious about inventing a solution?” And so, we did. We filed for an LLC, I believe, in June 2016. And that’s when we got really serious about making what is now known today as SlumberPod.
Mike Blake: [00:08:03] Now, the other neat part of this, and I could make it a second show, but we won’t get into that today, but I mean, the dynamic mother-daughter working together. Mothers and daughters don’t always necessarily get along that well that you can start an entrepreneurial company together and be successful. And I know I’m going off the script here, but I think that’s okay. I am curious as to what is it about your relationship that’s made you be able to work together so successfully?
Lou Childs: [00:08:32] That is a really great question. And Katy and I have had what we found out now to be a unique mother-daughter relationship in that we have always gotten along. Katy’s a little bit of an old soul. So, in her teenage years, there weren’t a lot of rebellion. I’m also a pretty open person. I don’t typically overreact when something happens. I try and understand things from everybody’s point of view. So, she felt real good about bringing me issues, or problems or things that we talked through. So, we actually are really good friends.
Lou Childs: [00:09:21] I felt no, I guess, hesitation in getting a business together, because we know each other’s strengths and weaknesses. We know how each other reacts under stress or when the chips are down. And we both are really resilient. We have a lot of energy. We’re very determined. We do speak our mind, but we do so in a way that is respectful and loving. So, I can only think of maybe one time when maybe I was tired or Katy was that we just had to say, “Okay, we we need to go to bed, and we’ll reconvene on this topic tomorrow.” Otherwise, we talk things through really well. It’s been a great journey together, honestly. And the wonderful thing is I thought we were close before, but we’re really close now. So, it’s been a blessing.
Kate Mallory: [00:10:22] I was just about to say that that I feel incredibly fortunate that I get even more time with my mom than my siblings because of this business and what we’ve started together. And I have to brag on my mom too because one could think like, “Oh, what’s your mom going to bring to the table? She’s getting closer to retirement age.” And that could be nothing further from the truth. She’s one of the most technologically savvy people I know. She is a problem solver. She’s like, “Oh, the code needs to be updated on the website. I can do that, or I can implement this new piece of software, or I’ll research which review platforms will work the best and which integrate with our other systems the best.” She’s a dynamo.
Lou Childs: [00:11:03] Thank you. I enjoy it.
Mike Blake: [00:11:04] Well, I have a feeling I’ll get a lot of emails from people asking for your email address, Lou because people will want to be adopted. So, good for you, guys.
Intro: [00:11:13] What’s with more at this point?
Mike Blake: [00:11:16] So, what gave you the idea? I mean, you went through that process, what was a leap from starting the business and developing the product? Why go on Shark Tank? I mean, I haven’t really seen the show, but you probably have. And I know that not every entrepreneur’s experience on the show is awesome. What motivated you to think about that and try that?
Lou Childs: [00:11:42] So, first off, getting on the show is like a needle in a haystack. So, 40,000 people apply every year.
Mike Blake: [00:11:51] 40,000, wow!
Lou Childs: [00:11:53] Yes, every year. So, when we realized when we went on Amazon and after the first five months of being on the market, we had $150,000 in sales and we said, “Why not? We’re crazy. We really do love to have a lot of fun.” As those of you who have seen our pitch can see that we’re in pink pajamas with shark slippers. But we just said, “Hey, what the heck? We’ve got Delta miles. Let’s pick a spot and go stand in line and be in the casting call.” And that’s exactly what we did.
Lou Childs: [00:12:36] Katy is so good at public speaking. I’m a great sidekick and I’m a lot of fun. Of course, during the pitch, I forget my lines and the producers thought that was hilarious. But I think we’re endearing. I think that people kind of feel once they get to know us that they want to be our friend. So, it was easy. It was easy to just say, “Hey, what have we got to lose? We’ve got a great story, and let’s go have some fun.” And that’s what we did. And I think it really paid off that we had that attitude.
