At just 22 years old, Zack Schreier and his co-founder were on the Shark Tank stage, closing a deal with Daniel Lubetzky (founder of KIND Snacks). But the real story started after the handshake. In this episode, we explore the lifecycle of a business and the maturity it takes to recognize when you’ve hit your prime—and when it’s time to move on. Zack shares his honest take on the “leaky bucket” of scaling, the reality of Amazon fulfillment, and why he’s now betting on “Magic Bars” and AI to fuel his next chapter. If you’ve ever wondered what happens behind the scenes of a seven-figure exit, you’re in the right place.
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The Art Of The Exit: Scaling, Selling, & What’s Next With Zack Schreier
Welcome to another episode of the show. You have been tuning in every week to listen to great Shark Tanks, their experiences, their golden nuggets, if they got a deal, if they did not get a deal, did the deal go to fruition, and what is beyond the tank. We have another great guest here with us. His name is Zack Schreier, and he is the founder of Quevos. We are going to talk to Zach about his experience in 2021. What season was that again?
Season 12, episode 11.
That was in 2021. Let us get started here. Let me just say this. You cannot make a better entrance than that, I think. This is one of the best Shark Tank episodes I have ever seen. I love this entrance. You need to get their attention. You’ve got three seconds to get their attention. You guys nailed it. Good job.
Thank you.
“Sharks. I am Nick Hamburger.” “I am Zach Schreier. We are here from Chicago, Illinois, seeking $200,000 in exchange for 5% equity in our venture, Quevos.”
“$200,000 for 5%, $4 million valuation without getting into the middle of the Apple sell. How did you come up with that real quick?
It was really based on the valuation that we had been raising from investors previously. We will talk about it on the show, but we have already raised some money at a $4 million valuation. We thought we did not really want to screw our initial investors with a down route with the sharks. We have grown since our investment round, and so we figured we could justify at least raising it to the same valuation that we did.
Coming into the tank, what percentage did you two have?
Probably between the two of us, we had 60% or 65% at that point, maybe more, maybe 70%.
Mastering The Hook: Connecting With The Audience
“Sometimes it is the snacks we love dearly that hurt the most. When people realize that their favorite snacks are not healthy, they often experience the five stages of grief. First, we see denial, where we just cannot handle the truth. Potato chips are veggies. Comes anger.”
“Empty calories? White flour?” After that, there is bargaining, where we hold on to false hope. Blue corn tortilla chips? Come on, these have got to be healthier than yellow corn tortilla chips. Fourth, we see depression. What is the point of snacking when you always get hurt? Finally, sharks, we see acceptance. We make peace with the fact that our favorite snacks will never be healthy for us.”
I absolutely love this because what did you do here? You connected with the audience. Everybody knows the five steps of grieving. Everybody knows that, everybody can relate to that. Especially holds true for snacking, because it is the same thing. I have snacked on chips before. I am like, “I just got wasted calories, empty calories. I thought this was brilliant. Anything to add here?
It was Nick’s idea, and he nailed it. He did a great job.
It was his idea, but you guys are very cohesive. You guys are a great team, often picking back off of each other, not stepping on each other. Two great things here I have seen so far, the great intro, running in, and then also the props are outstanding. I love the five steps of grieving. Well done.
Thank you. Appreciate it.
When you guys are going on Shark Tank, these are the things you have to think about. You do not want to be boring. If you get bored, you will not air on TV. If you are boring, you probably will not get accepted. You’ve got to go on with everything you’ve got. It is okay if you look silly, which I think you all look great. I did not think you all looked silly.
Thank you.
“That is where we come in. We have created a healthy snack to save people from this vicious snacking cycle. Quevos. Quevos are the world’s first-ever chips made from egg whites. This is the snack that is both delicious and healthy. Quevos are packed with eight grams of protein and four grams of fiber in every serving. Our keto flavors only have four net carbs per bag. The days of starchy, fried, and processed snacks made from potatoes and tortillas are done. Now sharks.”
I love that. I am not going to ask you how you came up with the concept because it is coming up here, but is there anything you can add right now that we are not going to talk about in a few minutes?
It will probably all come up pretty soon.
“Excited to crack out of their shell with Quevos. We will have to try some samples. Even more so with the sizzle.”
I love those shirts. Entrepreneurs out there have sold the sizzle from the minute they walked in the door with a great entrance, with something that somebody can relate to, the steps of grieving, and most importantly, who is going to get excited. They really nailed this all the way. I have not seen too many guests do this.
Thanks, Michelle.
“We have our two classic flavors, cheddar and sweet barbecue, and then two of our keto flavors, sour cream and onion, and dill pickle. Tastes good. We have over 500 five-star reviews on Amazon out of 800.”
Five hundred 5-stars out of 800 is amazing. It is amazing. How did you accomplish that? What advice can you give other entrepreneurs?
Scaling Strategy: Navigating The Shift To Amazon
We started actually on Shopify, trying to drive traffic to our own owned channel. It is like you tell a difference between setting up shop in the desert versus on Main Street, with Amazon being Main Street, and in the desert, you need to route customers to you. They are not going there automatically. The benefit is that there are no other competitors around. As soon as you get their attention, you have a captive audience.
