10 Things Startups Can Learn From Shark Tank

By: |Published on: Jun 28, 2019|Categories: Business Advice|

Anyone who’s remotely interested in startups and venture capital investment has probably heard of the American television show Shark Tank, which has been airing for the past ten years now.
In a novel format, the show revolved around entrepreneurs making pitches and presenting their products in front of investors to garner funds. In return for the funds that the entrepreneurs receive, the investors get a share of equity in the business.
This reality series has provided acute insight into possible entrepreneurs as to what they could expect when approaching for funds.

Something like a Shark Tank has made venture capital, fund garnering into buzzwords in the startup ecosystem of the world, to the point where people are getting inspired to become entrepreneurs through shows like Shark Tank.

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(Television series like Shark Tank has made the abstruse world of venture capital investments more approachable for anyone who has a good product and seeks to grow it further.)
In this article, we pore over episodes of Shark Tank, look at the pitches made, investments sought or granted and draw for the readers 10 things that they can take away from the show.

1. Pitch Perfect!

Your business pitch (after the product) is the single most important thing in this process. You created a product- that was the first step. Now, develop and convey a vision for your product.
Let your product tell a story.

Show them that by them investing in your company is the beginning of the product. Show them a roadmap of how you plan on taking the company forward from here.

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A whole lot of times startup founders come with amazing stories-but personal ones. No matter how impactful your personal story is, it will not have a bearing on how your product is analyzed or granted funding.

Your pitch needs to tell a story about your product- primarily. It needs to be involving, engaging, and an extension of the product you’re offering in itself.

2. Profits

Show the investors that your business is garnering profits. No matter how groundbreaking an idea- should it not make money, gathers no attention from the investors.
If you are already developed business, make sure you include that your business is revenue generating or if it is a business that has just started out- make sure you have a solid revenue model ready for analysis by investors.

3. Personal Profiles- if it is relevant

Who are the founders of the company, what relevant experiences do they have that you could include in the pitch to make it stronger?

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Should the founders have an education in that discipline, or have worked in that area- information like this is integral to your business pitch.
Also, read: 7 mistakes first-time founders make when starting a business

4. Exhibit That You Know Your Customers

Sharks (investors) on the show want to see if you know the people/ entity that you have created your product for. More than this, they are also interested in how the product in question can meet a present need of its targeted customers.
The investors are also going to bear in mind how relevant a product is to the current times.

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85% of the products that gained even the first stage of investment by venture capitalists were products for the masses. The reach of the products was larger. Most products that were granted investment were meant for a larger customer base and not a niche audience.

5. Build a Customer Base

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But even this goes a long way to exhibit the real-time success of the product to the investors by assuaging their doubts.
Once you exhibit that the product is already being used by people, and include their testimonies in your pitch- the investors will be more keen to take your company forward.

6. K-I-S-S, Keep it simple, silly!

Understand that your pitch is just an extension of your product.
Your primary focus should always be on building a good product that you believe in, and that aside from everything the product should speak for itself.
Several times people have appeared on the show exhibiting technology to affix chips into people’s ears/ calculating the speed of a dog running etc. which has nothing but incited ridicule from the investors.
Even while building a product- continuously ask yourself the question that what problem is my product solving? And spend maximum time/energy in making sure the product itself is perfected. Anything else should be an ancillary detail in the beginning.

7. Prepare

If there’s one important takeaway from the several rounds of pitches, an exhibition of products and negotiations have revealed in Shark Tank, it is that the entrepreneurs need to not only know their products in and out but also be fully aware of its implications/repercussions, benefits/drawbacks.

Not just this, startup founders need to get ready for grilling on valuations/worth of their company, other details.

Image source: medium.com

It is important to note that companies need to set a certain milestone they wish to achieve with the funding they are seeking now.

Make this milestone clear from the very beginning.

This will give you a goals-based approach to even making sure you get funding in the later rounds for your company and it will create a good venture capitalist-entrepreneur relationship after the first round of investments and milestones having been achieved.

Know the figures that you are asking for. Have adequate explanations for the figures you’re quoting in your pitch.

8. Have a Plan Already in Place

Numbers are a tricky deal here. Understand that you’re sitting in front of the likes of Mark Cuban, who have made fortunes gauging businesses like yours. They know what they are doing.

So when quoting figures to venture capitalists, you’ll need to exhibit the why’s and the how’s.

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And also simultaneously have a road plan on just how you plan on utilizing the funds you have- a process that needs to have probable returns for the investor.

Questions like what are the five to ten-year projections for the company, future financing are asked.

So, all in all, if you’re asking for cash, get ready to explain and account for every single penny.

9. Know Your Investor

Another thing garnered from the show is that most investors have their style of granting investments.

Mark Cuban for instance, when he once pronounces that something is a final offer,  that is his last word; the entrepreneurs that have continued to negotiate beyond this have not gained any investment at all.

Image source: pixabay

This could work for startup founders in India trying to approach a Sequoia Capital or a Saama Capital for investments.

Startup founders- look into how the investors you are seeking investment from have functioned in the past. Understand their style, do your homework in the investor department. This starts from first even figuring out which particular investor to approach for your product.

Conclusion

Lastly, don’t underestimate questions on possible marketing strategies you wish to adopt, legal aspects of the company. Basically, be prepared to provide a whole outlook to the company and it’s functioning in front of the investors.

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