Kate Mallory: [00:13:16] My mom mentioned, Mike, that we had some sales, and I wanted to expand on that a little bit because from watching the show, which I think we both seen every single episode over the last 11 years, we’ve seen that when companies have no revenue or their only revenue is Kickstarter or Indiegogo campaigns, they really get the the ninth degree from the Sharks because the Sharks don’t feel like there’s enough to go on to feel confident investing. So, having that revenue and not just $5000 of revenue, but I think when we applied, what would you say, mom, it was more than $200,000 or $150,000 or something like that when we first applied? And then, by the time we recorded, we had $600,000 or $650,000 in revenue in just a couple of months. So, that made us feel confident.
Kate Mallory: [00:14:10] Of course, there is the exception of The Comfy, which is a brand that Barbara Corcoran invested in that was pre-revenue, but she just really felt like those entrepreneurs were magnetic and she went out on a limb and invested in them. But historically, that’s not the case.
Mike Blake: [00:14:27] And what’s interesting about that is in Atlanta, and really I think throughout the southeast among entrepreneurs, there’s a frustration among many entrepreneurs that angel investors really want companies that already have revenue, right? And I think, somehow, that a lot of them think that they’re kind of being picked on or the south is just a lousy place for investment. And what you’re talking about on Shark Tank, and those are very accomplished investors, right, they know what they’re talking about, it’s interesting that even they, when they’re on television and it’s as much entertainment and for them, brand building as it is making an actual investment, they’re still wanting to see that there’s some sort of customer validation out there.
Kate Mallory: [00:15:09] Absolutely. And another little disclaimer is that we had two private investors invest in us before we even had, really, a minimum viable product. And that is a result of maybe personality, but also some some privilege and connections as well. So, that helped us get off the ground because it is really challenging, especially with a product that has a pretty high manufacturing cost to do all the safety testing, and the marketing, and the market research and the product development. So, I feel where we feel for entrepreneurs who can’t get that seed money to get started. And we look forward to being able to get back.
Mike Blake: [00:15:48] It really is tough to get that money. And you’re right, those connections really help because I think – well, you tell me, but in my experience, when I’ve seen those pre-revenue investments happen, as much as anything that I think the investor is doing it because they want to just give you a chance to succeed. And then, if they get their money back, they’re thrilled, but they’re not looking at it like they’re JPMorgan saying, “I’m going to make a gazillion dollars out of this,” right? And that’s just the kind of way that capital works. Silicon Valley is an exception. It’s just that, right? You can get a few million dollars for a vaporware kind of thing but, man, it’s exception rather than a rule. You guys built it. You built it the right way. And I think you were clearly acknowledged for that.
Lou Childs: [00:16:36] Thank you.
Kate Mallory: [00:16:37] Thank you.
Mike Blake: [00:16:38] So, I’ve got to ask you because I did watch your pitch, I actually watched it a couple of times. And you had them rolling in the aisles when you were showing them kind of how people were trying to create dark spaces for their kids, right? And the canopy that you’re putting on the playpen with the jumper cables, and then that poor woman was trying to put tin foil over the window. I mean, it was just hilarious. Did you make those up, or are those kind of urban legends, or did you actually hear of somebody you know, somebody who actually tried to do those things?
Kate Mallory: [00:17:15] Seriously, people try, or do, have done those things. The jumper cable I’ve only heard once. But seriously, somebody did tell us that. I’m in a lot of mom groups, so that I can monitor for people mentioning SlumberPod. And I’ve seen people say, “Hey, I don’t want to buy a SlumberPod. It’s really expensive. What do I do?” And you’d be surprised how many people say, “Oh, we just drape a blanket over the pack and play,” which that doesn’t sound safe, or “We bring trash bags and we tape them to the windows,” or “We ask for a wheelchair-compliant hotel room,” which that’s kind of sketchy, “big enough to set up the pack and play inside. And then, we go down to the lobby in the night to use the bathroom.” So, the stories are are wild.
Lou Childs: [00:17:58] Oh wow!
Kate Mallory: [00:17:59] It really is crazy. And one little aside about the lady who was on Shark Tank with us, she actually was a customer, and we’d never met her, but she was such an enthusiast of our product that we invited her to come on the show with us.
