Kwame Kaudey came up with a unique business idea: Gift Card Rescue. He realized that billions of dollars worth of gift cards each year remained unclaimed, so he devised a simple solution: people who had such unwanted cards could sell them to Kwame’s company, and he would find a way to make money from this.
Sure, the deal got an investor on Shark Tank, but there is still more to the story.
- Entrepreneur: Kwame Kaudey
- Business: Unused gift card exchange
- Ask: $150,000 for 30% equity
- Result: $200,000 for 50% equity
- Sharks: Kevin O’Leary and Robert Herjavec
Gift Card Rescue Pitch on Shark Tank
Kwame made his appearance in Shark Tank in the inaugural season of the show with his business, Gift Card Rescue, a business which he valued at close to $500,000. He started his business as a Johns Hopkins University business school project.
He requested $200,000 to scale his business which seemed very simple. He had a marketplace where people could buy and sell gift cards. The model for Kwame was to buy such cards at a discounted rate and then resell at a higher price. The profit was to come from the difference.
The marketplace was designed to verify the authenticity of cards before accepting them. The business was initially working well for Kwame, but he realized it was time for him to expand because it had outgrown his personal resources and the help of his wife.
Kwame made it clear that buying gift cards from customers at 65-70% of their face value and selling them for 90% of their face value, gave him a gross margin of around 25% per gift card.
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Kwame Kuadey Secured A Deal in the Show
Kwame made it known that he had already made $55,000 from his business and was on track to bring in $120,000. Another enticing piece of information he provided was that he had gotten confirmation of Amazon’s interest in partnering with his business.
Daymond John and Barbara Corcoran did not waste any time before deciding not to invest as it was not their kind of business. Kevin Harrington declined because he felt the business was still too early for an investment.
After the temporary setback, Kevin O’Leary indicated his interest in the business but he was only willing to offer $150,000 for 50% of the company. Impressed by the negotiation skills of Kwame,
Robert Herjavec also made an offer. He was willing to jump on the business together with Mr. Wonderful. The two sharks would offer $200,000 for 50% equity. This gave Kwame more money than he had asked for, although it was taking more equity than he was willing to give, but he was still happy with the arrangement. The men had a deal.
What Happened To Gift Card Rescue After Shark Tank?
Although Kwame accepted the offer of Kevin O’Leary and Robert Herjavec, he changed his mind afterward as he was not willing to let go of half of his company.
The business became a success after the appearance of Kwame on Shark Tank, coupled with his good fortune of landing a partnership deal with Amazon.
The business soon earned its place as one of the fastest-growing startups on Shark Tank by pulling in $6 million in annual revenue in 2012. By the next year, the business had grown to over $10 million in 2013. In 2015, he made $12 million in sales and was set to make $24 million in 2016, but that was when things went south for the business.
GiftCardRescue.com was forced to close after a lender won a loan default judgment, which froze the bank account of the firm and the ultimate demise of the company. Kwame revealed he never thought he “was going to find myself in this position. I sincerely regret the impact this has had on our customers. They’ve been very loyal to us. It breaks my heart that things have come to this point.”
Kwame Kuadey has since gone on to found other businesses including Pioneer Branding, a personal branding agency, and Thrive Company.
On its part, Giftcardrescue.com is still in operation but is now under new ownership and operations.
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