In The Deep End
The television show Shark Tank is a series for aspiring entrepreneurs seeking investments from a group of investors (called “sharks”) for their product or service. It highlights the importance of pitch meetings when trying to raise capital for start-ups and already-established businesses, and introduces these entrepreneurs to the sometimes-cutthroat nature of business.
Let’s Make A Deal
Shark Tank has been on the air for five seasons. According to the infographic below, the sharks have invested over $20 million in 109 companies over that time period. Although 186 deals have been made for an average of $107,763 per deal, only a third of the deals made on the show actually close. Why is this? A quarter of all startups fail in their first year, making it risky to invest money in a startup as there is no guarantee of long term success.
Square Peg in a Round Hole
Any aspiring entrepreneur is trying to find something that is needed in society, sell it to customers, and hopefully make a profit. The modern consumer is often fickle; hence, entrepreneurs must make their product flexible to suit their needs. Most entrepreneurs state that their reason for becoming an entrepreneur was to capitalize on a business idea; but almost half of them fail due to scalability. Some ideas are just not a good fit; others will struggle to fit if there are many competitors already in the field.
Investors want to see the numbers. As the saying goes, “numbers don’t lie.” Panelist Kevin O’Leary says, “Know your numbers. And if you aren’t good with numbers, bring someone who is!” Your pitch needs charts and graphs detailing how successful the product will be. Barbara Corcoran, another shark on the show, says that over-preparation is necessary—at over 80%, she has one of the highest deal rates on the show.
Don’t Curb Your Enthusiasm
You need to be in love with your product or service in order to pitch it successfully—it can be something that can benefit everyone, but if you’re not into it, investors will think it’s not worth investing in. You control the fate of your product, which means you need to see through to your goal through good times and bad times. It helps greatly if investors are also in love with the product or service that you’re pitching.
Chasing The Paper Trail
So you’ve already found investors, which is an essential part of making your idea a success. But investors aren’t just bringing their checkbooks to the table—they can also bring insights that you may not have thought of, and two other important things—more checkbooks and more insights. “Investors will put their money into a deal when they trust and believe in the CEO and know that the business can grow and distribute large profits,” John says. O’Leary helped a contestant on the show, Shane Talbott, by bringing his idea on the show, Talbott Teas, to smoothie giant Jamba Juice. Jamba Juice bought Talbott Teas for an unknown large sum estimated to be in the millions.
The Sweet Spot
Knowing how to accept, back down, or walk away are important skills. Some entrepreneurs bide their time on deals, or ask for more than what it’s worth, which will scare away investors. Time and money are investors’ most valuable assets, so wasting one or both will be a sure way to not land a deal. Even though you want investors right away, don’t move too quickly—only 2% of business deals occur during the very first meeting. You want to build relationships with your investors. While selling your idea, you may be daunted to know that only 8% of salespeople make 80% of all sales. Those 8% never back down even after hearing a no and manage to get the attention of the wealthiest investors.
Straight From The Top
All of the panelists on Shark Tank bring years and years of experience, so if they say no, they have a good reason. One of the most well known panelists, Dallas Mavericks owner Mark Cuban, says, “It’s not about money or connections—it’s the willingness to outwork and outlearn everyone…if it fails, you learn from what happened and do a better job next time.”
To learn more about Shark Tank and the entrepreneurs behind the show, take a closer look at the infographic below!
Guest blogger Megan Ritter is a social media and tech expert who enjoys writing and researching business solutions and new technology.