Lou Childs: [00:18:12] And her son sleeps – and still does to this day, and he’s over three years old – he slept in a SlumberPod every night and every nap. So, I mean, even that day, he had napped in SlumberPod. But we filmed mid or late afternoon – I can’t remember exactly what time – and for him to be put inside a SlumberPod at a time when it wasn’t nap time, and who are all these people, and what are all these lights, of course, he was upset, he couldn’t figure it out, but the the pack and play was might. So, his little cries were a lot louder on TV than they were in reality.
Lou Childs: [00:18:55] But yeah, I mean, it was a challenge to keep going, but you’re given one take. So, we were in front of them almost an hour. And then, of course, they edited it down to seven minutes that you see on TV, but there were also a lot more laughter that you missed. So, one of the things that people that watched our episode missed was Laurie and Robert got inside a SlumberPod together and were talking about how dark it was. And Katy said something about this being an HR violation, and everybody just howled. So, we had a lot of fun taping that shed.
Mike Blake: [00:19:37] Well, you know, and I think it shows because I cannot – I mean, I did not realize it for first seven minutes of video. I guess it makes sense, but for seven minutes of video, you had an hour of actual material. I mean, I’d pay money into a Kickstarter to get whatever didn’t make the edit. I mean, that’s just got to be hilarious. And then, you have a crying child, which given what you’ve described, is predictable, right? It would have been surprising if you didn’t have a crying child in the background kind of in retrospect. And I’m curious, did you have that plan? Did you sort of think about, “Okay, what if he’s screaming his head off during the entire thing? How are we going to handle it? Or do we push through it?” Or was that was that just something that just came up and you had to deal with?
Lou Childs: [00:20:28] We thought about it, but didn’t really think that it would be a big deal if he whimpered or made some noise. I guess I didn’t realize that. Like Robert said, “Those are real tears. Damn it.” I didn’t realize that he would get that upset, but I think we handled it pretty well. Elizabeth, his mom was right there with them, scooped him right up, settled him down. I think he was just perplexed by the whole situation, but you just have to keep on going and no harm.
Kate Mallory: [00:21:12] That brings us to another key takeaway about the experience, especially for your listeners who might be interested in applying, is that being entertaining is critically important. So, if you go out there, and you’re low energy, and you’re boring, they might not take your episode to television because they record well more than how many they need. And we know people who went all the way out there, bought all the things for their set, taped it, and then it never ended up showing. So, while that crying baby may have hurt some of our ability to sell product, some people say, “Oh, that’s kind of scary. I don’t want my baby in that,” it certainly helped us make it to television because entertainment level is key.
Mike Blake: [00:22:00] Well, I think it’s just authenticity too. I mean, if you’re a parent for more than 10 seconds, you just realize that crying babies are a part of life. And sometimes, as a cause, you can address. And sometimes, there just isn’t. A baby just sometimes going to cry, and that’s just what there is to it, right? So, let’s walk it back a little bit. I’m really curious about what the process is. After you sent in an application, they tell you somehow, “Congratulations, we’d like you to be on Shark Tank, or go through some process,” what is that like? Were there are a lot of phases? What were the phases like? What did you have to do? How long did that? Can you to take us kind of through that timeline?
Kate Mallory: [00:22:42] Sure. So, some of it we’re under NDA about, of course, but we can still tell you quite a bit about what the experience was like. So, right now, I believe you can only apply for Shark Tank through video submissions, they might bring back the live auditions at some point, but we have the choice of submitting a video or doing a live audition. And we thought that we would have more of a chance of moving forward if we did the live audition because if we could really capture their hearts and minds in that one-minute opportunity, that would be much more telling than if a company re-records their pitched 300 times in order to get the perfect cut. So, that was one thing that we did.
Kate Mallory: [00:23:25] And it took, I don’t know, two weeks or so to hear back with, “Hey, you’re proceeding to the next step,” but with every step, they want you to submit either some paperwork or some other materials that tell more of your story. And then, of course, you’ve also got all the background checks and things like that that go along with it because they want to make sure that they’re investing their time and resources in people who don’t have criminal records or who haven’t been sketchy in some other way in the past.
Kate Mallory: [00:23:54] But the whole process took about four months from interviewing or auditioning, to being flown out there, but they do record for several months. We happened to be one of the first companies of that season to go out and interview. But you’re assigned producers, who were incredibly helpful in helping us put together like a storyline for our pitch. And since my mom and I are marketers by background, we blended their recommendations with some things that we thought would work well. But overall, it was a really neat experience.
