The Value Equation

Chapter 10The Final Form of OPM

Aaron Krause founded and owned a small company that manufactured buffer pads. In 2008 he sold the company to 3M, the large Minneapolis-based publicly traded company. At the time of the sale, he retained ownership of one product, a polymer sponge that he had developed to tackle hard cleaning projects. Because the sponge was similar to other products owned by 3M, the company declined to include it in the company purchase.

They would come to regret that decision.

Sometime later, Aaron brought a few of the sponges into his kitchen to use for cleaning dishes, and an idea was born: An effective sponge in the shape of a smiley face, with functional holes representing the eyes and mouth that could be used to aid in the cleaning process. The sponge was cute, easy to clean, and possessed properties that enabled it to become soft in hot water and hard in cold water. In May 2012, Aaron founded a company to manufacture and sell the sponges, which he called Scrub Daddy. In October of that year, Aaron and his idea were invited to the nationally syndicated reality business show Shark Tank to make a pitch for an equity investment to the panel of successful entrepreneurs. Aaron was ultimately able to sell 25% of Scrub Daddy to QVC shopping network empresario Lori Greiner for $200,000, valuing the equity of his company, which had minimal revenues, at an even $800,000. A day later, Lori and Aaron sold 42,000 Scrub Daddy sponges on QVC, and they were on their way. ...