This startup with Pittsburgh roots just walked away from Shark Tank with half a million dollars

Pittsburgh native Jon Shanahan recently went on national television with a goal of introducing more men to the idea of wearing makeup.

He was there repping 2017-founded Stryx, a New York-based startup Shanahan launched with Devir Kahan that’s focused on the development and sale of male cosmetics. The startup just got a feature on popular entrepreneurship reality TV show Shark Tank, and the episode aired last Friday.

The cosmetics company was one of four featured in the latest episode of the show, in which founders pitch their ideas to a panel of “sharks,” five potential investors who grill the founders on their finances, business plans and more. One of the five is fellow Pittsburgh native Mark Cuban, a billionaire entrepreneur who owns the Dallas Mavericks and co-owns 2929 Entertainment.

Before making his reality TV appearance, Shanahan graduated from Baldwin High School in Whitehall before going to McCandless-based La Roche University for information technology and business management. His family still resides here, running the Sugar and Spice ice cream shop in the Baldwin Borough, where Shanahan himself once worked.

Now, he’s focused on being a pioneer of men’s cosmetics with Kahan. On Shark Tank, the two began their pitch with a story of Kahan’s wedding day, when he was plagued with some unsightly acne on his nose, a blemish that was visible in the thousands of pictures taken that day, he said.

There were makeup artists there for the wedding, but Kahan said he was too embarrassed to ask for some concealer, a dilemma he ascribed to a culture where men wearing makeup isn’t socially acceptable. That’s the crux of the idea behind Stryx — to repackage and develop concealers, tinted moisturizers, eye creams and more to make makeup more accessible and approachable for men.

“When you look your best, you feel your best,” Shanahan said during the pitch on Shark Tank. “Which is why Stryx is changing the way that men can instantly fix their appearance with, you guessed it, it’s makeup for men.”

The two cofounders went on to tell the sharks that Stryx is the first company to engineer cosmetic and skincare products with custom formulas and packaging for men. So far, the company’s suite of ten products include pimple patches, an energizing eye tool, a brow and beard gel comb, bronzing gel and more.

Much of the business right now operates on a direct to consumer basis, Shanahan and Kahan said, but Stryx’s products are also available at CVS in the shaving aisle (as opposed to the cosmetic aisle). To date, Stryx has attracted around $2 million in sales, with a current rate of around $130,000 per month. The average selling point of the company’s products is $30, with an 85% gross margin, the cofounders said. But despite that success, Stryx currently has a monthly burn rate of around $40,000 to $50,000 — a stat that alarmed some of the sharks.

A big part of Stryx’s success came from a $500,000 friends and family round the startup closed in 2018, but it also forced them to give up about a third of the company’s equity to early investors, they said. And with continued raises since then, Kahan and Shanahan said they now only own a little over a third of the company combined, a stake that will undoubtedly decrease with future investments.

Given all of that, the two asked the sharks for a $600,000 investment in exchange for 5% equity. After digging into the numbers above, only Kevin O’Leary and Robert Herjavec were interested in a potential investment. O’Leary offered the team $300,000 as a factoring loan over 36 months with an 11.5% interest rate, with the remaining $300,000 as a loan for 2.5% with a royalty of $2 until the total $600,000 is paid off, at which point the royalty would drop to $0.25 in perpetuity.

“Kevin, I think you actually hit a new low with this offer,” Herjavec said after hearing the terms. “Not only are you being a loan shark, you’re also adding a royalty to it.”

Herjavec’s own offer was for the $600,000 in an equity deal in exchange for 10% of the company, up significantly from the 5% the cofounders initially sought.

Despite having to give up even more of their already dwindling ownership stake, Shanahan and Kahan accepted Herjavec’s offer. Regardless of the financial hurdles the company has yet to overcome in its revenue model, Stryx’s exposure on the show and the new deal will undoubtedly yield new business traction — a point fellow Shark Tank entrepreneurs have celebrated in the days after their respective episodes aired.

Sophie Burkholder is a 2021-2022 corps member for Report for America, an initiative of The Groundtruth Project that pairs young journalists with local newsrooms. This position is supported by the Heinz Endowments.