Kate Mallory: [00:24:31] But to be honest, we kept asking ourselves, “When is this going to fall apart?” because certainly with how many people apply for this opportunity every year, are we really going to make it all the way to the end? And even once we taped, we had to say, “Okay, let’s not get too excited because it’s possible that it won’t end up happening, and they could pull us off the air at any point in time.” And with that, we had a lot of nondisclosures we had to sign. In fact, that’s a funny story that my mom could share real quick, if we have a second.
Mike Blake: [00:25:05] Yeah, please.
Lou Childs: [00:25:05] So, one of the steps in the process along the way, you have to send additional videos, but we had to script our pitch. And so I happened to be on an anniversary cruise with my husband, and the next video was due. So, in the NDA, it says you can’t tell anybody that you have gone beyond the casting call. So, I had not told my husband that we were doing this-
Mike Blake: [00:25:36] Wow!
Lou Childs: [00:25:36] … and we were on our way. I love my husband, but he can’t keep a secret. So, I mean that it would be on the next billboard in downtown Atlanta if I mentioned it. So, I had to send him on an excursion while Katy and I taped a Zoom call of us doing this pitch together. And then, we go out and we film in June. So, we still don’t know, are we going to be on the show or not. So, season 11 started that night during the season premiere. I said, “Oh, Tripp, let’s watch the season premiere. Shark Tank is going to be on.” The intro video has me and Katie running out of the set with our pink pajamas on. So, I’m looking at Tripp, and he’s looking at the TV, and then he looks at me, and he’s mad at first, and he’s like, “Oh, my God. You’re going to be on Shark Tank.” So, that’s how he found out.
Mike Blake: [00:26:39] That is funny. So, you must have had to go so far as to tell him you’re flying out to California and make up something like this.
Lou Childs: [00:26:48] I did. And I made up a story.
Mike Blake: [00:26:50] How did you sound, you think?
Kate Mallory: [00:26:50] But to meet with investors. We were going to meet with investors, which we were.
Mike Blake: [00:26:55] Okay. Well, that’s true.
Lou Childs: [00:26:55] I think I told him I was going to a conference.
Kate Mallory: [00:26:58] Oh, yeah. Yeah, maybe that. I told some people I was going to meet with investors.
Lou Childs: [00:27:03] There was a little bit of a white lie.
Mike Blake: [00:27:03] That is a howl. So, okay. So, this brings me then to a very natural question because I know that you’re – as I recall watching the video, you received two offers to invest in the company, right? You selected one because you liked it better. Was it by Lorie Greiner? Is that who? Who was it, the one you ultimately selected?
Lou Childs: [00:27:25] Barbara is the one we selected.
Mike Blake: [00:27:25] Barbara, that’s right. Barbara. See, I don’t watch the show.
Lou Childs: [00:27:29] And [crosstalk] gave us a licensing deal after he called it Slumber Prison.
Mike Blake: [00:27:38] Well, look, I would imagine they also have a specific persona they want to perpetuate to stay on the program. I wonder if they’re a little different in person than they are kind of on TV.
Lou Childs: [00:27:50] I loved it. It was funny.
Mike Blake: [00:27:50] So, even – I mean, I would have thought that after you’d agreed to accept an investment that you would have thought you’d still be on TV. But even then, there’s no guarantee, I guess.
Kate Mallory: [00:28:03] There is none.
Mike Blake: [00:28:05] So, now, from what I read, the investment part, the offer part is a little bit theatrical, right? Because it’s not a binding commitment to make an investment. Really just sort of as an effect. In my world, we just call that a letter of interest. Basically, a letter of intent. And then, they had to kind of do what they were going to do to be comfortable with the investment. So, are you under NDA for that or can you talk about what that process was like after offer to ultimately getting a deal done?
