Thinking of Pitching Your New Business on Shark Tank? 5 Things to Consider Before You Take the Leap.
While the limelight may be tempting, securing a spot on the show is still a long way from guaranteeing success.
Spanning 11 years, 200 episodes, 890 pitches, 490 deals, and $143.8 million worth of invested capital, Shark Tank is a staple TV program for seasoned and budding entrepreneurs. With a host of celebrity investors, the show has popularized pitching and paved the way to success for growing companies like Scrub Daddy, Ten Thirty One Productions, and Wicked Good Cupcakes.
For many founders, the chance to have a global platform and pitch investors like Mark Cuban and Lori Greiner offers a once in a lifetime opportunity. But while the limelight may be tempting, securing a spot on the show is still a long way from guaranteeing success. As with any other form of pitching (to angels, family, and friends, or VC firms), founders need to tell their story in the most compelling way and be prepared to negotiate a fair deal. Being on a popular TV show should not mean compromising on the amount of money you’re asking for, or the equity you're willing to split.
But importantly, Shark Tank is not to be treated like a regular conference room—it’s pitching with an inherent bonus. Regardless of the money you may walk away with, you’re almost guaranteeing your company once-in-a-lifetime exposure to an international audience.
For startups thinking of pitching on Shark Tank, here are five things you need to consider before taking the leap:
Determine if your industry is a good match.
Shark Tank isn't a one-size-fits-all-founders show. There are certain industries that are better suited to the structure, notably businesses with consumer products or in the hospitality sector. Food (20 percent) and fashion (19 percent) are the most popular industries being pitched on the show; however, lifestyle, home, and media are the industries most likely to receive a deal.
For instance, tech isn't always compatible with Shark Tank because the show can cost companies dearly. Gabe Zichermann, chief executive at Failosophy, says that sharks typically request large amounts of equity, so tech founders have to sacrifice a lot to secure investment. On average, entrepreneurs offer 13 percent equity but end up closing a deal in which they lose 27 percent—more than double what they initially planned. Angel investors or VC firms tend to be more beneficial for tech startups as they ask for less equity and take a more hands-off approach, without lowering the funds. Unsurprisingly, only 7 percent of the founders on Shark Tank are from tech or software ventures.
This is not to say that you shouldn't apply for the show if you're not from the industries the sharks typically invest in, but rather that you should think carefully about what other value - beyond financial - you can get from being on the program.
Market your brand, regardless of the outcome.
Shark Tank has more than four million viewers—that's four million potential new customers you can be talking to. Perhaps the most important thing to keep in mind when you step onto the Shark Tank stage is that you’re really stepping onto an international platform to market your product, for free. Even if you don't receive any offers or don't accept the deal, you have about 10 minutes to introduce your product or service to the masses.
Connecting with people watching at home is key. "Naturally, you want to impress the sharks, but you have to remember that the viewers are the real consumers," Zichermann says. "Unlike other pitch competitors such as TechCrunch Disrupt, that only targets professional investors, Shark Tank lets you speak directly with the people who will be using your product."
Pay close attention to all the user research you have conducted throughout your startup journey. When you're pitching, imagine yourself having a coffee with your ideal buyer persona and think about the problem you're solving for them, what language resonates most with them, and why they would be willing to spend their money with your company. If you keep your target users in your mind’s eye while you walk through your product, you'll transmit value to the people who matter the most. Of course, prepare yourself for the questions and reactions from the sharks, but don't make their engagement your only focus.
Articulate early traction in your startup.
Similar to any fundraising round, you have to have a solid pitch on Shark Tank, and that involves demonstrating any early traction you've had in your company. Time and time again, you see the sharks immediately perk up if a founder begins pitching a business with proven traction. Whether it’s subscriptions, online engagement, letters of intent or conversions, metrics that show you are already experiencing positive reactions from customers will speak volumes. Ultimately, the sharks are looking for a reason to say 'no' to your pitch, but demonstrable traction is a powerful way to persuade them otherwise.
In this particular case, how you present your traction will make a difference. If you're a shy, introverted founder, the sharks may fail to be impressed by your pitch, even if the stats are there. TV requires a particular type of energy—viewers and the sharks want to be entertained, as well as feel the competitive passion radiating from entrepreneurs. Simple facts aren’t always enough. You have to be memorable.
If you know you don't embody that ferocity, put forward a stronger personality from your team. Switching the front person isn't a critique on your ability to lead the company, it’s a bold acknowledgment of the different skill sets that stand out in your team.
Know the sharks' stories.
Doing your research around the sharks is the most effective way to bridge the stranger gap and boost the likelihood of striking a deal. The benefit of Shark Tank is that there are literally hundreds of episodes to browse through and take notes on which sharks invest in which companies, what they respond best to, and what feedback or advice they give along the way. With this information, you can tailor your pitch toward specific sharks and establish a warmer introduction that is encouraging to any investor.
For example, the founders from Cousins Maine Lobster gave a legendary pitch by watching all seasons of Shark Tank prior to going on the show. They then wrote down every possible question they thought they could be asked, and took turns quizzing one another to ensure that they knew every answer flawlessly. The result was a $55,000 investment from Barbara Corcoran.
Put your product in full view.
None of the sharks will put money into a project they can't see in action, so have a clear way to demo your product or service. If you have a software product, you could give the sharks a tablet to explore the features while you talk. If it’s a service, make sure that you have all the cables you require to connect to a screen in studio, to show the sharks a professional (and concise) video in which various people use and provide candid feedback on your business.
However you choose to showcase your product, it has to be TV-ready: so, utterly seamless. Triple check that everything is working well in advance of your pitch, and emphasize the elements that you think will be most appreciated by individual sharks.
Shark Tank is undeniably an exciting prospect for entrepreneurs, and it can propel early-stage projects to new heights. That said, founders should be careful not to get caught up in the theatrics and risk making the wrong decision for their company. If you can get a better deal elsewhere, negotiate, and don't be afraid to walk away. A place on Shark Tank means unique exposure, so leaving without an investment doesn't mean leaving empty handed.
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