Customers don't come automatically. You have to bring them to you. Share on XOn Amazon, there is a very steady flow of traffic. Maybe this has increased even since I learned it, but I think about 70% of product searches online start on Amazon. We made the transition to Amazon and brought with us all of our customers on Shopify. We told them, “Hey, we are going to Amazon, we need reviews, so do your next order on Amazon and leave a review.” That is how we got our base. We just kept accelerating our efforts there, and that ended up being a great channel for us.
Were they all Amazon reviews?
Those that he is referring to were primarily Amazon reviews, yeah.
Were you selling before on Shopify or direct from your website?
Exactly, on Shopify. It was a Shopify-hosted site, but it was called Quevos.com.
Why did you move all of that to Amazon? I do not want to get into the leads here because we’re going to talk a little bit about this. Were all of your eggs, no pun intended, in the Amazon basket? Did you have other revenue streams and platform streams?
About 75% of our revenue ended up being online, and about 75% of that was on Amazon. We had, in the end, half of our revenue came from Amazon. Another quarter came from brick and mortar. We had a lot of retail distribution, especially by the end. We were at about 4,000 stores by the end of the business.
Just an alert to all these entrepreneurs out there. A lot of entrepreneurs will put all their eggs, all their business, in one platform. Whether it is Amazon, whether it is Costco, whether it is something else, you’ve got to be very careful with that. We had a cosmetic company that had its products in Costco only. When COVID hit, nobody was thinking about cosmetics. Nobody is thinking about makeup. They actually went out of business because Costco said, “This is not selling, we are reducing your floor space. We are going to get rid of it because nobody is buying it.” You never want to have all your eggs in one basket. You want to have multiple channels through which you market your products. Does that make sense?
A hundred percent.
“I love them. They are very tasty. I really do. They have the same amount of calories as normal chips. Exactly, but much more volume. It is better than a typical snack. With all that fiber and protein, you walk away from each bag feeling much more satisfied.” “How long ago did you launch this?” “We launched this in 2018. We did a Kickstarter. We raised $72,000. Started launching retail later that year.” “What did you sell last year?” “$260,000 in sales last year. This year, we have done $660,000 through the first seven months on pace for 1.3.”
That is a big jump from $260,000 to $1.2 million. Did you reach that goal?
That year, we probably ended at about $1.3 million. We stayed right on pace. In the prior months, we added Amazon as a channel, and we immediately were doing 50k plus a month. That was definitely a big part of that. We were also getting more and more retail shops at that point. Probably at that point, we had some East Coast chains, maybe we had Wegmans, a few solid accounts.
The brick and mortar really increased that jump from the $260,000 to $1.2 million. What about your cost? Your bottom line? Did that grow or did that stay stagnant? When you go into retail, sometimes you get a higher cost.
The Hidden Costs Of In-House Manufacturing
Maybe I will touch on this more later, but in the end, we never really succeeded at making our cost structure work. We managed the project ourselves, and we did not have the automation and the efficiency that we needed. We were always looking to the future and always expecting things to get cheaper with scale. It is really difficult to run your own plant, and you have all this waste and all these various costs that end up getting factored into the cost of goods. It was a struggle. The bottom line was never positive, actually.
Never positive when you went to retail?
Yes, ever. The contribution margin from the different channels was positive, but it was never enough to overcome the overhead.
You all heard that. Just because you grow revenue does not mean EBITDA grows. Just because you are in 400 model locations does not mean that you are more profitable, because your costs will go up significantly.
That is a lesson going forward. You want to have the right structure to scale that can scale. If you have a leaky bucket, you could add more water to it, but it is not going to necessarily work in your favor.
You’ve got to patch the leak. I like what you just said there. Here is a lesson I learned going forward, because a lot of entrepreneurs look at it as failure, and they did not succeed, so maybe they should quit. You are like, “It is a lesson I learned. Now I am going to do it differently.” You did not look at it as a failure. You looked at it as lessons. I always say it is a blessing or a lesson.
“Online, 20% in retail, where we are in 400 stores. Tell me what it costs you to make one bag like this and what you sell them for.” “It costs us $0.83 to make a bag. We sell to distributors for $1.50, online for two and a half to $3. The price that we see at the end of the day, after referral fees, is $2.49. That is also the MSRP. The process is all auto.”
You are profiting $2.49 per bag except when you sell to distributors.
That was our revenue. $2.49 is the online revenue that we saw.
$249,000 or $2.49?
$2.49 per bag was the revenue, yeah.
$2.49 revenue per bag online, not through distributors?
Yes, through distributors, it was probably more like a buck 30 at that point.
There is a lot less. They were paying you $1.50, I believe.
Yeah, thank you.
“Co-packer? We manufacture ourselves, actually. We have a unique process, and so we had to scale it ourselves. We talked to co-packers, and we will continue to speak with them as we grow. So far, the quotes they have given us have been up to two times our cost. How do you make it?’
This is what you were talking about a minute ago, that you are talking about manufacturing yourself instead of going to a co-packer because it was double the price. Looking back at that, would you still make that same decision?
Yes and no. Co-packers were not really eager to work with us as we were getting going because our process was very unique. They would have had to set up a special process and bring in special equipment to make the product. If you are a big co-packer that is able to get these efficiencies, they are not really interested in doing that for such a small business. I am not sure we had another choice, but we ended up later discovering a more generic way to make the product, something that more co-packers had an existing capacity for. We were able to find a co-packer that could produce the product for, I believe about $0.65 per bag, which was much better than we were doing ourselves.