Kate Mallory: [00:28:37] So, actually, you have picked great timing for recording this podcast because we were under NDA until, I think, last month on how that all panned out. As you alluded to, Mike, what happens on TV, there’s more to it than what you see. And it’s true that when we went out there and presented that not one of those sharks knew anything about our company. So, they had blank pieces of paper. They don’t get a lineup of who’s going to come out there. And everything that we shared, we represented ourselves accurately. We memorized our answers, we had flash cards, we decided in advance who would answer which questions. We really worked hard to be buttoned up and got some good help in order to do that.
Kate Mallory: [00:29:25] But after that, that’s when the due diligence starts. And we worked with somebody from Barbara’s team, a guy named Mike Stevens, who was really lovely. And he met with us, at least, once a week for several months to go over any questions that he had to get our feedback on things. He requested documents, meeting notes, and financial projections and things like that. And he told us that while we were one of the most buttoned-up pair of entrepreneurs that he’d ever met, and he was very impressed by us, and Barbara was very impressed by us, and how they expected that we had a really bright future, ultimately, they decided not to move forward with investing in us because they hoped that we were already on retail shelves.
Kate Mallory: [00:30:11] We never said we were. We were one hundred percent honest and saying we’re on Amazon and on our own website, but we’re in discussions with retailers, but that was their rationale. So, they backed out, but that meant that we got all the exposure and didn’t have to give away any additional equity. And we didn’t need the money at that point. We were cash positive. So, really, it worked out the best way it could. I suspect that it’s something like 30 percent or less of the deals that go through on TV end up going through in real life because of the things that I just mentioned, but it’s sure still was a wonderful experience that we feel was worthwhile.
Mike Blake: [00:30:53] You know, and you bring up an interesting point that I don’t think is appreciated as investors are not infallible. And investors, when they get excited about a story, they can sometimes fill in gaps that they don’t realize they’re filling in gaps, right? And then, they hear, for example, that you’re selling $150,000 of product, and they therefore assume that either you’re already on store shelves or you have that in your plan. They just didn’t bother to ask that question.
Lou Childs: [00:31:23] No, they did. They did ask that question. So, that’s an even more fascinating part of it. And the other funny thing, for people who do watch the show that are listening, is you hear different reasons for why they want to not move forward. And sometimes, “We wish you were only online because the margins are better.” And other times, it’s “We wish you were in with retailers.” So, which is it? Because certainly, our online sales do really well for us, especially those on our website but-
Kate Mallory: [00:31:23] It might that the investors have a certain number that they strive to go through with and a certain percentage. And they say yes on TV knowing that a certain percentage of them are going to turn to nets.
Lou Childs: [00:32:10] Cast a wide net.
Mike Blake: [00:32:12] Yeah. Well, I think that’s interesting in terms of the inside baseball because I think if you’re not paying attention, you think that that’s an actual deal that’s happening in real time. And it’s a little bit of a deal, it’s happening, but not the deal, deal with the capital deals happening.
Lou Childs: [00:32:30] My only regret is that we didn’t get to go on Barbara’s trips because I really think she is an amazing businesswoman and such fun to be around. If you follow her on social, she is a hoot. And I would have loved to have gotten to know her personally.
Mike Blake: [00:32:50] Now, did you have a patent? Or I guess, you have a patent pending? Was your patent pending by the time you’re on Shark Tank?
Kate Mallory: [00:32:57] We were patent pending by that point. We filed for a provisional patent in the fall of 2016, and we converted that to a utility patent application about a year later. If you could believe it, we actually are still pending. We’ve had my numerous-
Mike Blake: [00:33:17] I believe it.
Kate Mallory: [00:33:17] … request for additional extensions. They call them RCEs. What does an RCE stand for? I should know this as an inventor but office actions, and appeals, and things like that. But we’re still working through that, but are confident that we’ll be able to come up with a few explanations for our claims that will allow us to be unique enough to receive that patent. But that’s something that definitely creates a little bit of stress and anxiety for us because we want our product to have that intellectual property protection, and it really is a moat that is hard to dig without it.
Mike Blake: [00:34:00] We’re talking with Katy Mallory and Lou Childs from SlumberPod. And the topic is, should I pitch on on Shark Tank? So, you weren’t allowed to tell anybody about the outcome until the thing actually was on air? How hard was that?
