Start-ups

'Shark Tank': Why Mark Cuban invested $640,000 in this company that sells empty boxes

Source: ABC

The deals on ABC's "Shark Tank" are no joke, but Sunday night a company that makes prank gifts got a $640,000 investment from Mark Cuban.

Even the pitch started out with a prank: Arik Nordby and Ryan Walther kicked off their time in the tank by asking for $75,000 in exchange for 15 percent of their business, "Rynarki," which they said sold a litany of time-saving products, from a coffee-maker shower head to slippers that act as dusters for pets.

The oddball "products," examples of which the co-founders handed out, inspired laughs from the Sharks. Just one catch: They weren't real, just empty boxes with the crazy gadgets printed on the outside.

That's when the entrepreneurs introduced their real company, Prank-O, which sells prank gift boxes.

Prank-O "products"
ABC/Tony Rivetti
Prank-O "products"

The boxes make it seem like the person is receiving a bizarre gift, but in reality, the boxes are empty and your actual gift can be placed inside. Examples of $7 prank gift boxes currently available on their website includes a "plant urinal" (which the box says, is a product that can "turn your liquid gold into leafy greens!") and an "earwax candle kit" (the kit supposedly includes a wax extraction device!).

From the get-go, Cuban was enamored, and calls the idea "brilliant."

The founders also reveal that their initial ask of $75,000 in exchange for 15 percent was a joke too. Instead, they were actually seeking $640,000 in exchange for an 8 percent stake in the business.

The valuation elicited exasperated groans from the Sharks. But then the entrepreneurs revealed the sales numbers: $10 million since 2013 and, this year, the company will do $2.8 million. Prank-O is sold via mass retailer as well as e-commerce.

It started after Walther, an early partner at the satirical website The Onion, met Nordby, who designed the prank gift boxes, which were then selling successfully on The Onion's e-store. The two teamed up and Prank-O was born.

While they boasted successful sales early on, 2016 and 2017 were not great years for Prank-O, the co-founders said. They tried to branch out and created physical prank products (like the ones advertised on their prank gift boxes), but the idea didn't work. The co-founders told the Sharks they had $1 million in debt and were working off a line of credit.

Lori Greiner didn't like the seasonality of the business. Daymond John and Barbara Corcoran opted out too.

But Cuban bit. He countered the entrepreneurs ask.

"I'll make you an offer, but you're going to have to listen," Cuban said. "You've got a great product, you've got great comedy minds, but your track record speaks for itself, and I don't mean that in any disrespect, but all entrepreneurs go through this."

He offered them $640,000 but for 25 percent, more than three times the equity they had originally offered.

O'Leary also made an offer: $640,000 for a royalty of 38 cents per unit indefinitely, and no equity.

The entrepreneurs tried to negotiate with Cuban for less equity, but he didn't budge, so they accepted the deal.

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Disclosure: CNBC owns the exclusive off-network cable rights to "Shark Tank."