Shark Tank tips on how to get that “yes”.
Aspiring entrepreneurs love the American business reality show Shark Tank, where entrepreneurs pitch their ideas to sharks (aka investors with experience leading successful businesses) to seek investment. The show gives you insight into new companies that are entering the market (some even within your specific realm of interest), how they pitch their ideas and the kind of expectations one needs to enter the board room with.
While typically only 40% of all startups are able to become profitable, Shark Tank startups have a 94% success rate. As of 2021, only 6% of startups featured on the show have failed and only 20% of startups are operating without a profit. With that said, here is what you can learn from the show about making a successful pitch.
1. Put in intense preparation
In an episode of the Indian rendition of Shark Tank that was recently released, shark Namita Thapar asked the founders of the insole company Color Me Mad a series of rapid-fire questions about their products, sales and previous investments. The founders were prepared and could quickly answer every question thrown at them and eventually ended up receiving an investment of INR4 million (US$53,110) for 25% equity.
The reason why they could answer these questions so quickly was because they were extremely well-prepared. Besides gathering information about your company, it is also a great idea to study the investors you would be pitching to and learn about their investment backgrounds. “Do the work. Out-work. Out-think. Out-sell your expectations. There are no shortcuts,” says Mark Cuban, one of the most famous sharks on the show. While this is true for business in general, it is also particularly true for creating a great pitch.
2. Make your pitch simple but interactive
Perhaps one of the biggest products to come out of Shark Tank is Scrub Daddy, a unique cleaning sponge that changes texture based on the temperature of the water it is soaked in (soft in hot water and hard in cold water). The founder of the cleaning tool company, which is also called Scrub Daddy, Aaron Krause, went on the show in 2012 to showcase his invention and gave a pitch with a live demonstration of how the product worked and how easy it was to clean. The pitch was heavily praised by all the sharks and was even compared to a live infomercial. The pitch went so well that it initiated a bidding war among the sharks. The company eventually partnered with Lori Greiner, a shark who invested US$200,000 in the company for 20% equity. Since then, the company has racked up more than US$200 million in sales.
Krause’s example should teach you that a clean pitch, where you deliver all the information about the product clearly and concisely, can get you substantial backing from investors. Their knowledge and resources might be what your business needs to succeed. Krause’s pitch was not a PowerPoint presentation but rather a live depiction of how his product works wonders. Thapar, a shark on the Indian rendition of Shark Tank, says, “Investors need to touch and feel to see it work…they’re putting their own money in it after all.”
3. Have a negotiation strategy and counter-offer ready
13-year-old entrepreneur Sofia Overton appeared on Shark Tank in 2020 to pitch her company, Wise Pocket Products, to the sharks. The product she brought to Shark Tank was socks with a pocket inside where you could put your mobile phone or other small personal items. Overton blew the sharks away with her negotiation skills. Originally, she asked for US$30,000 for 15% equity, but two sharks, Daymond John and Greiner, offered US$30,000 for a 33.3% stake in the company. However, she countered back with US$35,000 for a 25% stake and successfully made a deal with the two sharks.
Overton’s success is a clear example of how important it is to haggle for your business. Have a plan ready to negotiate with the investors. Try to put some research into how the investors you are meeting have negotiated in the past. Many investors have negotiation patterns that you can use to your advantage. When negotiating, it is important to think about what would be an acceptable agreement for investors and your business alike. Be prepared to give up little things in exchange for the bigger things you don’t want to compromise on.
Pitching tips from sharks
Now that you know what you should do, here are a few things you need to avoid. Speaking to Tech Crunch about what he considers when listening to pitches, Cuban says that his eyes glaze over when founders start out by implying that their company will be a success even though it captures a very small market. As for Greiner, she says that it is important to read the room and that she gets ticked off when “they’re being asked a question and they keep ignoring the question”. Long story short, make sure you can back up your claims and that you don’t avoid difficult questions.
Despite all of these tips, there can be instances where your pitch just won’t work out as expected and land you an investment. In such a situation, instead of giving up on your ideas, you should try to see what you can learn from the experience and use it to approach the pitching process with renewed vigor all over again.
Header image courtesy of ABC Network’s website