Lou Childs: [00:34:18] It was especially hard after we were in that intro video and people started coming up to me who watch Shark Tank and say, “I saw you on the Internet radio. You’re going to be on Shark Tank.” And I was like, “Oh, I don’t know for sure.” And we were so scared. But it was not hard to tell the outcome because that was easy to keep a secret because people know you can’t share that. But once the cat was a little bit out of the bag, it was really hard to hold back talking just about being on the show in general.
Kate Mallory: [00:34:58] I am-
Mike Blake: [00:34:59] [Crosstalk].
Kate Mallory: [00:34:59] Go ahead, Mike.
Mike Blake: [00:35:00] No, please go ahead.
Kate Mallory: [00:35:02] I was going to say I’m such an open book, it was hard to keep a secret because I just share everything. I think I had a co-worker asked me what I’d done lately, and I was like, “Oh, we just went to California. My mom and I did. And that was fun.” And I wasn’t even thinking. And he said, “What were you doing in California?” I said, “Oh, we were meeting with some investors.” And he said, “You weren’t on Shark Tank, were you?” And I was like, “Ah.” I wasn’t-
Mike Blake: [00:35:26] Why on earth would you say that?
Kate Mallory: [00:35:28] Yeah, I wasn’t expecting to get asked that. But I was really relieved, like my mom, once we showed up on that promo and then eventually got an air date because then we could talk about it a lot more. But it was tough to maintain or keep the excitement inside. And that is a memory that will hold on to forever how much fun everything was.
Lou Childs: [00:35:54] We’re in groups with other entrepreneurs. We’re in a Facebook group with – how many are in there? Like 40, Katy? – that are baby products. And several of those companies have applied and been on Shark Tank. So, it’s really fun to watch other people’s journeys. I have actually encouraged several people that I know that are entrepreneurs, and a couple of them are in the pipeline right now. So, I think it’s fun to be on this side and be a cheerleader for other people who are going through the same process. Now, we can’t help them because of the NDA process where we’re not allowed to be a part of whatever they’re doing, but I certainly encourage people to just go do it. Why not?
Kate Mallory: [00:36:49] I do have to add, though, that there’s been one time where somebody called me and was asking about going on the show, and I had to be very diplomatic but say, “I don’t think it’s going to be successful for you.” It’s a company that had no revenue, a Kickstarter campaign that didn’t end up meeting its goal. And she said, “Well, what if somebody just really believes in me?” And I said, “Well, there’s about a one percent chance of that, maybe five percent. And I don’t want to discourage you, but maybe this isn’t the right timing. Maybe you need to try again with a smaller goal on one of those fundraising things. And then, get product in people’s hands. But otherwise, I’m just afraid you’re going to get torn apart. And I hate to tell you that, but that’s also, I think why you called was to get my honest take.”
Lou Childs: [00:37:38] Yeah, good point.
Mike Blake: [00:37:40] Look at you now. You’re having office hours of your own.
Kate Mallory: [00:37:42] Hilarious. But she said, “Well, maybe another investor will see me on the show, and call, and want to invest even if I don’t get a deal on the show.” And it doesn’t often work like that, unfortunately. But most of the companies we talked to, we’re able to encourage them, especially if they have revenue, to go for it.
Mike Blake: [00:38:04] Yeah. The reality is that getting somebody to invest in a startup is hard, and it’s supposed to be hard, right? There’s just a lot more ideas out there and companies than there are dollars to fund them. There’s a scarcity. And for what it’s worth, I think, not only to think about the company, but I think you gave them good advice is that there’s always a chance you can get something funded. Bad deals get funded all the time. Is that a good thing or not? Who’s to say? But if you hang around long enough, you may run into that one person that finishes your sentences, and they just totally get it. You don’t have to explain. The next thing you know, you got $100,000 or a quarter of a million dollars in the bank.
Mike Blake: [00:38:46] You’ve mentioned a couple of times along the way that you had people help prep you for the Shark Tank experience. You can mention names or not, it doesn’t matter to me, but I’m just curious, what kinds of advices? What advice were you seeking? How did you work with them?
