TOP 5 LESSONS FROM SHARK TANK

We all watch TV, but the choice of what we watch is based on who we are. Being an entrepreneur, one of the TV shows I love the most is Shark Tank, the American version of the global Dragons’ Den franchise.

 

Shark Tank features a panel of investors called “Sharks” that considers offers from aspiring entrepreneurs who seek investment for their business. The entrepreneurs featured on the show may win or lose but for those of us watching, the lessons learnt should serve as pointers towards success. Here are my biggest take-aways thus far:

1. PROVE YOUR VALUE HYPOTHESIS: There are many reasons why an entrepreneur may think his idea is the best thing since slice bread. However, one of the major drivers of the decision to commercialize an idea is the assumption that the product/service will deliver value to the customer, and the customers will be willing to pay to have it. Evidence from Shark Tank however proves that this isn’t always the case. From an entrepreneur who assumed people will be willing to undergo surgery to implant a Bluetooth devise in their head to avoid Bluetooth earpieces falling off, to another who created a sticky-pad for sticky-notes to be stuck unto your computer, tons of entrepreneurs have based their business on flawed assumptions. This proof-of-concept failure has led many “wantapreneurs” to an economic abyss, therefore we must all learn to avoid it. Test your idea for feasibility and value proposition, only after this should you invest time and money into further development.
2. PROVE YOUR GROWTH HYPOTHESIS: Investors want to take a young $100,000 company and grow it into a $10,000,000 company; thus for an investor, the scalability of your idea is inherently fundamental.  So if you desire to grow your business into a large company (or you seek investment to expand) make sure your idea is scalable. A typical example of this is Tim Gavern whose business basically was selling ice-cream on mopeds; a concept which he wanted to franchise. For a business that buys its stock from other businesses, and can be easily copied, there was simply no way it could scale-up. Obviously he got no investment.
3. DO YOUR HOMEWORK: It’s easy for us to condemn entrepreneurs who fail in this regard, but as a Start-up consultant, I have met many entrepreneurs who do not know what they should (market size, the customer, their financials…basics). No matter what the idea is, investors want to know that you have invested sweat and blood equity and the best way to prove this is to show a vast knowledge of your entire business concept. Do not design a product which will excite kids but annoy parents; the kids are not your customers, the one who buys is the parent.
4. ONCE IT’S SOLD, STOP SELLING: When entrepreneurs come on the show, they want to make sure that all investors want their business; so it is not unusual to see entrepreneurs trying to sell their business to another investor even when they already have an offer from one investor. This occasionally pays off but more often than not, it backfires. Once an investors show interest in your product, it means they already understand what you’re proposing and are willing to take a punt on you. Entrepreneurs at this point should try to get themselves a good deal and then close instead of trying to convince others (thereby undermining the interest of the willing investor) who will most likely decline still.
5. YOU ARE THE BRAND: This is the most important lesson ever from the show; every other thing can be excused if your persona appeals to the investor. They are willing to excuse your errors just because they believe in you as a person. Therefore, before you invest everything in commercializing your idea, invest in yourself. Be the best you can be because the success or failure of a business depends on the humans who run it.

What lessons did I miss out on? Share yours below.