Alec and Aric Avedissian are two Californian-natives who came up with a great idea: why not recycle old billboards and turn them into bags and backpacks, each one with a unique pattern and practical design. Their proposal was $300,000 for 10% stake of the company.
Two brothers Alec and Aric Avedissian came up with a great idea: why not recycle old billboards? After college, one of the brothers moved to El Salvador, where he saw a tote bag made out of a billboard. After seeing this, he decided to build a surfboard bag out of a billboard for the first time. And from then on, Rareform was born!
What most people don’t know is that in LA alone there are over 10,000 billboards which are replaced typically every four to six weeks and then thrown away. And why is that relevant? Well billboards are actually made of a heavy duty and durable waterproof vinyl material, ideal for making a bag. The company intercepts the material before it reaches the landfill and turns it into one-of-a-kind bags and accessories. From just a single billboard, which the brothers explained are typically around 14 x 48 feet, Rareform can manufacture a thousand wallets or 100 backpacks, just to name a few! And the customers love that they’re getting unique products that are helping sustain the environment.
From just a single billboard, which the brothers explained are typically around 14 x 48 feet, Rareform can manufacture a thousand wallets or 100 backpacks, just to name a few! And the customers love that they’re getting unique products that are helping sustain the environment.
When it came to the product sample, the two brothers managed to turn a “Shark Tank” billboard into a surfboard bag, 3 carrier bags, and a backpack.
The first retail store the bags were sold at was Patagonia stores both in the United States and in Japan. But how do they get access to the billboards? Rareform has an exclusive supply contract with the two largest outdoor marketing companies. And the best news? They don’t even have to buy the billboards as they are given to them as a PR stunt! When it comes to transporting the material, they pay around 200 dollars to transport a thousand billboards.
How about retail and production cost? Their first product, the surfboard bag costs $12 to make and is retailed for $80 or wholesale for $40. For the wallets, their best selling product, the cost of production is $2 and is sold for $12.50.
When it comes to sales, the company has made over $1.1 millions in sales after 3 years in business, with $700,000 just in the last year. The bad news? Last year the company actually lost $103,000 because the products were still being manufactured in the United States. It wasn’t until the last four months that they moved to Mexico and have cut the costs down dramatically, bringing the company back to making a profit.
Prior to the company started to make money, they initially raised $200,000 from family and friends, meaning the two entrepreneurs have an equity of only 40%. Another aspect presented was that the company just got a deal with one of the largest theme parks in the world.
Barbara was the first one to express her doubts about the small equity the two entrepreneurs currently have, and therefore felt like there was no space for another investor and dropped out of the deal.
Mark was the second one to back out of the deal after disagreeing with the company’s evaluation of $3 million dollars and after realizing it would still take some time for the company to grow and for him to get his money back.
Lori was the third shark to share her insight, praising the two businessmen for the sales and the recycling aspect of the business, although she didn’t like the fact that no two bags are the same and therefore it isn’t possible for customers to buy a specific design. This led her to drop out of the deal as well.
Robert was the second shark to disagree with the evaluation of the company and quickly dropped out.
The only shark left is O’Leary. He started by criticizing the evaluation and the low equity offered. But he still saw some potential in the two brothers and decided to offer $300,000 as debt, with an 8% interest rate payable over a period of 36 months. On top of all that, Mr. Wonderful also demanded 10% stake in the company. The two entrepreneurs tried to counter the offer, although they ended up accepting Kevin’s offer, despite Barbara warning them that O’Leary’s deal was not fair for the company.
Rareform’s sales keep rising under O’Leary’s expert guidance. If you would like to know more about the company, or where to buy its products online, don’t forget to check out their website www.rareform.com
Original Air Date: 3rd March 2017
Entrepreneurs: Alec and Aric Avedissian
Proposal: $300,000 for 10% stake
Investor: Kevin O’Leary
Final Deal: $300,000 as debt, with an 8% interest rate over 36 months + 10% stake
Because Rareform products are made out of freeway advertising billboard, each item is unique and one-of-a-kind. They are very durable as you can expect. Right now they have many designs including surf, duffles, backpacks, totes, bike bags, wallets, sleeves, and iphone cases. Check the latest styles they have below!
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