Month: November 2018

‘Shark Tank’: Why Mark Cuban and A-Rod invested $700K in these genius portable protein powder pods

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Mitch Haaseth | Getty Images

With fitness trends like “strong not skinny” (over 7 million Instagram hashtags and counting) and diets like keto and paleo being all the rage, added protein in food and drink has continued to be big business in 2018.

Sunday’s episode of ABC’s “Shark Tank” was right on trend: Two founders pitched a portable protein powder pod so novel it got a $700,000 investment from Mark Cuban and former Major League Baseball star Alex Rodriguez.

Vade Nutrition husband and wife co-founders Joe and Megan Johnson from East Lansing, Michigan were both college athletes (Joe was a wrestler at Michigan State University and Megan a cheerleader at the University of Arizona), and Joe was a fan of protein powder. But they wished it was less messy and more convenient to use on the go — they had to pre-measure it and trying to use it in their car after working out left their seats and console covered in powder, according to the Vade Nutrition website. That lead to the idea of portable protein powder pods; the Johnsons quit their jobs and started a business.

Vade’s protein powder pods, which have a patent pending, are encased in a food grade film (so it’s edible) that dissolves instantly when shaken or blended. The scoops of protein contain 100 percent whey isolate protein, 20 grams of protein, 90 calories and no fat or sugar and a 1.6 pound package (30 servings) currently starts at $34.99 on the website. (For comparison, many of the top-selling protein powders on Amazon have 120 calories or more, slightly more protein and sell anywhere from about $5 to $18 a pound.)

The Johnsons started selling their product (patent pending) online in July 2017 to test the market, they told the Sharks. So far the company has $80,000 in lifetime revenue and social media buzz, all unpaid, according to the founders: Fitness influencer Carrie Lynn Beamer (who has 60,000 followers) praised the product on Instagram and athlete Jamie Hagiya (who has 120,000 followers) posed with the product when it was included in the Gainz fitness subscription box in April.

But the Johnsons were also upfront with the investors that mistakes had been made; ahead of the launch at a fitness expo, they spent $50,000 on the protein powder only to discover when it was delivered that it was flavored incorrectly. They were unable to use the inventory, and they weren’t able to get their money back.

“Welcome to being an entrepreneur,” Cuban said, smiling, after hearing the story.

The Johnsons came to the tank looking for $250,000 for a 10 percent stake in the business, having already burned through $300,000 to get there.

Cuban offered a deal: $350,000 for a 20 percent stake. He saw potential in licensing and expanding to new products, and was particularly excited about their pending utility patent.

“When you’re grinding and your back is against the wall, you take the path of least resistance to cash,” Cuban told the Johnsons. “On the one hand, you have a patent, and that’s your hammer… your hammer is more important than everything else right now.”

Lori Greiner also said she might be interested.

“Lori, you’re thinking, so that might take awhile,” returning guest judge Rodriguez joked, jumping in with another offer.

“This business is right in my wheelhouse,” Rodriguez reasoned. “Between my sports background, the gyms that we own, we have access to over 1,000 gyms.

“We just bought a company called Ice Shaker here last season, and it’s up over 500 percent. I did that with Mark.” Indeed, as a guest judge last season, Rodriguez along with Cuban invested $150,000 for a 15 percent stake in Ice Shaker, an insulated protein bottle business founded byChris Gronkowski, brother of NFL star Rob Gronkowski.

Rodriguez told CNBC Make It in February that investing in Chris was a good decision. “He’s under promised and he’s over delivered,” Rodriguez said. “Our sales have done incredibly well.” And Cuban has been happy with the deal too: “[I] love him,” Cuban told CNBC Make It of Gronkowski in October.

So Rodriguez and Cuban teamed up again and offered the Johnsons significantly more money than they had even asked for, but more ownership too: $700,000 for a 40 percent stake. The entrepreneurs countered with a 25 percent stake. “No,” Cuban said.

The Johnsons accepted anyway. After all, as Joe said, for a protein powder on “Shark Tank,” Cuban and A-Rod are “the dream team.”

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