Billionaire entrepreneur Mark Cuban loves to bang the drum about investing only in companies with proven sales, but sometimes the Shark Tank host just can't resist taking a chance on a promising idea.
One example of an untested business model Cuban bought into is Nashville, Tennessee-based TendedBar, a one-year-old startup that makes an automated alcoholic beverage machine for use in bars and restaurants. Founded by 23-year-old Jay Perkins, who built the first model in his fraternity as a senior design project at Purdue University in 2014, TendedBar makes a touchscreen-enabled beverage dispenser that can serve up more than 100 drink combinations.
After Perkins made it to the final round at the Cuban-backed collegiate pitch competition Recess in Las Vegas in 2014, he sent Cuban a short, concise email out of the blue, asking him if he'd invest in the company. Cuban responded two days later and within a week had invested an undisclosed amount for 25 percent equity. Perkins quit his job at Detroit-based HVAC company Trane the day Cuban agreed to invest, and has been working full time at TendedBar ever since.
Though Perkins secured Cuban's investment in a short amount of time, persuading the Dallas Mavericks owner of the product's potential was not a slam dunk from the word go. Cuban sent Perkins dozens of emails peppering him with questions about the cost of building the product, the margin of error (3 milliliters per pour), and what the ultimate sale price would be. Perkins even had to send Cuban a video showing that the device worked, after which Cuban agreed to fund the next prototype in exchange for equity.
Aspiring entrepreneurs take note: If you're trying to go from the idea stage to attracting funding for your startup, be prepared to have an answer to every imaginable question about your business--and make sure those answers convey why your concept works.
"The hardest part was proving the possibilities that TendedBar has, and how--in conjunction with Cuban's expertise--it can reach the next level," Perkins says. "Once he understood the capabilities of the machine, we shared a vision on where this could go."
Though TendedBar's device comes with a hefty price tag--the most basic version starts at around $20,000--Perkins says the value it brings to bars and restaurants in the long term is well worth it, and that maintenance costs are "very minimal." Like any automated device, TendedBar saves businesses time and labor costs, but also helps with inventory control, theft prevention, and overpouring. Perkins also has a version of the product that can be used directly by customers at events--which could fetch a larger price than the bar version--but the flagship product is intended for bartenders and restaurant staff only.
Honky Tonk Central in Nashville is the first bar to use the product, having signed an exclusive agreement with TendedBar, but Perkins says he has orders from a few other business owners and expects to add roughly a dozen additional customers by the end of the year. One of the reasons for the low sales target is that each TendedBar station has to be installed according to the unique specifications of individual bars and their point-of-sale machines.
"There are certain aspects that are going to require a little bit of custom work," Perkins says. "Most point-of-sale systems work the same way, but there's different interfacing work that needs to be done at each one." In addition to the machine itself, TendedBar comes with a set of cabinets that store varieties of liquor and mixers. The cabinetry comes in a standard size or can be built into bars' existing infrastructure.
One of the first big tests for the company will take place later this month at Florida Country Superfest, a country music festival in the Jacksonville Jaguars' football stadium that has ordered two TendedBar stations for the event.
"Our biggest goal is bringing the benefits of automation to the eyes of people who haven't seen it before," Perkins says. "A lot of bar owners and restaurant owners don't know very much about automation."
While other beer- and liquor-dispensing machines are on the market, what sets TendedBar apart, according to Perkins, is its mass-service production capabilities.
So what advice has Cuban had for Perkins during the early days of his startup? "He's just told me to go out and sell it," Perkins says.
Check out the video below to learn more about TendedBar's automated system.