Lou Childs: [00:39:05] One of the things that they really require a lot of due diligence on are financials. So, we worked with a contract CFO to do projections and just help us with all of our financials. We also took the opportunity to get our books cleaned up because, boy, were they a mess and we didn’t know it. So, it was really a great wakeup call for us on the financial side, which is not one of Katy and my strong suits. So, it was really great timing for us to have that happen. Katy, what else can you think of?
Kate Mallory: [00:39:49] I was going to just add that that contract CFO, we literally asked her to pull about 20 different numbers out, so that when they said, “What’s your-” We know our landing costs but other margin numbers, we had all those memorized. And I wouldn’t have trusted myself to go and look at the spreadsheets and make those calculations myself. So, yeah, that was a huge, huge, huge help, I’d say for Shark Tank, those were the biggest pieces. And there, obviously, had been a lot of other vendor partners along the way who helped us with things like product development and manufacturing as well, because it takes a village, especially for a small company.
Mike Blake: [00:40:27] I think that what you talk about, as you described the financials, I think that’s so underrated. Accounting is just not sexy. I get it. I’m doing this. I’m a partner with a CPA firm. Accounting is not sexy, but boy, when you don’t have it right, you miss it. And I do think and this is underappreciated, “When people ask me what can I do to make my company more saleable?” have great accounting records, haven’t be bulletproof, have financials somebody can look at and they just know that they’re right and that you know they’re right. It gives you a lot of confidence. So, I did not expect you to spend so much time describing working on that, but I’m glad that you did. And I am very confident that’s why you received that comment that your “So buttoned up.”
Lou Childs: [00:41:16] I believe you’re right, because we had it all clean. And anything they ask us, we had an answer for whether it was during the taping or during due diligence.
Kate Mallory: [00:41:28] The only numbers thing I was really worried about was having to do math on the fly for our evaluation because I know that a lot of times, we went in asking for $400,000 in exchange for 20 percent of our company, and I was afraid they would ask, like, “Hey, we’ll do $400,000 , but I want 30 percent of your company,” and that I would have to then calculate what that made our valuation. And I’m a journalist by background. I am so comfortable looking at graphic design and writing articles, but oh, I would not have done well in accounting classes or finance classes. So, that terrified me and actually almost brought with me a little index card that had a cheat sheet of if they say this and this and it means this. But I ended up leaving it in our trailer at the last minute thinking they probably wouldn’t like me relying on something that was in my pocket. So, that was another reason why I was thrilled that they offered us our original request because I didn’t have to do the math.
Mike Blake: [00:42:33] Yeah, it was interesting. I think the comment was that they thought you were selling yourselves too short.
Lou Childs: [00:42:40] Yes, they spent a lot of time telling us that we really didn’t need an investor, but then Barbara’s comment was, “I’m going to take advantage of you.”
Mike Blake: [00:42:50] Yeah, and you know what? I think too. I think to an extent, that may have been right. So when did the program air, and when did you learn that you were going to be on Shark Tank?
Lou Childs: [00:43:07] That’s an interesting story, and dovetails with what Katy said earlier about some companies never make it to TV. So, we were originally slated for very early November. So, they give you two or three weeks in advance of your air date. And because we were on the intro video, we kind of suspected that we were going to air, but most entrepreneurs don’t have any idea until they get that email three weeks in advance that says, “Okay, here’s your air date, and you can start talking about it.”
Lou Childs: [00:43:43] So, we got that email, and we immediately started blasting social media that we were going to be on Shark Tank. Well, about five days later, we get another email saying, “Oops, no. Your date has changed. You are now the first.” I think, was it Sunday night then or Friday night? I can’t remember. Anyway, the first week of January 2020. And come to find out, one of the companies that was slated to be in our episode was ditched.
Mike Blake: [00:44:16] Oh, really?
Lou Childs: [00:44:16] So, it was replaced by another company and those people never aired.
Kate Mallory: [00:44:21] And the episode – so we tried out in February, early February. We recorded in early-ish June, was going to air in November, but then got pushed out to early January. So, more than six months past after we recorded. But we also know a company that recorded our same day, and she ended up finding out her episode wasn’t going to air. But then, during COVID, they pulled some of those cut segments out of the archives, and she did end up airing about a year and a half later after recording. So, you never know what’s going to happen.
