Danny Grossfeld has spent six years and $2 million building a company with no sales. Mark Cuban is intrigued.
On last week's episode of Shark Tank, after all five Sharks passed on investing in Grossfeld's hot coffee-in-a can business Hotshot, Cuban said he would give the product a test run in one of his Landmark Cinemas movie theaters. Why?
Hotshot's canned coffee and "Hot Boxes" that keep it warm are technically untested products. Grossfeld has been perfecting the formula since 2009. Both the cans and Hot Boxes are available only for preorder, with shipping scheduled for January. Grossfeld says he's received more than 200 preorders for the cans and Hot Boxes since his episode of Shark Tank aired.
In addition to Cuban, three movie theater chains have agreed to conduct tests of the product during the first quarter of 2016: AMC, Regal, and Cinemark, according to Grossfeld. He says he plans to contact Cuban about a test in Landmark Cinemas in January.
"Mark was super sweet to me and very receptive," Grossfeld says. "He's the one person I'd want to partner with." Cuban did not respond to a request for comment.
Where did the idea for hot coffee in a can come from? Grossfeld came up with the concept after seeing a similar product in Japan, where he says consumers will spend $15 billion on ready-to-drink coffee in 2016. (Data from the Trefis says ready-to-drink coffee in Japan is a $9.5 billion annual market.) One difference between Grossfeld's product and the Japanese version is that Hotshot is hotter--140 degrees compared with 110 degrees, according to Grossfeld, who says his cans have a shelf life of about three months.
By at least one measure, Hotshot is the weakest pitch in Shark Tank history: Grossfeld is the only contestant to have spent six years and $2 million on a business with no sales. He says he invested around $700,000 of his own money, $500,000 from friends and family, and the rest from loans from friends and family. Grossfeld's professional experience consists primarily of working at his family's bankruptcy and liquidation business--useful experience for an entrepreneur.
So what made him think he'd get a deal on Shark Tank? It's worth noting that Grossfeld didn't apply to be on the show. The show invited him.
"We liked his passion, drive, and his company," says Clay Newbill, Shark Tank's executive producer. He says the show's producers don't intentionally cast weak businesses to illicit overly critical responses from the Sharks. Instead, they look only for companies they hope the Sharks will be excited about. A Shark Tank producer spotted Grossfeld after seeing a Los Angeles Times article about the company.
While Grossfeld failed to attract an investment on Shark Tank, all of the Sharks professed to like the taste of the coffee. Grossfeld says the product is also a hit with college students who've tasted samples. In addition to selling directly through his website, his initial strategy is to sell Hotshot in and around college campuses.
So has Grossfeld just been drinking his own Kool-Aid for six years? According to him, not at all.
"I'm not overly optimistic," he says. "I've been in business my whole life."