Start-ups

‘Shark Tank’: Mark Cuban invested 6 figures in a company that turned just $2,500 into $490,000 in sales in 16 months

The founders of Hug Sleep pitch investors on ABC's "Shark Tank."
ABC

Matt Mundt and Angie Kupper, co-founders of Hug Sleep, had all five "Shark Tank" investors in a bidding war during Friday's episode of the show.

The husband-and-wife duo from Milwaukee, Wisconsin, started Hug Sleep, a company that sells an adult swaddle called the Sleep Pod, with $2,500 they had in savings. In just 16 months, they generated $490,000 in sales.

"[The] Sleep Pod uses a four-way stretch material that wraps around your entire body," Mundt told the Sharks. "As this fabric stretches, it wants to compress, providing a gentle, calming pressure, helping you to relax and fall asleep. It truly simulates the feeling of being hugged."

At the bottom of the swaddle, there is an opening for those who prefer to leave one leg out while they sleep for temperature regulation.

Shark Robert Herjavec trying on the Sleep Pod.
ABC

Mundt and Kupper were inspired to create the Sleep Pod after noticing a growing interest in weighted blankets. The couple appreciated their own blanket's calming effect, but felt it was too heavy and difficult to wash.

They decided to create something lighter. Rather than using weight to create pressure, Mundt, a mechanical engineer, wanted to use compression, he said during the episode.

"When [Mundt] told me this idea, I was already familiar with deep touch pressure therapy, [which is] gentle, but firm pressure applied to the body that triggers relaxation," said Kupper, a therapist who specializes in treating anxiety.

"There are a lot of people suffering from anxiety, sleeplessness. We're not getting a lot of hugs," she added.

When trying the Sleep Pod on, Shark Robert Herjavec was pleasantly surprised. "It's actually really soothing," he said. "It was very comforting."

"It's silky-soft feeling," Shark Lori Greiner added. "Very stretchy."

Mundt and Kupper asked the Sharks for a $150,000 investment in exchange for 10% of their company. "We did bootstrap this company with $2,500. That is all we put in, and we were profitable on the first week or two of selling," Kupper said. Their net profit is "usually about 41% of topline sales," Mundt added.

Hug Sleep's sales are primarily direct-to-consumer through their website and Amazon.

All of the Sharks were impressed and each began presenting Mundt and Kupper with investment offers. But before the couple accepted any offers, Kupper made it clear that she wanted to partner with a Shark who truly wanted to help those struggling with anxiety and sleeplessness.

"I personally benefit from the Sleep Pod because one of my best memories from childhood was being tucked in by my mom every night," Kupper said. "The reason I went into psychology was because I lost my mom to suicide when I was 17. Through all of that pain, I found a passion for helping other people, and I am dedicated to helping kids. But there are adults out there who need help too."

Kupper's story struck a nerve with Cuban. "I've got people in my household, in my family, that have sensory issues. That's why it's very close to me," he explained. "I'll make you two offers: One will be just what you asked for, $150,000 for 10%. And the one I prefer is $300,000 for 20%, so that way, we're closer partners."

Every Shark matched Cuban's offer, starting a bidding war. As the Sharks each tried to get the deal, Mundt asked if any of them would go in on an offer together. Cuban immediately asked Greiner to join him, and the couple accepted their offer of $300,000 in exchange for 20% equity.

"2020 has been a scary time, and I think Sleep Pod is going to help a lot of people," Mundt said.

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

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