The popular TV reality series The Shark Tank is a show about a small group of experienced investors called the “sharks” who pick and choose investments from business pitches presented by contestants. The television show is very similar to real life angel investment. In fact, it is so much like angel investing that business owners seeking capital can watch a few episodes to understand how to properly pitch their ideas to investors that will help them get the capital they need. Here are some of the most important lessons pertaining to pitching your idea to investors you can learn from watching the Shark Tank.
Accurate Valuation is of the Utmost Importance
Every episode of the Shark Tank begins with a contestant asking the investors for an X amount of money in exchange for a percentage of ownership in their business. This is what establishes their proposed valuation. For instance, if a contestant wants to give 10 percent of their company for $150,000, he/she values his/her company at $1.5 million. Anyone who watches the show regularly knows that the sharks often vehemently protest valuations they deem too high wherein they make their own offers based on much lower valuations. One shark in particular, aka “Mr. Wonderful” or Kevin O’Leary often responds to valuations with crude comments and repetitive questions. Even though Mr. Wonderful can be annoying, there is quite a bit of value in what he has to say. When O’Leary or another shark asks a contestant why they think their company is worth so much, the good business people can explain that well by using sales figures, secured patents and other forms of tangible data.
Entertainment or not, the Shark Tank does clearly show us that valuation is very important when pitching to potential investors. When a business owner approaches a would-be investor and states a ridiculously high business valuation, the investor is likely to say no to the proposal very quickly as he or she may view the business owner as someone who knows very little about his/her own business and what it’s value is. And if a business owner cannot back up the valuation they’ve placed on their company with hard data, the chances of getting an investor to come on board are slim at best. So when pitching to investors, be well be prepared by taking data along with you that demonstrates why you value your business at the amount you do.
You Have to Show Some Hustle But That Alone Won’t Get You the $ You Need
As soon as they’ve been turned down by all the investors on the Shark Tank, entrepreneurs often blurt out things like“But I promise I’ll work really really hard” or “I’ve put my entire life and soul into this business idea”. But does this pleading help in getting the sharks interested again? Not usually, no. In fact, when a contestant says something like “ I will work so hard on this that my fingers will bleed”, they usually hear something back from the sharks like “We’ve heard it before and we’ll hear it again but we’ve said no and we mean it. Good bye”.
The most successful business people in the world are real hustlers who are on the go 24/7. In order to succeed at any business, you’re going to have to work very, very hard and make many sacrifices along the way. But, hustle doesn’t guarantee your success because if your business is no good and your product or service is unwanted, it doesn’t matter if you work around the clock 7 days a week, 365 days a year – you are going to fail. So what’s the lesson here? The lesson is that you should definitely show investors that you have a lot of hustle and are willing to give your business all you’ve got to give. But you first have to make sure that your business is a good one and that the things you are selling are actually things people want to buy.
Don’t Be Overconfident
One type of contestant often seen on the Shark Tank is the overconfident entrepreneur who comes across as knowing it all. This type of person has given their all to their product and is 100% sure that their business is The One that will rock the earth right off its axis – even though they seem to be alone in their idea. While this type of individual has good intentions and really does believe in their product and business, passion alone won’t translate into a viable business that succeeds. If consumers are not interested in buying your product or service, you can have more passion than anyone on earth but it still won’t help you create a winning business.
The majority of the overconfident contestants on the Shark Tank end up leaving the show without one investor giving them what they want. Part of the reason is often because the product/service in question was just not up to par according to the sharks. Another reason why this type of contestant is rejected is that the person’s overbearing personality is something the investors just aren’t interested in dealing with. While it’s fine and even great to be passionate about what you’re pitching to an investor, remember to show some humility as nobody likes working with boastful, know-it-all type people.