3 Lies You Heard on 'Shark Tank' Can you really trust reality television for sound advice on how to start your own business? Here are three 'Shark Tank' nuggets of wisdom you might want to question.
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There's no reality in reality television. We've all heard that before. But we keep watching, because fantasy -- particularly when it claims to be based on reality -- is highly entertaining.
I'm a huge fan of ABC's Shark Tank, the Friday night hit show about entrepreneurism. I enjoy hearing about the great innovations and even the less-than-stellar ones. I love experiencing the passion in the entrepreneurs' pitches. You can see it in their faces. They dream of making it big. I know what that dream feels like. And of course, the sharks are endlessly entertaining, with their huge personalities. Cruel or kind, they're fun to watch.
But how much should we take away from what we're watching? The sharks, who are venture capitalists and angel investors, are coming from a very distinct perspective. They want a high return on investment. That means they're looking for high-yield investments -- investments that are going to make them a lot of money.
At the same time, they want to spend as little money as possible investing in an idea. That way, they minimize risk and maximize profit. On the show, they're always making very specific demands of entrepreneurs. Are those demands realistic for today's entrepreneurs and startups? Let's take a minute to break down and assess some of them:
The sharks always say, "You need a patent." Naturally, it's in their best interest to keep competition at bay. But in reality, the majority of products and services on the market today don't have patent protection. Most of the time, if you have a good idea, I'd argue that speed to market and great customer service are much more important than patent protection.
If someone wants to try to rip your idea off, they will. But if you've established a powerful brand and supported it with outstanding customer service, they're going to have a much more difficult time succeeding.
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The sharks always ask, "Do you have any sales? How many stores are you in?" If the entrepreneur doesn't have sales, they're not interested. In reality, if you were already selling a lot of product, you'd be better off hiring a CFO to grow your business. That way, you wouldn't have to give away a lot of equity to a venture capitalist or angel investor.
The sharks always ask, "How large is your market potential?" If it's small, they're uninterested. We all want to make big money and come up with an idea that has unlimited market potential. But those ideas are rare. The reality is, having very large market potential creates its own set of unique challenges, including financing, scalability and competition, to name a few.
Starting small and building a strong foundation is smart. As time passes, you may be able to expand market potential beyond what you imagined by adding new products or reimagining your service.
There's no easy way to be a successful entrepreneur. And there's no single, definite way to be a successful entrepreneur. Don't let what entertains you on Shark Tank convince you otherwise. Learning how to pitch your ideas is extremely important because as long as you have ideas, you'll be making pitches. It's very important to understand manufacturing costs, market potential, and how you can protect your business. But the reality is that Shark Tank is entertainment.
And of course, if you do decide to participate in a show like Shark Tank, always be sure to read the fine print! Many entrepreneurs seek out publicity, but be careful what you sign up for -- or away.