by Jared Shelly | June 1, 2015 2:57 pm
A funny thing happened in 2008: A very profitable Philly-area startup company nearly sold its patent for peanuts. Now it has $50 million in revenue and has become Shark Tank’s biggest success story.
Long before Aaron Krause invented Scrub Daddy — the smiley-shaped sponge with the rough exterior that doesn’t leave scratch marks — he was in the car-washing business. An excitable inventor by nature, Krause created a buffing pad adapter with quick-connect technology. Once it started to disrupt the market, mighty multinational conglomerate 3M took notice. Early deals to acquire Krause’s company (called Dedication to Detail) included 12 of Krause’s other patents — including a weird hand-scrubbing sponge called Scrub Daddy.
“They said we don’t want this sponge thing,” Krause recalled. “They said ‘you keep all those patents — we just want the buffing pad business.’ We didn’t know what Scrub Daddy was. They didn’t know what Scrub Daddy was. We put it in a box and called it scrap. The product was completely dead and sat in that box for five years.”
Those are some humble beginnings for a product that has gone on to become a household name, available in Walmart, Target, Bed Bath & Beyond, and plenty of other national retailers. Krause’s “eureka moment” has been well documented: He used the sponges to clean his patio furniture, and quickly realized they get harder in cold water and softer in warm water — and they’re somehow scratchy without actually scratching anything. Once he cut a mouth slot into the design, Scrub Daddy was ready for market.
I spoke to Krause at Scrub Daddy headquarters, a sprawling factory and office in Delaware County. At the entrance is a huge cardboard cutout of Lori Grenier — the Shark Tank millionaire who now owns 20 percent of the company. On the factory floor, everyone wears Scrub Daddy T-shirts, even though it’s not required. In the office, Krause hung his original rejection letter from QVC next to a plaque from the TV retail giant celebrating the sale of 1.8 million Scrub Daddy units in a single day.
Krause told me about life as a successful entrepreneur — meaning long hours, working to balance family and work life, and his plans to eventually sell the company.
BizPhilly: Tell me about the growth of the business in the past few years.
Krause: We’ve done the hockey stick on a graph. We were at $120,000 in retail sales before we went on Shark Tank. We just announced that we’re at $50 million in retail sales across the entire product line, which includes Sponge Daddy, Lemon Scented, Heavy Duty and Colored Jumbo Blocks. More impressive than the sales numbers are the retail partners we’ve been able to get — Bed Bath & Beyond, Kroger, Home Depot, Ace Hardware, Walmart, Target, CVS, Wegmans, Shop Rite and Giant. These are serious brands. We’re also looking to open up in Europe in the countries that have a QVC presence.
Before Shark Tank and QVC, how did you gain traction with the product?
The Philadelphia Inquirer wrote an article on the front page of the Sunday Inquirer. They coined my name, “the Daddy of the Scrub Daddy.” The article got us a lot of attention. From that, orders started coming in, a lot of inquiries started coming in, and a broker who gets products on QVC called me. I said, “What do I need you for? QVC is down the street [in West Chester].” So I sent a letter to QVC on Wednesday, October 18, 2011. Literally the next day, I got the rejection letter that it doesn’t meet our criteria and you’ll never be on air and have a nice day.
So in our office, we posted that letter next to a plaque from QVC saying that we sold 1.8 million Scrub Daddys in one day.
How did you eventually get on QVC?
After I got rejected, I called the broker back. He came to the office, I did a little demonstration for him. He gave Scrub Daddy to this little old lady in his apartment building who hates everything. She’s miserable. He said, “Try this.” She came back and said, “I really like this thing.” So he got me a meeting at QVC.
The meeting was so surreal. Even with a broker, these buyers are super-busy. Two women come in, and one is literally 10 months pregnant. She barely fit through the door and was so miserable. She said, “You’re kidding me — a smiley faced sponge?” And she literally starts getting up. The broker says you need to watch the demo. After about eight or nine minutes, she looks at her co-worker and says, “I kind of like it.”
So you had made it to QVC. Why pitch it on Shark Tank?
I literally come home after doing my fourth show live at QVC and I’m on cloud nine. My wife and I are watching our favorite show about entrepreneurs and business people — called Shark Tank — and it’s a couple of guys who don’t even know their accounting and sales numbers. They leave crying. I say to myself, “I could go on that show and kill it.” So I sent them an email and it took about two months before a producer called me.
Tell me about the Shark Tank effect.
Most entrepreneurs’ websites crash the night of the show. So many people hit their site and they’re unprepared. We actually knew that was coming, so we moved the website off its current server and put it on a dedicated server. We had a backup one if it crashed. We paid an IT professional to sit and watch the analytics during the show.
In the first hour, there was probably 30,000 to 40,000 hits. It stayed in the tens of thousands for many hours after that. Needless to say, I didn’t sleep that night, I just watched Google Analytics. We were really prepared, not just with the website but we also knew it was a sales opportunity. So we brought in more inventory.
What is your exit strategy? Will you eventually sell the company?
It’s very simple. There are only three or four companies that could actually take my baby and do what I would want them to do with it. The most obvious is the largest company in the world for sponges and scrubbers: 3M.
So you could get bought out by 3M again?
Is that the sickest thing ever? I have lots of contacts over there. Other really good suitors would be Colgate-Palmolive, Clorox, Jarden and Armaly.
Any timeline on selling the company?
It will happen when it happens. I’m not going to force the issue.
Tell me about your transition from inventor to CEO.
That transition is usually the pitfall for lots of businesses. Owners who start a business and are in that position of wearing all the hats and doing everything don’t know how to let go. One of the things I pride myself on is that I don’t know everything.
Every time we go to another plateau, I bring in a few new people and I watch them very closely for a few months — then I slowly let it go.
It’s not easy for me, I love being in the trenches. But if you do that, you’ll stifle your whole business. I’ve learned to put people that I trust — and actually people I know — in important positions. My best friend is the director of sales and marketing. John, my vice president and COO, has been working with me for 14 years. He started on the assembly line on the factory floor at my previous company — now he’s running this business. I know him so well, he is one of my closest friends.
What is a typical day like for you?
My typical day starts at 7 in the morning when my kids jump on me and wake me up. They’re not supposed to do that but it’s the only time I see them during the week. I look at my phone and see that I have 30 emails. I scroll through them real fast to see if any of them are an emergency. If not, I put the phone down and go back to sleep until about 9:30.
Then I get up and decide whether or not I’m going to shave today. Ninety percent of the time the answer is no. I hate shaving. Unless I’m going on QVC that day, I won’t shave.
I get to the office around 10:30 or 11 and I’ve already had my first cup of coffee and I’m flying. Ask my staff, when they see me walking toward the door they say “hurricane coming.” I just start running around. I’m never sitting down. I’m here going hardcore until midnight or two in the morning.
How do you balance work and life?
It’s a very difficult balancing act. On weekends — unless there’s a QVC show — it’s only family. We’re doing soccer games. We’re doing lacrosse games. I’m coaching ice hockey games. My wife and I have dinner dates. That is very sacred time. I’m very visible in my kids’ lives. I don’t expect that I’ll have to work like this forever, but we’re in major growth mode right now.
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