USA or overseas?
In the USA, yeah.
You got rid of your manufacturing?
Yes, we did. We were leasing a space, and we ended up subletting it.
You were able to go from $0.85 a bag down to $0.65 a bag, correct?
It is about yeah. That $0.85 cents a bag. If you look at all the different costs associated with production, it was probably actually more than that. There was all sorts of friction and all sorts of waste. Running your own manufacturing facility is just a hard thing to do efficiently, and we were still learning those lessons.
Running your own manufacturing facility is incredibly difficult, and we were still learning how to do it efficiently. Share on XEspecially when you are running a company. You are running a company, you are new in the industry, you are new at the business, and you are trying to run manufacturing, which is a whole different ball game. As you said, a very important statement you just made is that it is not just the cost you see, it is the cost you do not see, like the friction and the waste and the lack of maybe quality control all the time. Those are the things you do not see. It is a prudent idea to go to a co-packer if you can. Makes more sense.
Totally.
“Can tell you it is not fried. That is the most important part, but it is a proprietary and novel process.”
It is not fried, but it is a proprietary process?
Yes.
You do not want to get into that proprietary process on the show.
Our IP is jumping a little ahead. Our IP is now not mine to provide.
“Dudes figured this out. I guess it all started ten years ago. I was diagnosed with type 1 diabetes, and I went from being a kid who loved to snack all the time, not think about it, to being somebody who had to watch every single carb I put into my body. I realized one day that those crispy pieces of egg white that coated the pan when I made an omelet, they crunched like chips. I thought, “Maybe I can make a chip out of this and benefit myself.” A call right there, because that is crunchy.”
I love eating products out of the pan.
Me too.
It tastes so good, especially if it has a little salt and pepper on it. It tastes really good. Type 1 diabetes is a tough disease, so my heart goes out to you on that.
Thank you. There is a lot of medical progress happening right now, and I am hopeful that maybe it is something I will only live with for the next 10, 20, 30 years, and I will be cured.
Me too. I do not think people understand how dangerous type 1 is.
You are totally right.
Thank you for working through that and developing a product that will help type 2 diabetes. I know your new product does that too, so we will talk about that in a few minutes.
“For about eight years, as we were going to college, I revisited the idea, called Nick up, and we got to work on it. I am the CEO. We have seven full-time employees on production.” “What does Zach do all day long?” “When we really got going, our sophomore year of college, I took one year off from Williams College to basically get this product from concept to finished shelf-ready products. Now Nick and I talk about strategy. I sit on the board. You have a different job. I am back at Williams College now.”
“Are you guys both out of college or one’s in, one’s out?” “After my sophomore year, I dropped out of the University of Chicago. Now I have had two years full-time in this business.” “You have not even finished college yet. How old are you guys?” “22.” “Nick, how much money have you raised?” “$1.6 million today. Who did you raise that from, and for how much?” “Heinz invested a little bit.” “Come on. How did you get introduced to them? We were in their incubator program. We were actually the only pre-revenue brand ever accepted to their incubator.”
Congratulations.
Thank you.
That is a huge brand, so congratulations on that. Did they ever show any interest in acquisition or anything like that later down the road?
That was part of the thinking behind starting this incubator, but I am not really sure that when we were in that stage, we were the right business for them. It started because it was just on the heels of RXBAR. You saw someone start a product not affiliated with one of these big companies that ended up in four years, scaling this thing, and selling for $600 million. Kellogg bought them at that price. I think all the big food companies at that point were thinking, “We need to get in earlier to make a good return on some of these up-and-coming brands.”
Their thinking was also that they did not have the capacity to innovate the same way that startups do. It requires a certain attitude to make new novel products, connect with customers, and hustle to do that whole founder journey. I think the big companies are good at doing more mainstream, more generic stuff that does not go very far from their existing product lines. That is where we came in. Five companies like us were all being helped along by Kraft Heinz. We were at pretty early stages. We were behind in the revenue.
A lot of people who apply for that do not get it. A lot of people who apply for Shark Tank do not get on.
I really have to give credit to Nick for that piece, too. I was the ideas guy in a certain way, and he was the one with the really disciplined energy to go and do all these things. He brought that real father energy, and I was following along and trying to emulate that. Maybe I needed a couple more years to grow up and learn to do that same thing.
How old were you when you started?
We were maybe nineteen.
You have grown up nicely. I do not know too many eighteen year olds that have these stories to tell as you do, so I think you guys did brilliantly. This is a lesson for entrepreneurs. Sometimes you have great partnerships, and you can work together, and you have the yin and the yang. You have somebody who has different skill sets. If you do not, then you need to hire that person, take stock of your weaknesses and your strengths, hire your weaknesses, and focus on your strengths.
There it is.
The Value Of Setting An Ideal Price Point
“You are too impressive. Very much, guys. Zach and Nick, the $0.83 cost of production per bag is pretty high. What is your ideal price point that you are targeting?” “At the end of the day, $1.99 a bag, we think, would be the lowest we need to go. You are definitely smart to start higher because once you start low, you can never go up. If you start high, you can always go down.”
When you have Daniel, the founder of KIND Bar, telling you good job, it is always better to start high because if you start low, you cannot go up. You can always go down. That was brilliant. You got Daniel in your corner right there.
