Entrepreneurs who have great ideas are desperate to get funding for them. Although it is often said that the venture capital industry is awash with cash, and that investors simply cannot find enough good ideas to put their money into, this is not the experience of most aspiring business persons.
Shark Tank provides an additional path for inventors to get money. The show has been on the air since 2009. It features a panel of venture capitalists who hear pitches from a range of budding entrepreneurs. If you are one of the latter, the show may look like a great way to get your business funded. But is that really the case?
The Reality of Reality Television
The phrase reality television is a bit of an oxymoron. In the end, a reality TV show is a form of entertainment. Although the inventors who make pitches on shark tank are real people who want to get their idea funded, and the sharks are actually venture capitalists, the job of the latter is to create as much drama and spectacle as possible.
Shark Tank can give some people the incorrect idea that there is only one way to succeed. It must also be said that the focus of the show is on how well the entrepreneur made the pitch, not how well his or her idea actually is or how much ability they have to run a business.
If you are thinking of going on Shark Tank, you should know that two-thirds of the deals made on the show fall apart. That is because there is no real effort to think through and analyze the fundamentals of a business plan.
Despite what many fans of the show believe, it does not teach people how to succeed in business. It exists to get ratings, to attract advertisers, and to make money for the company that produces the show.
What Shark Tank Cannot Teach
What was said above is not meant to put down Shark Tank. No television show, regardless of format, could possibly provide the insight, analysis, and instruction necessary to make an entrepreneur successful.
Here are some of the things that you will not learn on Shark Tank:
1. Identity matters
When you go on Shark Tank, you will be encouraged to present your idea in a way that will get you a good deal of money. However, this is not the same thing as developing a vision and brand identity. Part of the reason for starting your own business is doing things your own way. This becomes part of your company’s identity, and identity matters.
2. It’s okay to stay small
Shark Tank is all about making it big. The investors push the theme of scaling up businesses. They want to mitigate their risks and get a large return. Scaling up your business to its maximum capacity may not be the best thing to do long-term. Indeed, you may find more success by staying small.
What Shark Tank Is Not
This article is not meant to discourage anyone from going on Shark Tank. The show has helped some entrepreneurs become successful. But if you are thinking about applying for it, you should go into the thing with your eyes wide open. You should know what the Shark Tank is and what it is not.
Here are some of the things you should consider before deciding whether going on the show is worthwhile:
1. Shark Tank is not about funding entrepreneurs
As was pointed out above, nearly two-thirds of the deals initially formed on set fall apart afterward. Shark Tank is not about funding entrepreneurs; it is about marketing them. If you have a really cool product idea, the show is a great promotional platform for it. The most valuable thing that any entrepreneur who goes on Shark Tank will walk away with is exposure to millions of viewers.
The second most important thing that you can get from the show is contact with a top distribution company. Indeed, distribution deals can be worth millions. If you have marketing and distribution in place, you can always find funding elsewhere.
2. What you see on Shark Tank is not what actually happens
Shark Tank episodes are taped months before they are actually broadcast. These are marathon sessions that go from dawn to 9pm. During the taping, contestants consult with lawyers and business partners as they negotiate their deal.
Producers research companies, run background checks, and verify contestant statements. What you see on air is a tightly edited version of all this activity. The televised version aims to maximize tension and heighten audience suspense. It is not a fair representation of what goes on during the negotiation.
If you do not yet have a basic infrastructure for your business—lawyers, partners, etc.—it may not be worth going on the show.
3. You are unlikely to get a good deal
If you are a regular viewer of Shark Tank, you have no doubt noticed that entrepreneurs are asked to give up huge chunks of their company for very little money. The important thing to remember here is that if you want to run your business your own way you will not be able to do so if you sign over half of it to an investor.
Another important thing to remember is that 75% of companies that raise money from venture capitalists fail.
4. Only the story matters
Although Shark Tank producers verify statements made by contestants and carry out due diligence on their companies, the investors themselves are not that interested in numbers—at least not at first. What they really want to hear is a compelling story. They hear facts and figures quoted to them all day, most of which do not really bear out. Such investors pride themselves on being able to read people and situation. They believe (whether it is the case or not) that their success relies primarily on their instinct and gut feeling. They have to believe in and care about your story before they give ear to facts and figures.
5. The handshake is not the deal
The handshake is the iconic image of a deal made. This is not actually the case. Neither is a verbal agreement. Shark Tank features investors who make offers to entrepreneurs. These scenes make for good television, but they do not constitute a done deal.