Company Profile

COMPANY:FinalStraw

HEADQUARTERS: Santa Barbara, CA

YEAR FOUNDED: 2018

2018 REVENUE: $4.8 million

EMPLOYEES: 18

Miles Pepper was training for a half marathon when he came up with a million-dollar idea. Pepper, a cinematographer from Sebastopol, California, began picking up plastic straws on the streets of Los Angeles during his runs. What started as a handful quickly ballooned to 300. "I began to see how all the plastic trash got swept into the ocean," he says.

One 2017 study estimates that there are as many as 8.3 billion plastic straws polluting the world's beaches. So after thinking about the problem for a couple of months and finding few easily portable, sustainable straw options on the market, Pepper decided to create his own with co-founder Emma Rose Cohen. With a $30,000 loan from Pepper's parents, some engineering help, and a 3-D printer, the pair started developing FinalStraw, a fully collapsible straw made of stainless steel and silicone that folds like a tent pole and fits in a case the size of a keychain.

The product was an immediate hit upon its debut, and by the end of 2018 it had generated $4.8 million. The straws, which sell for $24.50, are now sold in Bloomingdale's stores as well as more than 40 independent retailers, and FinalStraw is working on a deal for placement in REI locations. The company is expecting to bring in $13 million in revenue this year.

But with instant success has come some harsh realities: thousands of knock-off products, difficulties filling large orders, and strife between founders. Now, only a year after launching, Pepper says he wants to focus on other ventures and has left the day-to-day operations of FinalStraw to  Cohen.

A stormy year

Many founders dream of developing a product that goes viral. FinalStraw shows that you should be careful what you wish for.

The company launched in April 2018 on Kickstarter with a campy marketing video featuring a mermaid and a stuffed turtle. Two days into the campaign, "Emma and I hit $200,000 and both started crying," Pepper says. After a month, the campaign had raised $1.9 million.

In October, Pepper and Cohen appeared on an episode of Shark Tank, where they asked investors for $625,000 for a 10 percent stake in the company. They received two offers, the first from Kevin O'Leary and another from Mark Cuban, but after flubbing the negotiations, they ultimately left empty-handed.

Still, their appearance on the show led to a short-lived spike in orders. As they scrambled to fill them, and their Kickstarter orders, copycats flooded Amazon, eBay, and Alibaba with cheaper knockoffs--some even using FinalStraw's branding.

"The knock-off situation is like whack-a-mole," Cohen, 33, says. "It has been the bane of my existence." In November, the company received a utility patent for the straw and has since been working hard to get listings taken down. Roughly 6,000 have been removed to date, according to Cohen.

Meanwhile, tensions between Pepper and Cohen had been high since the Kickstarter campaign, according to a person familiar with the company, and the two had a falling out in January.

"We have different definitions of what it means to work," Cohen says, noting that the two couldn't see eye-to-eye on how to share responsibilities at the company. Pepper agrees with that assessment, but attributes the tension in part to Cohen's expectations. "She was unhappy with anyone's work ethic," he says. "I was never doing enough, and working in a relationship like that day-in and day-out is tough."

The split won't be easy. The founders each have a 50 percent stake in FinalStraw but have yet to come to terms on how to divide equity going forward. They're now in the process of getting a valuation for the company. Cohen says she would prefer to reach an agreement, but that if necessary the company is prepared to take legal action against Pepper for breach of fiduciary duty. She also says that Pepper defamed her to vendors and the media.

Pepper denies these claims. "I just want to figure out a way to agree on this and go our separate ways," he says. "I wish no ill will toward her. I just don't want to work with her."

Moving forward

In addition to sorting out the dispute, FinalStraw will need to find ways to move forward to avoid being just the socially responsible flavor of the month.

"These companies like Dollar Shave Club that seize the day with some sort of viral marketing all face the same thing, going from that level one awareness to level three, where you're in it for the long haul as a legitimate sustainable brand," says Heath Shackleford, a strategic adviser and mentor to Pepper, and the founder of Good.must.grow, a marketing company. To stay relevant, he adds, the company will have to diversify its product line, since customers need only so many reusable straws.

Despite the challenges, Chris Larkins, a partner with CEO Coaching International who's coached more than 200 C-suite executives, says he's confident that FinalStraw will fare well with Cohen at the helm.

"I think through Emma's force of will, the company will not only survive, but also thrive," says Larkins, who has been working with the co-founders for about three months. "She has the necessary tools to scale it to be something successful."

Cohen says she plans to continue to grow the 20-employee company without her co-founder. As for Pepper, he is starting a new venture aimed at innovating replacements for single-use plastic items. Reusable straws aren't just a fad to him--they're part of an effort to fix a much larger problem. "This isn't a single issue that's going to be solved by one company," he says. "It's humanity realizing that our oceans are dying."

Correction: An earlier version of this article incorrectly indicated that Miles Pepper decided to create the straw, secured a loan, and used his film industry engineering connections to help initiate the development of the product on his own. In fact, co-founder Emma Rose Cohen was directly involved in the product's creation from the start. The article also misstated FinalStraw's location and number of employees. It is based in Santa Barbara, California, and has 18 employees.

Published on: Apr 18, 2019