That is great. He is great.
“Who came up with the name?” “We were thinking of eggs in other languages. We thought of huevos, and then someone’s like, “They are quick Quevos. They are eggs on the go.” We combined quick and Quevos. It is Spanish.” “What about marketing? How much have you guys been spending on marketing and where?” “Online, we usually spend about $20,000 a month on marketing. Last month we did 90,000 online sales, so we are seeing a good return.” “Zach, I think you guys are probably two of the youngest, most impressive people we have ever had out here, but I do not like the taste.”
Congratulations from Robert, because you guys, when I watch the show, I am like, “They got it together. They are eighteen years old, and I know 50, 60, 70-year-olds that do not have it together.” Congratulations there. He does not like the taste. What did you think about that?
Can I tell a little backstory, actually?
Sure.
We had spent eight days in a hotel room, quarantined for COVID, right before we got on the stage here. This set looks like the normal set, but actually, it was not the normal set. It was in the middle of a warehouse, and they got all these things together to make it look like we were farther apart than you typically would be from the sharks. Anyways, it was a different atmosphere.
In those eight days, we watched so much Shark Tank. We talked to mentors, and we just really got in that mode. One of the key things that we understood was that when the sharks exit, when they say, “I am out,” it is better to accept that gracefully. You only need one, and probably at least four of them are going to say no in different ways at different times. It is just to cut your losses and focus on the ones that are.
What did you think about him not liking the chips?
It was a really healthy product. It took a lot of effort to make a chip that was so healthy that it tasted almost like Lays, but not fully like Lays. For those content health products, it is very natural.
Everybody else loved it.
Yes, they did.
“You are going to do well. It is just not for me. I am out.” “Thank you so much. No worries.” “I love this deal. The story, the innovation from the fried eggs. I love that. You do not love the pricing.” “No, I do not. I tell you what, I would structure it a little differently. In this case, I would do this deal for $200,000, and I would put a royalty of $0.10 a bag until I get back $400,000. Wait for it. I would only take two and a half percent equity, so I get to participate. You get into the Shark Tank dome of desire, as I call it. I would help you with digital like crazy. I would prefer to sell this directly to customers rather than through Amazon. Work together with my companies to go direct. We are killing it directly.”
I agree with that too. If you can learn to sell directly instead of doing it through Amazon, it is so much better because you own the customer at that point and your profits are much better that way as well. At least he did not charge you, quote you $0.10 a bag into perpetuity, which is what he normally does.
I agree with that too. Amazon is really tough. That margin just gets abolished by all the fees and the shipping. If you want to compete and be visible, then you need to spend on ad dollars, too, and it is really pretty tough.
It is. I sell my books Exit Rich on Amazon, and I am always having to compete and things like that. What happens to Amazon is that they can just decide you are out. They really can. They can decide not to show you as much as everybody else, and whoever spends the most money gets shown the most, but they can decide to cut ties like that, and you are completely out of business. That is why I tell entrepreneurs never to put their eggs. That is all I can think of to say right now, eggs into one basket like Amazon, because you really need to be diversified, and the best thing you can ever do is direct sales. Mr. Wonderful is good at that. If you are going to be on Amazon and all those platforms, great, be on it.
GPS Exit Model: Planning The Three To Five Year Timeline
“What is your vision? What would be success for you?” “Our hope is to sell the company on a 3 to 4 year timeline.” “Why?” “We have seen in this space, it can be perilous to hang on to your brand the bigger it grows because the big guys will at some point either want to buy you or knock you off.”
This is one of the most important things I have heard you guys mention on Shark Tank. One of the biggest things. When you said we want to exit in 3 to 5 years, that was incredible. Why? The big guys are going to what? Build the product, and put yourself out of business. Maybe they will buy you, maybe. The biggest mistake that business owners make is that they hold on to their business too long. They never give themselves a 3 to 5 year window or even a 10 to 20 year window.
They wake up one day and say, “I’ve got to sell. I have health issues, partner disputes, and divorce. I hate my employees. The business is being run into the ground. We lost market share on Amazon. Facebook changed its algorithm.” Whatever the reason is, that is not when you sell because your business is typically turning down, not trending up. Zach knew he had a target. We call this a GPS exit model. He had a destination to sell within 3 to 5 years. What was that price you wanted to sell at, Zach, for 3 to 5 years?
Aspirationally, it was enough to retire as the 25-year-olds that we would have been. Probably that would have been in the eight-figure range somewhere.
As 18, or 19-year-old entrepreneurs on the stage, they knew exactly when they wanted to exit. They had their destination. They had a good idea what their current evaluation was, and they knew their timeframe. Most entrepreneurs never get this. This is why 8 out of 10 businesses will never ever sell, according to Steve Forbes. We are talking about that in my book, Exit Rich, which is an endorsement by Forbes. I just want to applaud you guys for that. Just knowing your timeframe, your dollar amount, and what you are worth is way beyond most entrepreneurs who are decades older than you. Well done.
Thank you.
“Do not blame me for having a very well thought-through answer. The problem that Mr. Wonderful mentioned is a serious one. Five percent is very hard to justify. The valuation is pretty crazy.
We came into the tank hoping not to give away too much equity at this stage, but it is worth it to give more than 5% to have you on board. We would be willing to come up to 10%, even for more cash.”
