Nick and Anthony Pucci came to the Shark Tank in hopes of securing $350,000 in exchange for 10% of their company, Cubicall. As many companies are moving to open office designs, which cut costs while promoting collaboration, it creates a lack of sound and visual privacy that leads to strain on employee production and morale. Cubicall is a modern phone booth that can be placed in offices to allow employees to make phone calls in private. Cubicall focuses on creating the four pillars of privacy needed in an office: audio, visual, territorial and informational. The fully customizable phone booth fits into offices where every inch of floor space is critical. Each Cubicall includes air circulation fans, outlets, and USB chargers.
— Shark Tank (@ABCSharkTank) May 6, 2019
The idea for Cubicall began when Nick and Anthony started their own marketing agency and they had either leave the office or stay home when taking important phone calls because they were too loud on the phone or the office was too loud for the call. They created the first prototype Cubicalls for their office and when clients came in they would ask if they could get one of their Cubicalls too. After refining their prototype, they have now sold $500,000 of Cubicalls in the last 12 months. They are predicting that they will net $2.5 million in their second year.
Because margins are so thin, Cubicalls are sold directly to the consumer instead of through distribution. Nick and Anthony feel that they can widen their margins by 20-30% by increasing inventory. There are 4 main competitors in their market but none of the competition makes a bi-fold door like Cubicall. This may sound trivial, but customers are looking to save on space and their specially designed door cuts down on the overall footprint needed for installation. Cubicall also has a more economical price tag in comparison with its competition.
The Sharks are impressed with Cubicall’s product but are afraid that someone else could come into their market space and make a similar product to undercut their margins. They also worry that the product is capital intensive, they are just getting started and that it will likely need a two-tier distribution. That would make it more difficult for an investor to get a return on their investment. The Sharks also share the concern that there is already a decent amount of competition in a niche market and most of them begin to decline to make Cubicall an offer.
Kevin O’Leary decided to extend them an offer for $350,000 in exchange for 10% of the company. He also included a royalty agreement. Every time they sell one of their products, Kevin would receive a royalty of $100. After he recovers $1.5 million, the royalty drops to $50/unit in perpetuity. Nick and Anthony are concerned about how complicated his offer is, especially when they go to sell the company. Barbara Corcoran also decides to offer them $350,000 but for a 25% equity share with no royalties. Although they try to counter, Barbara has contacts in the contract furniture space that she thinks would be helpful to Cubicall and believes her worth to be accurately portrayed in her offer. They decide to accept Barbara’s offer.
Do you think Cubicall made the correct choice in partnering with Barbara over Kevin? Would you invest in this product? Start the conversation in the comments below!