Season 10 kicked off with what seemed to be a home-run of an idea, but quickly turned into one riddled with more questions than answers that ultimately left CEO & Founder, Brad Ruffkess, without a deal.
In his pitch, Ruffkess explains how he, like “millions of Americans”, have dealt with package thieves, or “porch pirates” running off with his home orders. His personal experience inspired him to develop Boxlock. He sees this product as a win for both product buyers & shippers alike, with buyers gaining peace of mind regarding the safety of their orders and giving carriers a more package-secure delivery option.
Initially sold between $89-109 on Kickstarter, Ruffkess was able to sell 800 units in presale. Boxlock retails at $129 per lock and costs $65 per unit to make, giving him an above industry-average profit margin of 50%*. However, Ruffkess initially alarms the Sharks after mentioning that he’s already invested about half a million dollars in research & development (R&D) expense. Unfortunately, despite early consumer interest and a healthy top-line margin, things continue to go south for Ruffkess.
The Sharks point out issues related to changes to the delivery process and additional consumer
expenses. Mr. Wonderful worries about carriers’ potential unwillingness to persistently try to unlock the
storage container if the scanner doesn’t work immediately. Guest Shark Jamie Siminoff, Founder of Ring,
is turned off by the drastic changes in consumer behavior, from delivery time to package placement.
Furthermore, Mr. Wonderful & Mark Cuban point out that there will be tremendous costs & resources
required to train carriers on how to interact with Boxlock.Finally, Cuban also points out that product buyers will need to incur an additional expense of buying a storage container to place outside their home to use Boxlock. Despite those problems, what ultimately drew the Sharks away was Ruffkess’ inability to explain his valuation. He initially values his company at a staggering $20 million by requesting a $1 million investment for 5% equity stake in his company. When asked to justify his valuation, Ruffkess reiterates the size & complexity of the package theft problem, but provides no metrics behind that problem size or his expected sales trajectory. The lack of this information combined with cost concerns caused all but Lori to back out.
In typical Lori fashion, she leverages her QVC advantage, and the fact that QVC processes around 320 million shipments per year. Additionally, she mentions that she has been trying to develop her own solution in this space for years, but has been unable to produce a final product like Ruffkess. Utilizing her industry expertise, she confidently offers Ruffkess a $1 million loan at 8% interest in exchange for a royalty that lasts until $1.5 million is repaid and a 2.5% equity stake. Lori decides to let Ruffkess pick the per unit sales royalty she will receive.
Ruffkess counters by asking for a $1.5 million loan and a $3 per unit sales royalty until the loan is repaid and a 2.5% equity stake. Lori counters by asking Jamie to come in on the deal to utilize his industry expertise for Boxlock. He declines due to a lack of proven sales and projections for future sales. Lori backs out, so Ruffkess ultimately walks out of the Tank with no deal.
Analysis & Performance Score Total: 75/100
Presentation - 45/50
Ruffkess does a great job in his elevator pitch explaining what Boxlock is and how consumers benefit from the product. He described a real problem in package theft that he shows through video evidence. During his short pitch, he has an acting mail carrier show how Boxlock works and the delivery experience it fosters. This gives Sharks a clear visual of the product and its benefits. Ruffkess was energetic and engaging, utilizing effective hand gestures and eye contact while also using concise language.
Ruffkess came into the Tank with a rehearsed and sensibly-structured presentation. Ruffkess remained mostly cool and collected as the Sharks poked hole after hole in his product, showing some nervous gestures during his back and forth with the Sharks. Nevertheless, Ruffkess deserves high praise here.
Product - 15/25
At first glance, Boxlock seems like a near perfect solution to package theft. It gives two sets of customers a great benefit; it gives product buyers peace of mind that their packages will be delivered safely and gives mail carriers more satisfaction in ensuring a safe & reliable delivery. The demonstration during his pitch shows a low-effort delivery process, but it’s unclear if Boxlock always works that efficiently since there are no customer testimonies to date. Additionally, the amount of resources needed to train carriers on using the product is seemingly large, but very much unknown. Product buyers must also utilize/purchase a storage container to use Boxlock, incurring an additional indirect cost to the consumer. While Boxlock seems like a great solution initially, there are many hurdles to clear before it can become the ultimate package theft product.
Strategy - 15/25
Ruffkess leverages a clear and precise pitch and demonstration for Boxlock that efficiently shows a market problem in package theft and a solution in Boxlock. He focuses on Boxlock’s mission to eradicate package theft, but never provides tangible evidence around the size of this problem or that people see/would see Boxlock as the solution. Furthermore, his counter offer to Lori was not attractive enough given Boxlock’s infancy as a market player.
A $3 per unit royalty on a $1.5 million loan means Lori would need to help Ruffkess sell 500,000 units before she received her money back…and that’s not including interest. After hearing Ruffkess’ counter offer, it’s no surprise that Lori wanted to team up with Jamie to reduce risk and workload. For a company that’s only sold 800 units on Kickstarter and no has recorded retail sales, the 2.5% equity stake was too small for Lori to take on a sales initiative of that size by herself. On the plus side, he did score some free marketing from the Tank, which could prove useful in the short term. Ultimately, his lack of market data, future sales trajectory, and a vague plan to implement Boxlock into his consumers’ existing behaviors ultimately left Ruffkess without a deal.
* http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html
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