See, that was great because here is the truth. I invest in companies, too, Zach. Five percent does not do anything for me. It does not motivate me. It does not get me out of bed. I could just focus on deals and make high-ticket fees from that, and focus on my other companies, where I got 50% ownership. Five percent does not get most investors excited. What you did very well, very quickly before you knew you were about to lose him, is that you said, “We can negotiate. We can go up to 10% to get the right person in.”
That was from watching the show a lot, too. We saw that. That is their line. ” Five percent does not get me excited, does not get me out of bed.” We knew that we were coming in with an offer that would need some negotiation. We wanted to anchor it appropriately because we did not want to give away too much, and we did not want to have the valuation be too low. As I mentioned earlier, that is what our previous fundraising had been. It was a $4 million valuation, so we wanted to start there, and then the hope was to go up in cash, go up in equity, but not go down in valuation.
It works for you because the two of you, Nick, and the reason why is that you had it together. You knew what you were doing. You knew your numbers. You never stumbled. You maintained your cool throughout the presentation, and they were impressed by you two. Extremely impressed. That does not always work for everybody, though. It really does not, because when somebody sees a high evaluation like that, they are like, “Wait a minute, this is ridiculous,” and do not even really pay great attention to it. It worked because of the two of you and your expertise, and even your experience at a young age.
“5%, 20%.” “We could consider an offer, but our goal was to minimize the dilution. At the same time, we really want you involved and want you. If a shark gets involved, we want them to be motivated and really bought in.” “You guys are so solid.” “I am just sitting here. It is a pleasure watching you guys.”
Researching And Selecting The Right Shark Partner
Before all the offers start rolling out, did you and Nick have a particular shark, do not give anything away, that you wanted to go with? I am sure you did. Who was that? It was Daniel. It was Daniel because he was already in space.
Exactly. He had the most adjacent experience.
Usually, everybody goes in and says, “I want this shark or that shark.”
“I’ll do an offer. I will do $200,000 for 10%.” “Thank you so much for the offer. Would you mind if Nick and I talked about it for a minute?” “I do not mind. Do not forget the other offer.” “Listen, I will tell you something. I am already your customer. I love it. I think Daniel is a perfect partner for you.” “I do not. I think Mr. Wonderful is.” “I think Daniel is a perfect partner for you for those reasons.“
Did you already know that Lori was a customer?
No, we had no idea. That was a great surprise.
It is important to research Sharks. Sometimes you can find out, sometimes you cannot. It is really important to research them and see if any of them a customer. If they are, you know you already have them there.
She was probably on Amazon if I had to guess.
That is the problem with Amazon. You never know who is buying.
You have no idea.
Were you guys doing fulfillment? What was Amazon doing?
No, that is a good point. Actually, Amazon was doing fulfillment. We were actually for the show, maybe this comment later too, but we sold a bunch of products when the show aired, of course. We had a lot in the Amazon warehouse, but we were also producing on time at our factory. We were doing fulfillment ourselves, but typically it was Amazon.
That is the problem with selling on Amazon. Unless you are doing fulfillment, you have no idea who is ordering your products. That is why you really want to go directly to the consumer.
“We have not heard from Mr. Cuban. The question I have is what comes next. Exit is great, right? My whole goal when I started was to retire by the time I was 35, because the one thing you can never buy is time. I do not mind that at all, but I have a feeling that you guys have more in your mind in terms of breadth of product line in order to make this a brand like Daniel is alluding to. That is what I would like to hear.”
My question. Did you guys have other products in mind?
We were hopeful that the chips would be a large enough addressable market and that we would just do additional flavors of the chips. We also, because of a series of fundraising trials, like from our investors and pitch competitions and then Shark Tank, of course, we knew that it was important to have at least some ideas for other products, whether or not we would execute on them. We were thinking of protein pretzels and things like that.
Fundraising taught us to always have a vision beyond our first product. Whether we pursued those ideas or not, we knew we needed them. Share on XThat is a great idea because I do not know anybody who makes protein pretzels, and we love pretzels, and that is a good idea, but make them gluten-free. It is like Quest. Quest has a Quest for us, the Quest chips, the Quest cookies, the Quest shakes, but it took them years and years to develop that. They did not come out with all the products. Start with one product, entrepreneurs, start with one product, then you start to build upon that.
“It is really the cornerstone of the brand. They let us make things that are crunchy, delicious, and high in protein.” “What else can you make with egg whites? Quite a lot. Can make puffs, protein cookies.” “Guys, you wanted to go talk. I just want to tell you, I cannot do less than 10%. That is my floor number. I will make it easier for you guys. You do not have that one slam dunk thing, so you always have to get people to sample. That is going to be a challenge. For those reasons, I am out.” “Thank you, Mark.” “You still have two fantastic offers. I really like Mr. Wonderful’s. He is a great guy, and the Kraft Heinz guys love me. Just want you to know that.”
I love how you have been ignoring Mr. Wonderful.
His offer was a little, it sounds good to only give away two and a half percent, but when you think about what it means to have a royalty that pays you back twice as much as the principal, it is basically a loan with a 100% interest rate, or a loan where you are going to end up paying double the low value in interest. That is not that appealing, really. It is not that helpful.
It was two and a half percent equity and $0.10 on the chip until he got his money back, correct?
Right. Ten percent of the chip till he got double his money back.
