Before September 13, the night Jonathan Miller appeared on the reality show Shark Tank to pitch his year-old custom energy bar business, Element Bars, Inc., his Web site got about 200 unique visits a day. That night it racked up 25,000. The next day brought another 20,000. Less than two weeks later sales had soared from 1,000 bars a week to 10,000 bars, and Miller had hand-signed 1,500 notes apologizing for the backlog that had delayed deliveries.
On the show—which puts entrepreneurs in front of five self-made multimillionaires who try to drive a hard bargain for a share of ideas they like—Miller had begun by asking for $150,000 to grow Element Bars in exchange for a 15 percent stake in the company. The negotiations centered on a bid by one "shark," infomercial king Kevin Harrington, who offered to buy the whole business for $150,000 plus 4 percent royalties. After a tense standoff, Miller turned him down. He eventually got $150,000 from Harrington in exchange for 30 percent of the company and 4 percent of sales in perpetuity.
Miller, 29, says he was able to keep his cool because he'd pitched a business before—he won the Kellogg Cup, a business-plan competition at Northwestern University's Kellogg School of Management, for a golf-related class project—and was prepared for the negotiations, which were edited down for TV from 90 minutes to 15. "I practiced ahead of time, knew all the facts about the company, and was passionate," he says. "I thought about what type of offer I'd accept, what could be negotiated, and also what the sharks cared about and would accept." The one point on which he was firm was that he wouldn't give up a controlling stake in the company. "That was partly for business reasons and partly to keep myself motivated," he says. He also realized he might have to raise more capital later on, so he couldn't "give away the whole farm in one shot."
Miller's interest in energy bars dates back to a 2002-2005 stint at ZS Associates, an Evanston-based consulting firm, where he worked after getting an undergrad degree in computer science and economics at Northwestern. "I'd eat an energy bar off the shelf every day for breakfast, then crash from a sugar high by midmorning," he says. "I'd look at the lists of ingredients, and they were completely unpronounceable." So about four years ago he started making his own—just steel-cut oatmeal mixed with dried cherries and some whey protein powder.
Although he maintains he didn't originally think of the energy bars as a business idea, Miller was no stranger to entrepreneurship. In 1999, as a sophomore, he got so fed up with the high cost of textbooks that he started getcheapbooks.com, an online price-comparison textbook shopping site geared toward college students. By 2005 he was earning enough from the site to quit his job at the consulting firm. But a year and a half later, price-comparison Web sites had proliferated and the site stopped being quite as profitable, so Miller decided to boost his business skills with an MBA from Kellogg.
Late in 2007 his wife, Jennifer, a pediatric endocrinologist he'd married in 2005, introduced him to Maria Sutanto, an acquaintance who was getting a PhD in molecular nutrition at the University of Chicago and was looking for a snack bar that would be good for children with diabetes. "Maria wanted a bar with raisins," Miller recalls. "I hate raisins, which led us to realize that the bar that's right for you isn't necessarily right for me—and the decision to put the power to design the energy bars in the users' hands."
He set about writing a business plan for a custom energy bar Web site, settling on the name Element Bars after trying various choices out on 250 people. Sutanto signed on as nutritionist, and Miller enlisted Jonathan Kelley, a master's student at Northwestern's engineering school, to help with design and operations. A beta version went up in April 2008, and feedback from family and friends helped the trio fine-tune the ingredient combinations and the ordering process.
The site, elementbars.com, allows customers to choose from four all-natural cores (oaty, chewy, crispy, datey), a variety of organic and/or natural dried fruits, nuts, sweets (from agave syrup to chocolate chips), and boosts such as whey protein or "immunity." A nutrition facts box at the side of the screen is automatically updated as ingredients are selected, showing calories, fat, cholesterol, carbohydrates, fiber, etc. The customer then makes up a name for the bars, which cost $36 a dozen. When Miller thinks a recipe is especially successful, he makes the bars available to the public, at a 15 percent discount. He also offers variety packs of best sellers at 15 percent off.
Miller, Sutanto, and Kelley launched elementbars.com in August 2008, using $100,000 of their own money, and Miller enlisted a baker at TipsyCake to help him make the orders. He says people started visiting the site after he placed a Google ad using the keyword energy bar. The company grossed $18,000 in 2008, and in March production moved to the 12,000-square-foot Little Miss Muffin Bakery on the northwest side. "We needed more help and space to grow," Miller says. Half the business is wholesale orders from companies such as the Hard Rock Hotel and the Center for Advancement in Cancer Education. The cancer center, for example, wanted a preservative-free bar that was high in fiber, unsaturated fat, and antioxidants. The most popular so far—the Dr. Clyde Berry Bar, a chewy base with walnuts, blueberries, cranberries, and agave nectar—was created by Dr. Clyde Wilson of the Sports Medicine Institute.
When an order comes in, a recipe is generated by the computer system. Workers assemble the ingredients in a small area set apart from the rest of the factory. As many as possible are locally sourced, among them apple-juice-sweetened dried blueberries from Michigan and honey from Harvard, Illinois. Batches of dough for large orders are mixed in an industrial Hobart, and then each bar is formed by hand and pressed into an individual mold before baking. Only the wrapping process is fully automated at this point.
Miller foresees more automation and efficiencies of scale in the future. The deal with Harrington—which has led to one with the QVC Home Shopping Network—is still in negotiations but is expected to be finalized this month, and revenues are on track to reach $100,000 this year on top of the investment seed money.
Miller's always experimenting with new flavors, and he's already thinking about other products people might enjoy customizing. He declines to name his own favorite Element Bar: he says he eats one from the previous day's production for breakfast just about every day. If he likes it—as he did a recent oaty bar with cashews and pumpkin spice—he'll often e-mail the inventor to say so. His tip for first-timers: put in one fruit and one nut, and don't add too many ingredients. v