Mark Cuban doesn't usually invest in companies with unclear branding — but the billionaire may have recently had a change of heart.
The company, called Gatsby Chocolate, appeared on Friday's season premiere of ABC's "Shark Tank." Its co-founders, brothers Doug and Ryan Bouton, created a chocolate bar with "about half the calories and up to 75% less sugar" than its competitors, Doug said during their pitch. They founded the brand in June 2021 and are now in Walmart Safeway, and Sprouts stores nationwide.
This isn't the duo's first go in the low-calorie dessert game: Doug is the co-founder of popular ice cream brand Halo Top, and Ryan served as that brand's chief marketing officer.
The appeal for Gatsby Chocolate was evident — lots of people have a sweet tooth, and a candy bar with less calories but "no compromise on taste" sounds like a no-brainer. But the Boutons had one issue that left a few sharks on the fence: branding.
The name "Gatsby" was meant to "play on premium, decadence and indulgence," Doug said. But for Lori Greiner and guest shark Candace Nelson, founder of Sprinkles Cupcakes, it just didn't fit.
"I knew it was a chocolate bar, but beyond that, I didn't really know what it was," Greiner said. "I was thinking that this was, somehow, liquor flavored chocolate."
"I don't love it," Nelson added.
Doug and Ryan requested $500,000 in exchange for 5% of their company and help building national awareness to match their national distribution. The problem, on top of the confusing branding, was that Gatsby didn't have free cashflow at the time of filming, and the company lost $3.5 million in 2022, making sharks like Kevin O'Leary question their $10 million valuation.
"When you think about the credibility of who we are and what we've done with Halo Top," the valuation is accurate, Doug rebutted.
Greiner offered $250,000, along with a $250,000 loan at 6% interest, for a 20% stake in the company, promising to help redesign their packaging. O'Leary also made an offer: $500,000 as venture debt for a 12% equity stake.
Daymond John and Nelson declined to make a deal. "The calories so emblazoned on this package … millennials and Gen Z, they consider this toxic diet culture. And I think there's going to be a backlash against that," Nelson said. "I'm concerned about that … You desperately need Lori for your rebrand."
That's when Cuban jumped in, asking if they'd give up a 20% equity stake. Doug expressed interest, but only if a shark agreed to be the face of the brand. While Lori entertained that notion, for a 25% stake, Cuban balked: "My brand is too big to be the face of the brand," the billionaire said.
After Greiner paused to consult with Cuban, the pair cut off O'Leary and offered a joint deal that Doug and Ryan couldn't refuse: A $250,000 investment, plus a $250,000 loan, for a 20% equity stake that can increase to as much as 40% if the brand reaches $50 million in sales.
"We're thrilled to partner with Lori and Mark and learn from them how to hone in on messaging to generate awareness for an emerging brand," Ryan tells CNBC Make It. "Specifically, we're actively looking into 'Gatsby Chocolate: The good for you bar,' after discussing with Mark and Lori, so be on the lookout!"
Disclosure: CNBC owns the exclusive off-network cable rights to "Shark Tank."
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