Why Kodiak Cakes Is Undoubtedly A Missed Opportunity For Shark Tank Investors

Time and again, we see that experts don't always have all the answers. This doesn't mean their expertise is a bust or they're always off base. It just shows that seasoned pros can miss, like the "Shark Tank" investors who passed on the chance to invest in Kodiak Cakes, a company that later hit $200 million in annual revenue (or this tech company that became an Amazon success story).

Joel Clark and Cameron Smith, the founders of Kodiak Cakes, presented their high-protein, whole-grain flapjack and waffle mix business on "Shark Tank" Season 5, Episode 22. Their ask was $500,000, in exchange for 10% equity in the company. The Kodiak Cakes story began with a family recipe from Clark's grandfather. In 1982, when Clark was just eight years old, he helped his mom sell the original mix door-to-door. By 1994, they were ready to scale Kodiak Cakes into a national brand.

Prior to their appearance on "Shark Tank", Kodiak Cakes had already gained traction, securing shelf space in Target stores nationwide with $3.5 million in sales in the previous year (2013). With their first order of Kodiak Cakes from Target being for $260,000, they hoped to accrue about $1,000,000 in sales from Target alone, and Clark had projections that they'd make sales of about $5 million. These did not attract the Sharks.

The founders pitched Kodiak Cakes as a product that can change breakfast; a flapjack and waffle mix made from 100% whole grains, free of added fats and sugars, requiring only water to prepare. The Sharks raised critical questions about the valuation and potential of Kodiak Cakes. Kevin O'Leary grilled Joel Clark on how investors could recoup their money. Clark claimed that within four years, the company would be valued at $20 million and could be sold for $30 million.

O'Leary argued that food companies typically don't sell at 10 times their cash flow. He estimated Kodiak Cakes was worth only $2 million and the company would need a 30% growth boost to attract a major competitor for acquisition. To mitigate his perceived risk, Mr. Wonderful offered $500,000 for 50% equity. Aware it would be rejected, he declared he was no longer interested, then came back with Barbara Corcoran to split equity and offer equally — 25% equity with both Sharks bringing $250,000 each.

Lori Greiner passed on the opportunity, admitting she wasn't passionate about pancakes. Mark Cuban opted out, and Robert Herjavec threw in $500,000 for 35% equity, zeroing in on the need for the cash to cover slotting fees — payments to retailers for shelf placement. Still, the founders refused to give up such a large portion of their company. They walked without making a deal, unknowingly joining the list of successful businesses who prospered after rejecting "Shark Tank" offers.

After the program aired, Kodiak Cakes grossed $1,000,000 in sales. Two years later, the company tripled its sales, grossing $16 million in 2016. By 2020, Kodiak Cakes' market value hit  $160 million, increasing to $200 million in 2021, and $300 million in 2022, accruing more than the $20,000,000 that Joel Clark had projected to the Sharks. 

Eventually, Kodiak Cakes was acquired by a private equity group, L Catterton, for an undisclosed amount. The brand's products are available in major retailers nationwide. Turned out that the company's focus on high-protein, whole-grain foods did indeed resonate with health-conscious consumers, cementing its position as a leader in the natural food category.

The Sharks missed a brand that tapped into the growing demand for whole-grain, low-sugar meal options well before competitors. Kodiak Cakes' breakfast mix, which only requires water, appealed to busy professionals, parents, and fitness enthusiasts for its simplicity. Looking back, it's clear that the Sharks underestimated Kodiak Cakes' potential, focusing too much on immediate profitability and valuation. However, this pays off sometimes, as with Scrub Daddy. For Joel Clark and Cameron Smith, sticking to their vision paid off, demonstrating the value of perseverance and belief in their product.