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Co-founders of Outer, Terry Lin and Jiake Liu, came to showcase their reimagined outdoor sofa to the Sharks. Outer, named for their patent-pending outer shell cover makes covering and putting away patio cushions easier than ever, ensuring no one sits on a wet patio cushion again. The outer cover simply pulls over the cushion to protect it from the elements. The cushion can be left in place or easily moved to storage with the convenient built-in handle.

Redesigning antiquated patio furniture isn’t the only thing Terry and Jiake are trying to revolutionize. They also are reimagining the way consumers shop for patio furniture. Instead of showcasing their product in retail stores or showrooms, Outer is paying their customers to open up their backyards for others who are in the market for a new outdoor sofa. Current Outer customers can make $20 to $50 per visit. This model allows consumers to imagine the product in an actual outdoor space rather than on a retail floor.

Terry and Jiake would like to a partner with a Shark who would make an investment of $750,000 for 4% of the company. Because they are a brand new company, Outer has sold $800,000 in the first four months on the market, which are the only historical sales numbers they have to provide to the Sharks. The Sharks are confused by the valuation but quickly learn they are basing their valuation off of the market size, not their actual business projections. Terry and Jiake explain that they do not have any overhead inventory costs associated with the business because their family members subsidize the cost of inventory and they only pay for what they sell.

While the other Sharks are concerned about the valuation and the imbalance of risk vs. reward, two Sharks are interested in Outer’s product. Kevin O’Leary offers Terry and Jiake $750,000 for 20% equity. Lori Greiner also makes them an offer, which includes a royalty until she gets her investment back. After countering with Lori they agree to a $750,000 loan in exchange for 5% equity. She will make a $30 per unit royalty until she makes $1 million back. The royalty will then go away and she will be left with just her equity percentage. They are happy to partner with Lori who has expertise on selling to consumers.

What is the most you would spend on a patio sofa? Do you think Outer made a good decision by going with Lori’s loan and royalty structure? If you were a Shark, do you feel there would be enough reward with this company to offset the risk and time investment in promoting it? Begin the conversation in the comments below!

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