This cheesecake startup refused to give up a slice of its company for a lower valuation on Shark Tank India

• Cheesecake & Co is a Delhi-based dessert startup producing eggless, baked cheesecakes.
• In just a year of its inception, the startup has established a presence in Delhi, Bengaluru, Karnal, and Lucknow.
• Both the founders and sharks entered into negotiations over equity stake, but neither budged from their stance.
  

Many startups that appear on Shark Tank India look for a deal where the sharks’ expertise, investment, and connections balance the dilution of equity. But for Cheesecake & Co—the latest startup to appear on the show—the sharks’ offer wasn’t worth diluting equity.

Cheesecake & Co is a Delhi-based dessert startup producing eggless, baked cheesecakes. Founded by husband-wife duo Himanshu Gakhreja and Shreya Agarwal, Cheesecake & Co started operations in 2021- though the idea first struck Gakhreja in 2018.

“I took a resolve in 2018 and began working on Cheesecake. I dropped out in twelfth grade. Cheesecake is not just an art, it’s everything to me,” shared Gakhreja on the show.

The founders asked for an investment of ₹1 crore for a 2% equity stake, which valued the startup at ₹50 crore.

A cheesecake made of love and a secret ingredient

Gakhreja worked with a bakery company, Chawla Bakery for 2.5 years. After gaining an in-depth knowledge of cakes from the bakery, Gakhreja wanted to branch out on his own - but his father forbade him. Gakhreja’s father is a distributor of raw materials for bakery products.

Where Gakhreja failed, his wife succeeded and she managed to convince her father-in-law to let Gakhreja follow his passion. Though convinced, Gakhreja’s father didn’t offer any help, monetary or otherwise, to help the two.

In fact, to start his business, Gakhreja said on the show that he received ₹10 lakh from the owner of the bakery he first worked at. And that’s how Cheesecake & Co. was born. Gakhreja worked on the recipe for years, trying to replace eggs with ingredients that weren’t as costly as regularly available alternatives.

Currently, the startup uses a secret ingredient to replace eggs in the recipe, which the founders didn’t disclose on the show.

“It (secret ingredient) is never made in (our) factories. Even today, it’s made from home and is even shipped to Bengaluru from Delhi,” claimed Gakhreja on the show, prompting Shaadi.com founder Anupam Mittal to compare the recipe to the secret formula of Coca-Cola.

In just one year, the company opened 19 stores (physical outlets and cloud kitchens) - 17 in Delhi and 2 in Bengaluru. Since its appearance on Shark Tank India, the startup has further expanded to Lucknow and Karnal. It primarily offers cakes, dessert jars, cheesecakes, and brownies.

It generated sales worth ₹6 crore in FY22. Moreover, in just July 2022, the brand made sales worth ₹1.94 crore. And Gakhreja is also one of his father’s biggest customers.

Equity vs sharks

The judges couldn’t stop praising the products after tasting them, with Lenskart co-founder Peyush Bansal even commenting that he wasn’t surprised at how well the startup was doing, considering the quality of the cake.

However, Namita Thapar, executive director at Emcure Pharmaceuticals, was the first one to back out, because she believed that after a certain level, it would be difficult to scale a business of perishable products. Vineeta Singh, the co-founder of Sugar Cosmetics, also backed out because she didn’t think that cheesecake made for a huge market.

On the other hand, boAt co-founder Aman Gupta expressed an interest but asked the founders about their requirements from the sharks and their investment expectations. Gakhreja responded that he wanted to shift from being a traditional merchandiser to a corporate setup and expand further.

That’s when Shaadi.com founder Anupam Mittal made an equity-and-debt offer: ₹50 lakh for 5% equity, and a ₹50 lakh loan at a 15% interest rate. This valued the company at ₹10 crore.

After hearing Mittal’s offer, Bansal backed out stating that while he was impressed by the founders’ humility and hunger for growth, he couldn’t better Mittal’s offer and so wouldn’t make one. Meanwhile, Gupta decided to join Mittal.

However, the founders responded by asking the sharks to revise the offer to an investment of ₹1 crore for 3% equity, which had Gupta asking what really mattered to the founders.

“Is your company’s 3% more valuable to you or an investment of ₹1 crore? Or do you value the sharks more?” asked Gupta.

When Gakhreja responded that equity dilution and sharks are important to him, and they didn’t want a loan, Mittal remarked that 2% was the minimum equity stake that he would expect to hold in the company. The sharks revised their offer to ₹1 crore for a collective equity stake of 5% - 2.5% each to Mittal and Gupta. This valued the company at ₹20 crore.

“I feel that you need help. My investor helped me when I needed it. Today, we’ll stand with you to help,” added Gupta.

Though the founders tried to bring down the equity stake to 3.5%, the sharks didn’t budge - and neither did the founders. Ultimately, no deal was struck.

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