Double his money back and two and a half percent equity.
It was going to be a cashflow burden to do that, of course. Maybe his star, his profile, would have been worth it. Maybe we could have really leveraged that to grow quite quickly, as he was suggesting. From a cash flow perspective, it did not seem appealing.
That is something entrepreneurs have to really look out for because sometimes it sounds really good, “That is great, they get money when I get money.” You really have to look at the bottom line and see how scalable that is and how cost-effective that.
Totally. In this case, it would have been that he gets money as we lose money.
That is what you do not want to do, so you are better off saying, “I will give you 10.” Sounds off of a prophet. Off of comms.
“You have two offers. What are you going to do?” “We would like to counter Daniel first, just because of all of your experience with KIND. We are going to counter with 300k and a line of credit for that 10% stake. How much of a line of credit? Maybe a $200,000 line of credit or purchase order funding.” “Can you go up on the percentage equity?” “We prefer to come down on the cash at 250 in that case.”
“Here’s what I’ll do. I’ll give you a $200,000 investment and a $200,000 line of credit for a 10% stake.” “What was the other counter?” “How about it? How about you just say yes?” “No, I want to hear the other counter.” “Daniel, would it be okay if we shared the other counter with him?” “Of course it is.” “I give you that permission.”
You’ve got to be very careful here because you’ve got to burden the hand. Sometimes, when you try to find out what other offers are, Damon does this all the time on the show, and so has Mark. They just bow and say, “I am not going to be in it anymore.” You have to be very, very careful. If you know these are your Sharks, then you need to take that deal. Otherwise, you could lose that deal.
We got lucky. We did not play this part right, and the sharks were just generous with us. It was nice that Daniel did not seem to mind. I realized also, had we told Mr. Wonderful what the counter was, he might have said, “Deal,” and then potentially that would have been that. It was a potential blunder that we narrowly avoided here.
That is what practice does. That is really knowing what you want when you go in that tank. This is a shark I want. This is a deal I want. I will not go above this. It is really important to know that, but to also know what your flexibility is, because you have to negotiate. One thing that I like that Mark said very well is that there are two types of pain when you are in the Shark Tank. Two types of pain. Number one, giving up some of that equity. That is painful, and you feel it right then and there. Guess what? That feeling will go away. When you walk out of the Shark Tank without a deal, that feeling never goes away. Choose your pain, entrepreneurs, when you go on Shark Tank or when you are looking for investors.
“I have doubled the amount of cash you are getting. If you are not sufficiently excited, I think I am going to go mad.” “How about just 300k for 10%, none of the crap?” “Guys, the numbers, can you give me 12%? How about 10% plus 2% advisory shares, $300,000?”
Little whispers here.
“We got a deal?” “Daniel, how about what you said prior to our counter? 200,000 line of credit, 10%.” “You got a deal. Good job. You guys are going to kill it. You did a deal.” “Forward to working with you. Thank you. Well done, guys.” “Good job, guys.”
You guys did really well at negotiating quickly back and forth, but not losing sight of what was important.
I have got a bit of a secret. I think generously cut out some extra discussion. We actually went into the hallway to discuss one of the offers. They fiddled all that, and then they did not end up using it. They were so generous to us in this, and they took all the smoothest moments. They made it seem like we were better than we were a little bit. Of course, we appreciate that.
He is successful and humble. Zach, you are successful and humble.
That is nice. My parents would disagree, but thanks.
I am not your parents. I am a shark over here, too.
Maybe my friends, too. I am not sure, but yeah, thanks.
“That is crazy. And they still have the little camps on.” “We just pitched on Shark Tank. We are only 22 years old. We have been coming up with different businesses our whole lives and wanting to run them together. The fact that we got to go on Shark Tank together and get a deal from Daniel, who is a giant in the food industry, is a boy’s dream.”
We have about ten minutes, Daniel. Let us talk about beyond the tank. You got a part. You got a deal with Daniel, who was your dream shark, because he owned the KIND company, correct?
Yes, exactly.
Navigating Post-Show Deal Restructuring
The deal went through, as about 90% or more never went through. Your deal went through. A little bit of restructuring on the deal because you ended up getting $300,000 cash and no line of credit because the interest rates were so high at that point, because that was in 2021.
Daniel’s team had set up the line of credit in a way where it was not going to be the most usable for us. The interest rates that were offered, I do not remember exactly, but there was probably 10% to 15% of that range. We were only able to draw it in chunks of like 25K or something like that. We could have quibbled on those terms, but in the end, we realized that that was not that important a part of the deal anyway, to us.
The cash was just straight-up cash, and equity was more valuable. The post-Shark Tank sort of negotiations and restructuring that went on for a good 3 or 4 months, probably. I hope I am not saying too much here, but during that time, I believe Daniel actually sold his business. Also, we had continued to grow. We were in a slightly different situation where, in the tank, maybe 300k for 10% was not a deal he wanted, but by that point, it was a deal he was more comfortable with.
Did Daniel and his team help you grow the company?
They did, yeah. They helped us with packaging and really understanding the consumer. Daniel always had very good wisdom, good stories, and also good connections. They did a number of things for us, one of which was actually a subsequent investment. When we needed more money to continue growing about a year later, Daniel and his team participated in that round.
They gave more money.
They did, yeah.
They got more equity for that?
