Start-ups

'Shark Tank’: How this founder turned $300 into a company that did $15 million in sales in 4 years

Elly Gheno, founder of BootayBag.
ABC/Christopher Willard

For Ellyette Gheno, entrepreneurship runs in the family.

"My parents are entrepreneurs," Gheno said on Friday's episode of ABC's "Shark Tank." "My mom owns a hair salon. When I turned 18, I felt like it was my path to take over the salon."

However, Gheno ended up creating her own business instead. After a "terrible experience" while shopping for underwear, she was inspired to start a subscription underwear service, called BootayBag. "I was sick of going to the mall, the semi-annual sales, the clearance bins," she said, adding that she disliked the process of waiting for sales and digging through bins.

In 2016, with just a $300 loan, Gheno got to work. Within two days, she built a website and started to receive orders.

With BootayBag, Gheno aims to better customers' buying experience and offer affordable underwear year-round. Subscribers can order one of three packages each month: A four pack of underwear for $20 per month, a two pack for $15 or a single pair for $10.

Gheno pitched her business model to the "Shark Tank" investors and asked for a $500,000 investment in exchange for 5% equity.

While the Sharks were impressed with her story, their interest spiked when Gheno revealed her sales numbers. At the time of filming, BootayBag had generated $3 million in sales year-to-date, Gheno said during the episode. And in the four years since its start, BootayBag had generated about $15 million in total lifetime sales.

Gheno doesn't have any debt, nor did she raise any money or funding for BootayBag, which was shocking to the Sharks.

"Wow! You're amazing. That's amazing," guest Shark and entrepreneur Kendra Scott said.

Guest Shark Kendra Scott holding lingerie from BootayBag.
ABC/Christopher Willard

But Shark Kevin O'Leary was skeptical. "You've raised zero dollars? How did you pay for the inventory?" he asked.

Gheno explained that she had get creative to fill orders at first. "I went to the store, got clearance underwear and I did the packaging," she said.

Later, she started buying underwear in bulk online before eventually finding her own manufacturer. "Demand forced me to figure out how to produce my own line," she said.

BootayBag gained traction on social media, which translated into increasing sales, Gheno said. "We have a huge following on Instagram. It's all user-generated content on our feed, so, we have real women posting. We don't edit our content."

Shark Mark Cuban was impressed. "Best story I ever heard so far," he said.

However, due to manufacturing problems, Gheno doesn't make much money off of her company. "We net 5%" of sales, she said.

Because Gheno doesn't have a direct connection to a manufacturer, she has to use a middleman, which often complicates the process. When she orders new designs, for example, she often has to wait almost nine months to receive the product, which is an abnormally long lead time for business owners, she said.

"I'm at [the manufacturer's] mercy," she said. "I'm very small on some of the scales that they do. It's my first go at all of this so I'm figuring it out as I go."

Despite this problem, Sharks Scott, Barbara Corcoran and O'Leary made Gheno an offer. Each saw the potential in BootayBag and felt they could fix the manufacturing issues. Scott and Corcoran decided to make an offer together, while O'Leary did so on his own.

"Elly, I love you. I am so impressed with you. What you have created with $300, how you have harnessed the power of social media — you're creating a movement around your brand, which is so unbelievable," Scott told Gheno. Scott started her billion-dollar jewelry line, Kendra Scott, with just $500 and could relate to Gheno's story.

Together, Scott and Corcoran offered Gheno $500,000 for 20% equity, while O'Leary offered $500,000 for 15% equity. Ultimately, Scott realized Gheno was uncomfortable giving up 20% equity, so she cut Corcoran out of the deal and offered $500,000 for 10%. Gheno accepted.

"I wanted Kendra. I got Kendra. We're ready to take over the world," Gheno said.

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

Don't miss: Chase Sapphire Preferred is offering a massive 80,000-point bonus for a limited time

Check out: 'Shark Tank': How this 15-year-old landed a 6-figure deal with the founder of Toms

VIDEO1:0201:02
Why Kevin O'Leary supports a weekly $400 unemployment insurance boost
make it

Stay in the loop

Sign Up

About Us

Learn More

Follow Us

CNBC.COM