It doesn’t take much to start a company in the Internet age. Two entrepreneurs I met last Friday have a business they say is set to gross $1 million this year. They started Sleeping Baby with $500 in savings just two and a half years ago.
It’s a classic up-from-the-bootstraps entrepreneurial story, but it’s happened at hyper speed, and the latest chapter is quintessentially of the media age. The company, Sleeping Baby, got its latest round of funding — $200,000 — from mogul Daymond John on the ABC hit show Shark Tank.
I talked to a couple of people about why the show is so appealing. Most people say they like rooting for the entrepreneurs against the capricious Sharks — and we’re in an age where entrepreneurs are even more celebrities than celebrities are. On a practical level, the show offers some great insight into the mechanics of venture capital, which is all about aligning incentives so that everyone is invested in producing a winning company.
“In the end it’s important that enough ownership remains with the founders so they stay highly incentivized,” said Bob Greene, co-managing partner of Manhattan-based Contour Venture Partners, which has invested in such startups as OnDeck , Ticketfly, Movable Ink and Bounce Exchange. And “it’s important to the entrepreneurs that the investors have skin in the game.”
He says his kids ask him whether Shark Tank is true to what he does — and it’s close, in terms of the kinds of questions asked about the size of the market and the quality of the business, he says.
Of course, a venture capitalist like Greene is investing other people’s money; angels like those on Shark Tank are investing their own money, so they’re freer to follow their hearts, which is what makes the show interesting and the results sometimes unexpected.
Brett and Stephanie Parker used to watch it even before they started building their Fort Worth, Texas-based business.
“We’re both business-minded and we’re both dreamers,” says Brett Parker, who was a regional sales manager for Cintas before he quit to help his wife sell the baby sleep sacks she was sewing. Their daughter refused to sleep, so one night, out of desperation, Parker says she sewed one of the Zipadee-Zip sleep sacks.
“She slept 12 hours that night,” Parker says. “It was right around that time that I was going to have to go back to work for financial reasons and the prayer of my heart was to stay at home with her. So this was like the answer to a prayer.”
The company followed a startup’s dream path. After they spent $500 to put up a rudimentary web site, they found an early market with evangelists: mothers who were willing and eager to share a baby sleep solution.
With $70,000 in revenue, they pitched Shark Tank and were actually chosen. Here they showed incredible judgement.
“We made it on the show after being in business for four months,” Stephanie Parker says. “But we realized we didn’t have the manpower to support manufacturing.”
(Their manufacturing at that point was being handled by women at the local fabric store that Brett had begged into working for his wife on the side).
The couple declined the show. In the meantime, they kept building, investing in a better web site, and locating a manufacturer who could comply with all the regulations that go into baby sleep wear.
They built the company to $1 million in sales over 18 months.
When they decided to pitch Shark Tank again, Stephanie was pregnant with their second. She gave birth to a boy by C-section seven days before the all-day lineup — it was about 500 people– to pitch to the show’s producers, so Brett stood in line starting at 6 a.m. and called her when he reached the front.
“We did our little pitch and left,” she says.
They were picked again, taped the show in June, and it aired on Friday. They got offers from three sharks, and were particularly flattered to get one from Mr. Wonderful that didn’t have a royalty attached to it, they say.
In the end, they accepted Daymond John’s offer for $200,000 in exchange for 20% of the company. They thought John’s experience in the textile business would benefit them.
“We’ve been so reactive in our growth,” Stephanie Parker says. “So we really wanted someone to give us the wisdom.”
Since the show ran, they’ve sent 5,000 orders to their shipper and received thousands of emails.
Parting note: There is one thing that troubles me a little bit about Shark Tank, which is that it seems to celebrate the endless accumulation of money. I wrote a story for BBC Capital recently that the editors headlined: Do You Have To Be Ruthless To Get Rich?
I think the answer is no — I don’t even think the Sharks are ruthless, having watched the show. But framing them that way, even for entertainment purposes, seems to perpetuate the idea that having a lot of money inevitably leads to, well, asshole behavior.
I keep hoping that’s not the case.
This story and others on New Builders Dispatch are made possible by a sponsorship from the Ewing Marion Kauffman Foundation. The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation that provides access to opportunities that help people achieve financial stability, upward mobility, and economic prosperity – regardless of race, gender, or geography. The Kansas City, Mo.-based foundation uses its grantmaking, research, programs, and initiatives to support the start and growth of new businesses, a more prepared workforce, and stronger communities. For more information, visit www.kauffman.org and connect with www.twitter.com/kauffmanfdn and www.facebook.com/kauffmanfdn.