How to Get On Shark Tank: a Semi-Serious Guide
BY LORI CULWELL
So, I’m sure you can imagine that Stephan and I are a little
obsessed with the show Shark Tank, because we are just that kind of ambitious
entrepreneur-type people, and also, we like to admire the products that are
truly innovative, and mock the ones that are just plain dumb. I’ve found that we say the same things so
often while watching this show, I decided to write them down into a
semi-serious guide for people who are thinking of trying to get on it.
If you have an awesome product and you feel like you’re
ready to face the sharks, here is the casting information. http://abc.go.com/shows/shark-tank/casting However, I would STRONGLY recommend that you
at least skim the following guide, lest you be eaten by the sharks in a feeding
frenzy because you went on there with a product idea but no sales. DON’T GO ON SHARK TANK WITH NO SALES, dudes.
Here is the kind of entrepreneur who usually gets a deal on
Shark Tank:
Joe Business has a good idea. He does a proof of concept, sells a decent
amount of product (say, $10,000 worth of
product per month for six months). He
has a decent margin (meaning, he makes
his product for $1 and sell it for $7). He
has no debt on the company, his operations are in order, he has more than one
product (or at leaset ideas for other products), and so on. Basically, Joe Business has set up and tested
a structure, and now all he needs is, say, an infusion of cash to lower his
margins even more, or to partner with one of the sharks for distribution and
industry contact purposes. That is to
say, they already have their sh%t together, and bringing in one or more of the
sharks is going to be a slam dunk and a win for all concerned. What’s even better is if you already have $1
million or more in sales, meaning that you are already totally kicking ass with
your business structure. If you added in
the factor of one of the sharks with their money and connections, you would
have exponential growth and success, and in fact, this is what happens.
Also, it is very helpful if you do not over-value your
company, because this pisses the sharks off and makes them look for ways to not
help you.
If you are this “Joe Business” type, please do go over to http://abc.go.com/shows/shark-tank/casting
and apply. That is a great show and it
is totally inspirational to watch the American Dream come to life like
that. Some of the Shark Tank success
stories can be found right here, in case you’re curious:
Buggy Beds (bedbug early detection and control
system—freaking genius! http://www.buggybeds.com)
Simple Sugars—this girl is 18 years old and has her own
beauty products company. Do you feel
like a slacker? I do. http://simplesugars.myshopify.com
Chord Buddy: Nifty gadget that goes on your guitar and
helps you learn to play in steps. What’s
cool about this is that you can play actual songs on your very first try (I was
so impressed with this, I actually bought one!)
And so on. As you can
see, these people were already organized and had successful businesses, and
partnering with one or more of the sharks made them more successful. This is the kind of thing that investors
like to do.
Everyone who gets a deal on Shark Tank has one or more of
the qualities listed in the above scenario, but really, success stories come in
all shapes and sizes, which of course is
what makes America great and makes Shark Tank hilarious. With that in mind, I’m going to just go over
some of the things that will probably cause you NOT to get a deal, so you can
plan accordingly.
Here are some “red flags,” or things that will make the
sharks become sharky and possibly eat you.
1. You are WAY
overvaluing your company. Bear in mind
that if you come in saying “I want 500,000 for 20% equity in my company,” you
have just placed a valuation on that company of
$10 million. Each and every one
of the sharks knows how to do math, and now you are going to be on the hot
seat, justifying where you got that number, why you have flagrantly overvalued
that much, and also, who do you think you are with your $1,000 worth of
sales? Overvaluation is a reflection of
your ego, and it is probably the thing that makes the most entrepreneurs leave
the tank without a deal.
2. You are thinking
of the shark tank like a bank. If you
have not made any sales, you can’t really go in asking for $75,000 to “get your
distribution costs down.” You are
essentially asking for a bank loan, when Shark Tank is more about equity partnerships. No one is going to loan you money for a
concept that has not been proven. One indicator of this is if you’re about to
say “The X industry is a multi-billion dollar industry,” which basically
indicates that there is a market for what you’re making, but you haven’t
participated in it yet.
3. You want the
sharks to perform a miracle and bring your product back from the dead. This happens once every couple of episodes—a
person comes on, their product or company has hit a wall for whatever reason
(like they got screwed by a business partner, got a big order they couldn’t
fill, or mis-managed their money the first time around). These are people that have thrown up their
hands and want the sharks to perform some kind of miracle. The key indicator of this is: “I’ve had X amount of sales over the past 8
years,” 8 years being the red flag part of the statement. No one measures their sales in years, and if
you are, that means you’re trying to inflate your number because your last year
has not been that impressive. This is a
“blood in the water” moment. The sharks
will make you tell the truth, people!
Don’t hide things from them!
4. You are in some
kind of trouble (like legal or financial), and you want the sharks to bail you
out. This is kind of like # 3, but the
indicator is a little different. For
this one, you can tell there is a # 4 coming when the person in question has,
for instance, $1 million worth of sales per year, but of that, they are only making
$10,000. This is a fishy situation that
makes the sharks go “Where is all that money going?” You will then have to
respond with the truth, which is that you are $800,000 in the hole over some
manufacturing equipment that you absolutely had to have, or you got into some
legal trouble with your patent and now you have some huge debt to pay off. Daymond John is the shark who is most likely
to be “out” right after you say this, because he does not like to take on other
people’s problems.
5. This one is almost
universally true: the one thing that seems to bug all the sharks equally is
when entrepreneurs start paying themselves a “back salary” for all the years
they worked on the product or business before it actually took off. That’s not to say they don’t want you to pay
yourself. It actually is better if your
business is profitable AND you’re taking a salary. The thing they hate is when your business is
not as profitable as it could be because you are paying yourself back for the
eight years of trial and error before you hit upon a success. Just my opinion, but it seems like they feel
like this is you cannibalizing your own company just as it is becoming
profitable, plus they don’t seem to like it when you are valuing your time but
not theirs.
6. You are weird, and
why would the sharks want to start up an ongoing business relationship with a
person who is weird and possibly flaky?
I’m looking at you, freaker with a lower-case f, Vermont guy who wears
only tie-die, or single-serving wine glass guy. You have to be together for the sharks to
want to work with you!
Generally speaking, if one of the sharks makes you an offer
for a distribution or licensing deal, YOU SHOULD TAKE THAT DEAL, even if the
upfront money isn’t great. You cannot
put a value on that kind of access, and that is why you went on the Shark Tank
in the first place, so don’t get all precious and try to nickel-and-dime with
some weird counter-offer that is going to make them mad. DO NOT TURN DOWN A DISTRUBTION DEAL,
especially with Mark Cuban, Daymond John, or Lori Grenier.
Also, generally speaking, Kevin O’Leary (Mr. Wonderful)
is probably the shark you want to make a deal with the least. He performs more of a straight-up venture capital
role, and usually makes deals that involve him getting a share of everything
you sale, either until he gets his investment back or in perpetuity, and who
knows if you can ever get that guy on the phone if you need advice (or if you
would even want to). His deals almost
always seem like you could do better if you just want to a bank, in my opinion.
So, do you have an awesome product, and can you confidently
say that you’re not going to do any of the 6 things I’ve outlined above that
will make the sharks not like you? Then
by all means, go on over to http://abc.go.com/shows/shark-tank/casting . We
will be watching for you!