Why Did Shark Tank Pass On Chubby Buttons In Episode 17?

Why Did Shark Tank Pass On Chubby Buttons In Episode 17?

The primary reason Chubby Buttons did not secure a deal was the inability to agree on the terms of the offer, particularly the high royalty demands from Kevin O’Leary, which the entrepreneurs deemed unacceptable.

Chubby Buttons didn’t secure a deal on Shark Tank for a few key reasons, based on the information from the article and typical Shark Tank considerations:

1. Kevin O’Leary’s Offer Terms: Kevin O’Leary made an offer of $250,000 for 10% equity plus a $10 royalty per unit until he recouped four times his investment. This meant that the entrepreneurs would have had to pay a significant royalty per unit, which they found too high. They attempted to negotiate the royalty down, but O’Leary was firm on his terms, leading to a standoff.
2. Valuation and Equity: The entrepreneurs were asking for $250,000 in exchange for 8% equity. While this valuation was reasonable based on their sales figures and margins, the equity ask combined with O’Leary’s high royalty terms may have been a sticking point. The Sharks might have felt that the terms did not align with the perceived risk or potential return.
3. Product and Market Fit: Although Chubby Buttons had solid revenue and impressive margins, the Sharks might have had concerns about the product’s scalability, competitive landscape, or the overall market demand. The device, while useful in specific scenarios, may have been seen as a niche product with limited broad appeal.
4. Negotiation Standoff: The fact that they couldn’t reach a middle ground on the royalty terms indicates a classic negotiation failure. This often happens when there’s a significant gap between the entrepreneur’s expectations and the investor’s offer.

Chubby Buttons Season 14 Episode 17

Chubby Buttons is a wearable Bluetooth device designed to simplify smartphone control, particularly in environments where users are encumbered by gear like gloves or helmets.

 The device enables users to adjust volume, pause music, and perform other functions without touching their phone. The product was brought to the attention of the Shark Tank investors in Season 14.

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Entrepreneurs Mike Cherkezian and Justin Barad sought $250,000 for 8% equity but did not secure a deal.

Despite generating over $1 million in revenue by 2022 and having a strong profit margin, the pitch faced challenges. Kevin O’Leary offered the requested amount but with 10% equity and a $10 royalty per unit until he recouped four times his investment. The entrepreneurs rejected the offer due to the high royalty rate, leading to no agreement.

After the show, Chubby Buttons continued to operate and benefited from the exposure, which helped boost sales. The company is still in business and available through their website and Amazon

Key Details of the Pitch:

• Entrepreneurs: Mike Cherkezian and Justin Barad
• Product: Chubby Buttons, a Bluetooth remote for smartphones that is usable in conditions such as skiing, motorcycling, or flying.
• Request: $250,000 for 8% equity in the company.

Performance Metrics:

• Revenue: The company achieved over $1 million in revenue, with $500,000 in 2021 and $600,000 in 2022.
• Cost and Pricing: Each unit costs about $13 to produce and sells for $79.99, providing a margin of over 80%.

Challenges and Outcome:

• Offer from Kevin O’Leary: Kevin O’Leary was the only Shark who made an offer. He proposed $250,000 for 10% equity plus a $10 royalty per unit until he recouped four times his investment.
• Negotiation Issues: The entrepreneurs found the royalty terms too high and attempted to negotiate, but O’Leary was unwilling to lower his demand. The negotiations broke down, and the deal fell through.
• Other Sharks: Mark Cuban, Barbara Corcoran, Robert Herjavec, and Lori Greiner all chose not to invest, which could have been due to concerns about the product’s market potential or the terms offered by O’Leary.

Post-Show Developments:

• Business Status: Despite not securing a deal on the show, Chubby Buttons continued to operate successfully. The exposure from Shark Tank was beneficial, helping to increase sales and visibility.
• Sales Channels: The product remains available through the company’s website and on Amazon. The company has continued to perform well, leveraging the visibility from the show to potentially drive further growth.
• Product Features: The Chubby Buttons device supports multi-device compatibility, is weatherproof, and features a long-lasting battery. It is aimed at users in active environments such as riders, skiers, and gym-goers.

Overall, while Chubby Buttons did not secure a deal from the Sharks, the experience on the show provided valuable exposure, contributing to ongoing success in the market.