Mike Blake: [00:44:55] That’s TV, I guess.
Lou Childs: [00:44:56] But we had the luxury that a lot of Shark Tank entrepreneurs don’t have in knowing for many weeks that we were going to be on Shark Tank. So, we started promoting it when they told us in late October, all the way through to January. We really felt that that boosted our November and December sales on top of it being holidays. People were like, “Well, when they get on Shark Tank, their inventory is going to sell out. So, we better order it now.”
Mike Blake: [00:45:33] So, now, you’ve had some distance. I don’t want to have you reveal proprietary data, but where is the company now? And how much did your Shark Tank experience impact your success?
Kate Mallory: [00:45:48] That’s a great question. So, we don’t know for sure. I’ll start with the latter part of the question. So, we don’t know for sure what our sales would have been like if we had aired in November, but we have a feeling they would have been a little bit higher following our appearance because that was in advance of Thanksgiving and other winter holiday travel. So, with the new air date, that was after people had bought Christmas gifts, Hanukkah gifts, then doing all their traveling. And so, with less money available, had already done their traveling, they probably thought to themselves, like, “Oh, I’m going to earmark this for a later date, but I might not purchase right now.” Our website traffic was up like 20x, but sales were only, I don’t know, two and a half or three times more than usual for that day and a half or two days following the show.
Kate Mallory: [00:46:42] So, I took off work. We cleared our calendars, so that we could answer any social media questions and the barrage of emails that would come in, and we didn’t get as much of that as we expected at that time, which felt a little disappointing in the moment. But we now recognize that it’s all about the long tail. It’s not just about how you’re going to do immediately following your airing. So, we are able to have “As seen on Shark Tank,” on our website. It mentions it on our Amazon listing where members of these, I don’t want to say elite, but exclusive communities of people who were on Shark Tank where we can share best practices and network, and you’re only in because of that opportunity.
Kate Mallory: [00:47:29] So, even with it not being quite the sales boom that we expected, we recognized that it all worked out really well. And we went on after – let’s see, when we recorded, we’d done about $600,000 in sales, mostly in that calendar year. And then, we ended up almost – let’s see, we did $1.5 million for the back half the year.
Mike Blake: [00:47:56] Okay.
Kate Mallory: [00:47:56] So, we did really well. And then, we doubled that in 2020. And then we’re looking like we’ll probably double that again this year.
Lou Childs: [00:48:04] Or more.
Mike Blake: [00:48:05] I would think so, especially now that people are going back to traveling if you’re able to grow when travel is at a standstill.
Lou Childs: [00:48:12] That’s right.
Mike Blake: [00:48:13] Right. I mean, now, the gloves are off. Well good for you guys. Ladies, this has been, really, just a fun talk. Learned a lot of things I did not expect to learn today. And other people may want to kind of get your advice, maybe a thing about Shark Tank or a similar program like, I don’t know, Dragons Den or whatever it is. If they want to get your advice like you’ve been able kind enough to give out, can they contact you? And if so, what’s the best way to do that?
Lou Childs: [00:48:42] I think the easiest way for people to remember how to get in touch with us is just to email our customer service. It’s firstname.lastname@example.org. And then, our customer service team can forward it either to me or Katy. And we’ll get back to them as soon as possible.
Mike Blake: [00:49:02] All right. So, just mention to them that you heard them on the Decision Vision Podcast. They know that you’re not Riff-Raff trying to get in. And I’m sure they’ll be happy to take care of you. So, this is awesome.
Mike Blake: [00:49:14] That’s going to wrap it up for today’s program. I’d like to thank Katy Mallory and Lou Childs so much for joining us and sharing their expertise with us. We’ll be exploring a topic each week, so please tune in, so that when you’re faced with your next business decision, you have clear vision when making it. If you enjoy this podcast, please consider leaving a review of your favorite podcast aggregator. It helps people find us, so that we can help them. If you like to engage with me on social media, with my chart of the day and other content, I’m on LinkedIn as myself and @unblakeable on Facebook, Twitter, Clubhouse and Instagram. Once again, this is Mike Blake. Our sponsor is Brady Ware & Company. And this has been the Decision Vision Podcast.