If you’re a fan of Shark Tank, you’re probably like me: begging startup founders not to stumble over the valuation question. Telling Mr. Wonderful not to be so harsh on the entrepreneurs. Urging business owners to go with Mark Cuban’s offer, as he’s best suited for helping the company. It’s my equivalent of talking to the TV during sports.
Whether you talk to your TV or not, there’s a lot to be learned from Shark Tank.
1. Know Your Numbers
The single most fact that seems to turn off the sharks from a potential deal is a founder not understanding valuation. You don’t have to have an MBA to know that if you haven’t made any sales, your company is not valued at $1 million. And know that the percent you want to offer the sharks also determines your valuation. That’s why the sharks start calculating on their notepads the minute a founder mentions the amount he’s seeking and the percent he’s willing to give up.
2. You are Not Unique
Unless you’re creating leg jewelry, a VC like Kevin O’Leary will ask: “what makes you unique? What’s stopping me from going out and doing exactly the same thing?”
To be fair, this question is loaded, because the truth is: anyone can try to replicate your business. But don’t let this question stump you. Have an answer; whether it’s the one-of-a-kind organic butter your grandfather makes that goes into your recipes, or simply your own brain power that makes your company unlike any other, be able to explain to the vicious shark why you believe your company stands out.
3. Don’t Be Stiff
The pitches that the sharks respond best to are the ones that are delivered seamlessly, not stiltingly. It’s clear that all the entrepreneurs memorize their pitches, but most don’t work to deliver them convincingly. Many great ideas have been turned down in the shark tank, simply due to a bad pitch.
4. Do Your Homework
Another winning strategy we see on the show is from entrepreneurs who know a shark’s interest. Mark Cuban is easy; he likes sports. But knowing that Robert Herjavec’s father was a factory worker was enough to get the man moved to tears, and it opened him up to hearing what the presenter had to say. Knowing your audience is important.
5. Have All the Answers
It’s impossible to predict what venture capitalists will ask you in a pitch, but you can still be prepared. They will ask you about the cost to produce, how many you’ve sold, how you arrived at your valuation, whether you’d be willing to manufacture overseas, how much of your own money you’ve put in, etc. Before going into a pitch, make a list of all possible questions you might be asked, and be sure you have solid answers.
Even if you don’t actually go on Shark Tank and risk public humiliation on television, you should prepare for a meeting with a VC as if you were going to be televised. That will keep you in line and make sure you’re doubly prepared for the vicious sharks you pitch!
Photo: DDFic on Flickr