The third entrepreneurs into the Shark Tank this week were presenting their business Nootrobox. They were looking for $2Mill in exchange for 5% in the business. No, that was not a typo. That is a valuation of FORTY MILLION DOLLARS. In other words, it’s the highest valuation in the history of Shark Tank. They have developed chewable coffee cubes that they call Go Cubes. They come in three flavors; Latte, Drip Coffee, and Mocha. Each cube is the equivalent of half a cup of coffee, allowing you to get the exact amount you need and maintain more balanced energy.
As for their numbers, they started in 2014 with sales of $55k that year. As of the filming of their presentation they had seen $1Mill in revenue year-to-date with around 17% month over month growth.
Before we move any future into their presentation, we have to get into a bit more detail on what this business actually is. They are not just making chewable caffeine. These cubes use a combination of caffeine and nootropics. If you have never heard of nootropics you’re probably not alone, but instead of trying to paraphrase it for you, here is the definition Nootrobox gives for nootropics on their website:
Nootropics are a broad classification of cognition-enhancing compounds that produce minimal side effects and are suitable for long-term use. These compounds include those occurring in nature or already produced by the human body (such as neurotransmitters), and their synthetic analogs.
These two entrepreneurs are part of a growing culture known as “biohackers” and they are constantly testing mixtures and compounds that can help to improve mental acuity, awareness, energy, focus, and other beneficial effects.
So moving onto the Shark’s thoughts on the business, they dove right into the $40mill elephant in the room. Almost all of them dropped out due to the massive valuation and the entrepreneurs’ inability to justify it. They seemed to stumble over their words trying to bring the science to a understandable place for the Sharks, and they even tried to make their valuation analogous to an investment in Apple.
The problem with their comparison to Apple is simply the industry. These two guys are computer scientists that seem to be cut straight from the same kind of cloth as many others in Silicon Valley. That being the case, they would naturally draw comparisons from the tech industry. There is one problem though, this is not a tech business. It does have one major similarity to a tech business, in that they rely heavily on R&D to bring new and better products to market, but that still does not justify a tech valuation. This is a supplement business and it needs to be roughly valued as such.
I use the word “roughly” because even Chris Sacca admitted that he could see that value with their current trajectory. As their research improves and brings out better products alongside their Go Cubes, they could end up seeing staggering numbers. The problem still comes back to the industry though.
When you do R&D for tech and then bring it to market, there is not as much worry about side effects. Yes, constantly holding our cell phones up to our faces may one day give us all brain cancer, but the worry over health related side effects of tech is no where near the risk associated with supplements. That risk makes it extremely hard to accept a value that’s based on such optimistic future success.
My personal experience with nootropics is mixed. My job requires long nights of editing and long days of consultation, and I jumped on the wagon when Onnit’s product Alpha Brain was first building in popularity. I saw some major benefits that cannot be chalked up to simple placebo, however I also saw some side effects that I didn’t much care for. I found that many evenings, after taking the supplement in the morning, I was going to bed with a massive headache. That was keeping me up at night, negatively impacting my energy in the morning, and effectively ruining the benefits I was getting from the nootropic. After that continued for a while, I gave up on the product all together.
Despite my previous experience with it, I would not ignore further research and refinement of these kinds of supplements. They could very well be the future of energy, focus, and performance. I still see major problems with their valuation, though. I can completely understand the Sharks’ hesitation to jump into such a risky industry with so much money on the line, and trust that this brand can grow to point where they would see a significant return on their investment.
Even though I have reservations about using a nootropic again, I would love to try out their Go Cubes and do a full review of the product itself. I am major coffee nut and that product sounds right up my alley. So keep at it guys! Based you your numbers, it looks like you have got everything going in the right direction and you are obviously passionate about your product!