Shark Tank' Discovers Vending

Posted On: 4/8/2016

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TAGS: Vending Times, Vending Times editorial, vending industry, coin-op, vending machine, coin machine business, office coffee service, vending machine operator, micro markets, Alicia Lavay, Shark Tank, NAMA OneShow, Vengo Labs, Brian Shimmerlik, Steven Bofil, Lori Greiner

Alicia Lavay, vending, Vending Times

It's an exciting time to be in the vending business, and it seems that ABC-TV "Shark Tank" hosts agree with me. Costars Lori Greiner and Robert Herjavec will headline the general session at the NAMA OneShow in Chicago on Wednesday, April 13. The hosts will oversee a novel "Swim with the Sharks" competition in which teams of hopeful innovators will pitch their industry-related ideas for the opportunity to win a $10,000 prize.

What's more (and entirely unrelated) is that entrepreneurs at vending machine developer Vengo Labs recently made an appearance on the "Shark Tank" TV show (March 18, Episode 22 of the show's seventh season). Vengo has developed a slimline six-select wall-mounted machine boasting a 21.5" touchscreen panel and supporting a wide range of cashless payment systems, including credit and debit media, mobile NFC-enabled applications like Apple Pay and Android Pay, as well as "campus cash" through the popular Blackboard and CBORD networks.

Vengo chief executive Brian Shimmerlik and cofounder Steven Bofill entered the pitch room seeking $2 million in exchange for 12.5% equity in their company. They explained that they started Vengo Labs in 2011 as a way to revolutionize the vending machine space. Initially, the "sharks" were confused about what business Vengo is in: advertising or vending? But after an exciting, hard negotiation, two of the five "sharks" got it, and decided to back the venture. Shimmerlik and Bofill walked away with $2 million in venture debt, to be paid over three years at 7% interest, in return for just 3% equity in their digital vending machine company. | SEE STORY

The entrepreneurs had the confidence to demand that "Shark Tank" investors Kevin O'Leary and Lori Greiner adjust their joint offer before they would accept that $2 million, and that confidence paid off. And why wouldn't they be confident? The company's original concept, which started as Taxi Treats (it proposes to install miniature vending machines in New York City cabs) won the Big Apple's "NYC Next Idea" contest in March 2012. Taxi Treats is still under development. Before their "Shark Tank" appearance, the two inventors were able to spark interest in their idea from high-profile investors in their hometown of New York City. And in February 2016 they inked a distribution partnership with Canteen, Compass Group's vending services division. According to Shimmerlik, Canteen noticed early versions of the Vengo machine on the campuses of New York University and LaGuardia Community College, and recognized Vengo as a potential supplier of a unique product that could serve the national operation's higher education segment.

The Vengo machine was conceived as a medium for creating an online shopping experience but with an immediate reward, located in places where consumers spend time already -- like hotels and college dormitories. Shimmerlik and Bofill told the Sharks that their business model generated $1 million in revenue in 2015, with a loss of $300,000, but that their growth would enable them to break even the next year.

If you've been around a while, you likely know that an electronic display that interfaces with a vending machine goes back farther in time than many people realize. A vending machine with a video graphic display panel is a much more attractive proposition if that display is integrated with a payment system that identifies the patron. Today's cashless options include many that can support this feature, often working through a loyalty program or some other promotional incentive.

Beyond that, the fact that vending machines are found where people congregate has suggested that they might be employed to display advertising in general. Again, this idea has been around for a long time, but prior to networked venders that could interact with patrons in ways beyond simply vending the desired product, it has been difficult to put into effect. Advertisers could not be sure of what they were buying, and it was difficult to gauge effectiveness. But today, the prospect of upgrading to new technology that can increase sales and customer satisfaction with new payment options, while simultaneously increasing route efficiency by monitoring machine inventories and collections, becomes even more appealing if it also opens the door to an additional revenue stream.

The age-old dream of using vending machines as advertising media very well may work this time; Intel and the Digital Place-based Advertising Association seem to think that it will. I think, though, that it has to be presented in context and implemented in ways that customers will find at least useful and, at best, enjoyable.

I believe that Vengo has invented a system that meets this requirement. For that reason, I think the sharks made a sound business decision. Congratulations to Vengo for their keen negotiating skills, and to "Shark Tank" cast members Kevin O'Leary and Lori Greiner for recognizing a novel opportunity.