Shark Tank is a show where hopeful entrepreneurs go to successful entrepreneurs in hopes of exchanging equity in their business for cash. If you've never heard of Shark Tank, I would suggest that you go to hulu (link attached) http://www.hulu.com/search?q=Shark+Tank and check it out for yourself.
Here is also a little clip to get an idea of the show if you're not looking to invest an hour of your time:
In this inquiry, I decided to watch the entrepreneurs and record their behaviors. If they used the same methods that we discussed about how an individual fits in versus standing out, and how many of those individuals were successful in gaining a shark as an investor in the company. There are 4 entrepreneurs on each episode.
The Nail Pak
The first person that came on for this episode had a 2-3 minute sob story about how she lost all of her money and that this opportunity to gain a shark as an investor is her last hope. Her idea was a nail polish that had a nail file and remover attached to the polish itself, entitled Nail Pak. She was seeking $300,000 in exchange for 30% equity. When she entered the shark tank, she began her pitch with a background story about how she developed this product because of the "nail nights" that she and her 6 daughters have. She then transitioned into an explanation of the product itself, and ended by stating that it was convenient and simple.
Then, the questions from the sharks came. They wanted to know:
What are your product costs?
What are your revenues?
Would people think it's expensive?
When did you apply for your patent?
What is your personal investment in this product?
Do you have any orders?
A QVC representative then offered $50,000 for 50% stake in the company. Another shark, an Internet entrepreneur offered $60,000 for 40% stake. There was some squabbling between sharks about undercutting other sharks, which lead Daemon Johnson, the creator of Fubu clothing, to say "A piggy bank with 2 nickels makes a lot more noise than a fully piggy bank" referring to the QVC offer and saying she was talking more than she was investing. In the end, the QVC rep ended up making the deal when she lowered her offer to $50,000 for 40% stake, along with offering to promote the product on QVC and help with setting up manufacturing contacts.
Debbie Brooks Handbags
This was a wife and husband duo, seeking a $540,000 investment for 20% stake in their company, Debbie Brooks Handbags. The wife crated the concept, by creating a piece of art that she then used a magnet to attach to her handbag, and her husband was the sales end of the business. The product is currently being sold in Barney's New York and Henry Bendel's, two high end department stores. They have 2 patents associated with the product around the magnetic, interchangeable artwork that is included with each piece. The husband took the lead talking a million miles a minute, and was just spewing out facts about their success and distribution
The questions that the potential investors had were:
Where else are you sold at?
What do you need the money for?
Why do you sell in jewelry stores?
What makes this unique and different?
Why are you valuing your company at 9.5 times free cash flow?
In the end, no one made an offer to invest in this product because the husband was very defensive and wasn't letting the sharks get a word in edgewise. One said that the presentation was confusing, and the husband talked so much the shark didn't even know what was being sold. Another shark said that they weren't sure about the legitimacy of their patent, and therefore couldn't invest.
Trimi Tank
This was a two best friends who started their pitch with a background of how they thought up this idea. They then said they were asking for $57,000 for 30% stake in the company. They didn't have a strong pitch, and continued more of a conversation, saying that they only produced $3,500 off of 100 units of sales at flea markets. They then gave more background about who the investors were, and why they loved the product. Finally, they introduced what the product was and showed how to change the straps of the shirt, a product entitled Trimi Tank. The sharks tried to say they weren't sold on the idea, and instead the women went forward with the dreams that they had for their business.
The questions that the sharks had were:
Repeat how many you've sold again?
Why so few?
Have you done market search? How many women have said they would buy and wear this?
In the end, they didn't get any offers from the sharks because none of them liked the product.
Lollacup
This was another husband and wife duo coming in that said the name of their company, and said they were seeking a $100,000 investment for 15% stake in their company. They gave a background of how they came up with the idea, and lead into their manufacturing strategy, which hinged on the product being made in the US. They then gave out samples of the product to the sharks, and concluded the pitch with "We are confident in the product that we sell, and we hope you'll join us in making this a success."
Questions: How many did you sell>
What did you sell them for?
Could it be made overseas cheaper?
What does a normal sippy cup cost?
Have you gone to large retailers?
What patents do you hold?
Then the QVC woman was schoomzing them up because she liked the product, and complimented them on their design patent. It was then mentioned that they had a sales agent that charges 15% of all of the sales in the U.S. One o the sharks didn't like the idea of a separate sales agent already involved, and bowed out. Another shark said that they thought that the baby niche market was too small for their unique and complicated marketing strategy. They instead suggested just marketing it normally to the entire baby consumer market.
Finally, an offer for $100,000 for 50% of the business was laid on the table, but contingent on moving manufacturing overseas. Another offer was thrown out for the same about (100K for 50%) but contingent on getting out of the sales agent agreement. The first shark offered $100,000 for 40% of the business, and then the first player matched that offer for 40%. A new offer for 30% went on the table, but with a time sensitivity. This offer was then retracted because they didn't agree to it quick enough. The couple realized that they had a lot of interested investors, and asked for the two individuals offering 100,000 for 40% to partner and split that investment so that they could get two of the sharks investing and consulting on the business. They complied and made a deal,. When the husband and wife team were leaving, the sharks were commenting on how much they liked them, and how they were excited to work with them.
Takeaways
This is not the only episode of Shark Tank that I've watched, but it is the first that I've sat down and analyzed the "contestants". I think that episode taught me that it really doesn't matter how much you know about business or how many degrees you have, you need to be able to sell a version of who you are as a business person in order to gain the respect and trust of others. The people who were doing over a million in sales (the handbag people) didn't get a deal because really, from watching the sharks faces, they were untrusting of the husband, and thought that the wife was clueless about the business aspect of their product. the people that made deals were honest and forthright, and showed that they were investing their personal money as well as a piece of themselves and their hard work. People can see a glimpse of this even in the first few minutes of talking to you. So, to conclude with this analysis, I think this proved that it's really important to have your pitch down and are able to communicate your business and vision, but it's important to show that you, yourself, are worth investing in.
Until next time!
Grace
