ABC’s Shark Tank. It’s half drama, half business lesson and provides a taste of the fast pace, do-or-die entrepreneurial lifestyle. While it’s certainly a Hollywood look at business pitches and ideas, it yields some interesting and valuable lessons for business owners and aspiring entrepreneurs.
For those of you who are not familiar, Shark Tank is an American business TV show which started in 2009. Small business entrepreneurs from all around the world pitch their idea/business model to a panel of investors (5 “sharks”) and persuade them to invest money in their idea to turn their dreams into million-dollar realities. Next time you’re tuned in, keep an eye out for the following lessons and more.
1. Passion is a Must
From the first 15 seconds of a pitch on Shark Tank, viewers have a pretty good idea of whether or not there will be any interest from the Sharks. Even when no financials or other pertinent details have surfaced, much is said through how the entrepreneur carries him or herself. A monotonous, poorly scripted pitch sets aspiring entrepreneurs behind and necessitates a recovery at some point. An energetic, well-developed pitch positions them ahead and intrigues investors from the get-go.
2. Networks Matter
The Shark Tank investors bring huge value in their networks. Daymond John got the sticker guys distribution in Best Buy as well as retail distribution for Nubrella. Lori Greiner is able to help the businesses she invests in get on QVC. When you’re looking for investors understand their networks and more importantly if they’re willing to leverage them for you. Ask about this before you sign a deal. Sometimes a deal with less lucrative financial terms is better if it brings the right network to the table.
3. You will never know till you ask
In the 6 months of my binge watching the show, I have seen all kinds of deals and evaluations made in the tank. All of them had one point in common.
4. The participant was not afraid to ask or Re-Negotiate
This went both ways. Either the person convinced the panel that his/her product was worthy enough of the said investment and got the deal. Or, he/she had to accept or reject the offered deal.
But then I realised recently, the maximum the person could lose is…nothing! Yes, the judges could possibly say no, but if the participant had not even tried, they would not even have known such a chance could exist! Such sort of deal could change a person’s life.
5. Do Not Overextend
One of the biggest mistakes entrepreneurs make on Shark Tank is going back on their original asking price. Time after time, an entrepreneur will get the exact offer he or she asked for but then hesitate on the deal. The greed of the moment causes them to attempt to squeeze out a few more dollars. Never go back on your word if you want to be honest and gain respect. If you do, one day it will come back to bite you.
6. Build a Team
Another characteristic the Sharks like to see is a strong core team; key word being team. While solo teams do work, there are advantages to a strong, cohesive team with complementary skillsets. Investors typically prefer this for a number of reasons, including an ability to take on more responsibility and increased flexibility.
7. First Impression does Matter
The participant’s entry into the tank starts with his/her sales pitch, which creates the first impression of them to the Sharks.
Shark tank has seen all different sales pitches. The serious type where the person let the investors know all the features of the product, there were direct demos and role plays. There was also a rapper once! Many of them were confident of what they were saying and looked like they knew their shit.
8. Know your Business
There is one sure-fire way to destroy a pitch and scare off investors: not knowing your business inside and out. If potential investors ask for a statistic, financial figure, product specification, or key insight, you must have an answer. If you don’t, you have to be quick on your feet to figure it out or point to another fact that addresses the issue. Sharks and investors are not keen on entrepreneurs who don’t know 100% of the facts regarding their business.
9. Deals are always 2-way streets. It is not always about Money
When you get an investor for your business, it is not only their money you receive. It is their many years of experience and lessons learned from it. You get their contacts around the world and their guidance.
Sometimes their guidance and experience are even more important than money. So many times when the participant gets multiple offers, I have seen them asking “What can you get on the table other than money?” Knowing this is of extreme importance and the answers you receive will play a pivotal role in deciding your deal.
10. Do your Homework
When Mark Cuban negotiates and tells you a deal is final, he means it. I’ve seen enough episodes to know this, so I cringe when an entrepreneur tries to negotiate further and loses a deal entirely. You won’t have the benefit of seeing most people you’ll negotiate with on TV in advance, but you can still do plenty of due diligence like researching their past deals and talking to their business partners.