Yes. Actually, I believe, not to get too technical, but I believe that was a convertible note. A convertible note is one that converts into equity. Daniel, that investment remained that way until a liquidation.
Cool. They helped you grow revenue, they helped you grow profit. They introduced you to other vendors, and they injected more money. It was a win-win. What happened? You sold your business without me. How dare you do that? You would have got more money.
We sold. It was really great, really lucky.
Into 3 to 5 years. How long after you were on Shark Tank did you sell?
The deal was signed in January 2023. I suppose it was about two and a half years after we filmed and two years after we taped.
Your window was 3 to 5, and you did it in two years. Happy you got a seven-figure price tag for that.
We got a seven-figure price tag. This is not me being humble. This is me being honest. I consider it, if you think in terms of baseball, you have got your hits and your home runs and whatnot. This was a walk, not a huge killing. We did not retire early. Our investors did not get a tremendous multiple. We had some fundamental difficulties. We were very lucky that the business was appealing enough to acquire at that point, but I am not sure that it would have been an easy path forward.
Why sell it in two and a half years then? Why not fix the things that need to be fixed and tweaked, and then go to 3, 3.5, 4 years out? Why sell in those two and a half years? Did you feel it was going down? What was your reason for that?
Again, if I am just being totally honest, we were really young, and Nick had been working on it for five years at that point. It can be very frustrating, very stressful. He was a 23-year-old, and he was managing a team of eight employees, or maybe ten, including manufacturing staff and operational staff, and dealing with investor relations, dealing with retailers, and dealing with distributors. It is a lot. It is really a lot. It was sometimes hard to see. It is two things. Is there a path forward? Do you have the energy and the excitement to bring it forward? Those things were flowing for a couple of years.
It comes down to two questions: Is there a path forward? And do you still have the energy and excitement to pursue it? Share on XThose are really good nuggets because all entrepreneurs, when you look at that, instead of staying in stock and say, “Is there a path forward here? Do I have the energy? Do I have the right team in place? Do I have the right people in place?” I am not sure if Daniel wanted to continue to grow, fix, tweak the business to get a higher exit, or if he had checked out too because he sold his company.
He would have been excited to support us. If we had made a bet, he would have been there every step of the way. If I speak frankly and candidly, I think Nick and I entered this space. I entered with a product excitement as a diabetic. I was excited to make a cool product like this, but I did not really have business excitement. I wanted to be a college kid, and I wanted to do philosophy and economics and procrastinate my homework. I did not want to manage people, deal with distributors, and learn all the nitty-gritty of this world. I took a gap year that I attended, and I went back to school, so I was not full-time.
Nick’s reasons for entering, I think he was more passionate about the business side, and he was excited to do something different at a young age. He loved it, but Nick was the kid who got an A-plus in his sleep. It was not challenging for him, and so I think he wanted something a little different. His real passion, it was more psychological, mindfulness, meditation, the life of the mind and of the soul in a certain way. He was finding himself getting further and further away from that passion of his. It was time to sell.
At least you knew when it was time to sell, and you already started planning for the sale. You do not wake up one day and say, “Burned out, that is not my passion, I do not want to do it anymore.” Now, let us talk about this because you are an entrepreneur or you are not an entrepreneur.
Yes, I am an entrepreneur for sure.
You are an entrepreneur. You are not just a college kid. You are an entrepreneur. You say you do not want to manage people, you do not want to manage vendors, teams, etc. What do you say now about that?
Now I say I am a little older. My mind is a little slower. I am not a college kid anymore. I am a real working person. The trade-off for me as an 18-year-old was, do I work really hard, or do I have a bunch of fun? Still, I am really into the big questions in philosophy. At that point, I was thinking about things like AI and automation and machine consciousness, things that are topical now, but that were very exciting to me and futuristic at that point. That was really what drew my attention.
I just wanted to say, so I will talk about the life cycles of a person and a business. It starts with being in the incubator. You get out of that incubator. You are a newborn, then you are a toddler. Same thing with a business. The business starts in the incubator. It gets out of there as a newborn. What does it need? Lots of money, lots of attention. You were what I call a teenager, young adult, really, teenager. You were in a teenage stage. Your business was in a teenage stage, becoming a young adult.
You were not quite there personally, you and your partner in that life cycle continued to grow that business beyond really what you had grown yourself, because obviously you did a great job, obviously you did your stuff, obviously the sharks were impressed. You were not really there to continue to grow that business to what I call a young adult and adult business, where you are in your prime. That is where you get eight-figure billion-dollar exits.
Because of that, you had the fortitude to know that, and you were not attached to the business. Many entrepreneurs get attached and go, “This is my baby, I came up with egg chips. This is my baby.” You were not attached to it emotionally. You knew who you were as an individual, as an entrepreneur, but you were not attached. You were ready to let it go, which, by the way, knowing that is really one of the things that most business owners always miss. You guys were magical.
Magic. What have you done next? Let me tell you folks what he has done next. He has created the Magic Bars. You cannot even see it on camera. The Magic Bars is what Zach has created now. Zach is a solo entrepreneur on this. He created the Magic Bars, which is an entrepreneur. Let me tell you, he sent me this beautiful box, which came in perfect shape. These bars are the yummiest bars I have ever had. I have tasted the maple bar, then we have the mint bar, and what was this bar?
That is a peanut butter chocolate chip?
I love these bars. My daughter loves these bars. Great morning and afternoon snack. Zach really thought about what he wanted. He grew up, now he is going to be an adult, and now he is going to grow this business. They are probably in the adult stage where he is going to exit for eight figures.
Absolutely, exactly. I will say a couple of things. One is, now that I guess I am 27, so the trade-off is not between being a college kid and doing a really hard thing, running a company, it is between working for somebody else or working for myself. Working for somebody else, I feel like my parents really instilled in me that if you are working for somebody else, or if you are working in a way where you cannot actually employ other people under you, then you can only ever get as much as your wage commands. If you are working for yourself, and you can have people that are working for you, then you can scale.
You have ownership in something that can scale, and you can have an income that is greater than what you would be able to command on your own by your own wages. From a lifestyle perspective, the freedom of running your own company is great. I am sure there are a lot of people who really like to be told what needs to get done. They like to take instructions. You did not have to tell me. Neither do I. I want to figure it out. I want to decide. That is a luxury that you have to earn. Of course, you can plan to do that, but then you have to get a business off the ground. It is really difficult. It is definitely a trade-off that makes sense for me.
This is what is so impressive about you and Nick is that you realize what cycle of life you were in. You are a college student running a corporation, and he had a seven-figure exit. Not too many people can say that. You need to take some time off, regroup, grow up, as you say, and then start this new business. Congratulations. I am very impressed.
Thank you so much. Do you mind if I also just say something about the Magic Bar? I would like to just mention that real quick.
Yes, go ahead and talk about my favorite bars now. Great.
Thanks so much. Yes. This product was born in the kitchen, and it was just an item that my wife was a tremendous chef and baker. She should really do it full-time. She is very good. She was just making this really delicious bar. I, as the food entrepreneur that I am, was aware of certain great ingredients and trends. I became aware of the mushroom craze.
You are talking about the good legal mushrooms, you guys.
The good legal mushrooms. How nutritionally beneficial those good legal mushrooms are. They have excellent fibers, they have excellent phytonutrients, platinutrients, and they really nourish your gut, they nourish your brain, they are really good for your whole body. She was making this delicious bar, and I was like, “Let us put mushrooms in it.” We started giving it to friends and family. They loved it. This is a little windy. I am sorry.
I will try to wrap this up quickly, but I will just say, I was nervous to start a bar company because people loved it, but bars are really competitive. There are two sides to that coin. Really competitive also means a really big market. If you have a product that can compete and that can stand out in a really big market, that is going to be better than having a great product for a really small market. In the end, we worked up the courage and entered the bar category.
A product that stands out in a massive market will almost always outperform a great product in a tiny one. Share on XWe are raising the bar.
We go from the home kitchen to what you have on your desk right now, that packaging and shelf-ready products that take a lot of work and a lot of food science. The most important thing for us as we were doing that work, doing that food science, was that we had to stay true to the original fresh, delicious, wholesome feel, taste, texture that the bar has. The other bar companies are really, they are more often starting in the lab.
They are not starting from food. They are starting with whey protein. It is just, what do I put alongside this whey protein to make it palatable, to make it sweet? Which artificial sweetener should I use? We really came from the exact opposite direction. How do we keep this product real food through and through with that real food experience? People are telling us it is unlike anything they have tasted before. It is so much better.
I hope everybody goes out and buys the Magic Bar because, as I said, it is delicious. I have tasted so many different bars. I am the bar connoisseur, especially when it comes to protein and nutrients. I love this bar. Golden nuggets you want to leave for entrepreneurs.
Leveraging AI Tools For Small Team Efficiency
Let us see. That is a great question. I should have prepared some. Maybe one thing I will say about our current approach and our current go-to-market is that there is a lot of stuff that is possible now for a small team. I have got myself, and I have got a co-founder as well, on this project. We are a small team.
Do you have a partner?
I do have a partner, yes, Vincent, who I met on the very first day of college, actually. We stayed good friends through school and after school, and then we started a company together. Basically, we are finding it is possible to do things using the new tools available, using AI. That would have been really difficult, first of all, to do before. At this point, you cannot snap your fingers and have something happen, but if you learn how to talk and work with the tools, then you can almost treat them like employees. They do certain things really well. They do certain things not so well. They need to be onboarded. It does not work out of the box. You need to introduce it to your processes.
What tool are you talking about?
I am really talking about the AI models in particular.
We might have to have you come back and talk about that. Talk about the AI tools because every single entrepreneur out there is, many of them are afraid of it. You cannot be afraid of it. You have to learn it, and you have to know how you can adapt it to your company. You either use AI, or you are either growing or dying, so you have to learn how to adapt to it because it is here to stay.
It is here to stay for sure, and it is here to improve. There is a lot there, and I know we are out of time. I think it is maybe. I have no special expertise on the topic of AI, and there are a lot of people talking about it. I can definitely speak to how we are finding it useful and how we are incorporating it.
Let us bring you back on to talk about AI. Does everybody want to hear him come back on? Thank you, Zach, and thank you to all of our audiences for tuning in to another episode of the show. Zach and his partner, Nick, did an amazing job, full of golden nuggets, full of lessons from college students to young adults now starting their new masterpiece. Please go listen. Please listen to this again and again. Share it with your network, and make sure you subscribe to the show. We will see you next time.
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