The most successful entrepreneurs also know enough about the Sharks to customize their pitch. They tell each one why he or she should personally be interested in the business.
11. Solve your Own Problems
The most successful founders built companies to solve problems they faced. They’re building for a market they understand and are passionate about. A couple examples are Travis Perry who developed ChordBuddy to help his daughter learn to play the guitar and Eric Corti who invented the Wine Balloon to better preserve wine after he and his wife opened a bottle.
Of course, the problem you’re solving has to address a sizable market. No Sharks wanted to invest in Ledge Pillow because they didn’t think the market was big enough.
12. Learn from Criticism
I know this is too cliche, but it’s true. A lot of us take criticism to our heart. We either become too harsh on ourselves or the others, thus we end up not seeing the message in it.
Most of the time, the sharks tell the contestants why they do not wish to enter a deal with them. They also give them words of advice about what are their weak points and how they can proceed.
If the contestants take their criticism or comments positively and work on their mistakes, they would go very far. Because they are getting advice from experts in the field with loads of experience.
13. Master the Pitch
Simply put: you must master the art of the pitch. Unless you’re self-sufficient and can fund your own ventures, you will need to ask for resources at some point. Whether you’re asking your brother or a venture capitalist, a good pitch is needed. It should be simple, comprehensive, and enticing. Next time you’re watching Shark Tank, spend time grading each pitch. What are they good at? What do they lack? Consider giving them a grade for each of the factors above simple, comprehensive, and enticing to learn more about mastering the art of the pitch.
14. Do a deal that works for everyone
The Sharks often say they won’t invest in something because they don’t have the right background or connections to help the business. If you’re looking for investors, try to find those that can help you by serving as more than just a bank. In any deal, whether it’s related to VC or not, make sure both sides provide value. You’re probably going to do more deals in the future, and a one sided deal won’t be good for your reputation.
15. If you can’t sell, learn to
This lesson is for everyone. Even if you’re in a large company, you need to sell your ideas and yourself to get ahead. In the case of investors, Sharks are looking for people who can sell. And, business valuations are significantly higher when someone has revenue. Do whatever you can to get sales prior to approaching investors. Mark Cuban stresses that selling is one of the most important skills for entrepreneurs in his great book, How to Win at the Sport of Business.
16. Don’t respond to people you’re pitching with disdain or sarcasm
Even if they say something nasty the people who do, tend not to get deals. How you act in a pitch will shape what potential partners think it would be like to work with you. In fact, maybe they’re pushing you just to see how you’ll react under pressure.
17. Your product need not be complex. It should solve a consumer’s problem
You always find people with “great” ideas and complicated products. Tonnes of such ideas fill the Shark Tank. There are those which require enormous investments, research, technological brains and are of course expensive (sometimes).
I am not dissing these ideas off, and I am not even in a position to. But all I’m saying is, don’t let these complicated products not keep your product in the forefront. Thinking it is too simple.
Self-doubt is a powerful tool, isn’t it? This situation has occurred too many times in my own life. I am an over-thinker, and there are always too many thoughts and ideas filling up my brain. Most of the time, I tend to not consider my idea important enough because I think it is too simple.
I’ve seen entrepreneurs on the show who don’t know their financials or seem to freeze up in the middle of their pitch. When you’re going to a meeting or pitch, practice enough that you can talk about your business even in stressful circumstances and please know your financials. The most successful people are usually over prepared. This is something Barbara Corcoran mentions in her excellent book, Shark Tales: How I turned $1,000 into a Billion Dollar Business.
19. Demonstrate your Commitment
Investors want to see that you’ve taken a risk investing your money and time showing that you believe in your business. Don’t ask for their money if you haven’t invested yours.
20. Find Investors who are passionate about your Business
The Sharks gravitate not only to the businesses they like but the ones that they’re passionate about. Kevin O’Leary invested in the tea company (loves tea); Daymond John in the trash can cover company (he said he had just lost his own garbage can cover); and Robert Herjavec in the guitar learning company (he has a lifelong dream to learn guitar). Those entrepreneurs were solving problems that the VCs personally experienced. Do research to find partners passionate about what you do. You’ll have a higher likelihood of making a deal.