Shark Tank Investments

[finances5]

I'm wondering what goes on behind the scenes in the TV program Shark Tank? Whereas there's an agreement between the investors and budding entrepreneurs. Do the investors do all of the investing themselves or do they also bring along other investors, those outside of the program, to also do some of the investing and all?

Thanks.

 

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[G-Man]

I'm wondering what goes on behind the scenes in the TV program Shark Tank? Whereas there's an agreement between the investors and budding entrepreneurs. Do the investors do all of the investing themselves or do they also bring along other investors, those outside of the program, to also do some of the investing and all?

Thanks.

Why does it matter?

 

[finances5]

Why does it matter?

Just wondering from a business perspective. Cause I'm thinking if it's just those 5 to 10 investors that's doing all of the investing, isn't that kind of like putting too many eggs in one basket?

 

[G-Man]

Just wondering from a business perspective. Cause I'm thinking if it's just those 5 to 10 investors that's doing all of the investing, isn't that kind of like putting too many eggs in one basket?

There are tons of companies that come on there looking for funding... so I'm sure each one of those "sharks" is invested in a couple dozen companies by now, plus all of the investments they had before.

 

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[Scot]

I'm pretty sure Mark Cuban, a man worth $5bn knows how to invest wisely

 

[G-Man]

I'm pretty sure Mark Cuban, a man worth $5bn knows how to invest wisely

The Cubes turned our company down on Shark Tank, so I'm gonna have to take issue with that

 

[KLaw]

The Cubes turned our company down on Shark Tank, so I'm gonna have to take issue with that

You were on shark tank?

 

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[G-Man]

You were on shark tank?

Company was, but it was before my time. Sadly, I'm no celebrity.

EDIT: Really it was the founder that was on the show, before the company was a company.

 

[Denim Chicken]

It depends on the company. Sometimes they ask if they have debt and investors and will dig into it. Remember the segment is about 10-15 minutes but they are in the Shark Tank for 2-3 hours at a time. There is also due diligence that happens afterwards. ABC also used to get equity stake of I think 5% or 7% for just taping until Mark said no more of that.

 

[AubreyJ]

I woman I know was on shark tank as was a member of this forum I believe?- supposedly the stuff that happens on the show is such a small portion of what really goes on. The Shark that invests- they really are interested in investing but there is a lot of research, agreements..etc that go on behind the scenes after the fact, and a lot of vetting, research, and qualifications that you have to go through before making the show. The person I know who was on the show made a deal with Barbara and at first, Barbara really did provide value to her company, but now that her company is doing pretty well- Barbaras involvement has drastically declined.

 

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[G-Man]

Yeah, obviously what you see on TV is only what survived the cutting room, and then there's due diligence. One thing to keep in mind: it's a TV show. TV shows sell narrative. This is something our founder didn't take into account. He went in with a really analytical and boring pitch, when what they really seemed to want, at least for a food company, was someone talking about their "passion" for their particular food.

Going in with a bunch of data that says there's an underserved space with weak competitors doesn't make for good TV.

 

[KLaw]

Yeah, obviously what you see on TV is only what survived the cutting room, and then there's due diligence. One thing to keep in mind: it's a TV show. TV shows sell narrative. This is something our founder didn't take into account. He went in with a really analytical and boring pitch, when what they really seemed to want, at least for a food company, was someone talking about their "passion" for their particular food.

Going in with a bunch of data that says there's an underserved space with weak competitors doesn't make for good TV.

Yep. I think all of that is a must have but use it sparingly and when / if they ask. The rest is all narritive and drama and comedy. Sounds like he'd been better off hanging out in the background and letting a more polarizing person do the majority of the presentation. Ahhhh. Hind site is 20 / 20.

 

[G-Man]

Yep. I think all of that is a must have but use it sparingly and when / if they ask. The rest is all narritive and drama and comedy. Sounds like he'd been better off hanging out in the background and letting a more polarizing person do the majority of the presentation. Ahhhh. Hind site is 20 / 20.

Yeah, and in terms of mistakes the business has had to learn from, unfortunately that doesn't even make top 10

 

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[KLaw]

Yeah, and in terms of mistakes the business has had to learn from, unfortunately that doesn't even make top 10

Care to elaborate?

 

[G-Man]

Care to elaborate?

• Focusing on the wrong distribution channels to start with
• Going wide instead of deep
• Not controlling unit cost due to obsession with cool branding
  
• Bloated staff
  
• Not negotiating slotting
• Asymmetrical broker agreements
• Not securing debt earlier in the business
• etc, etc, etc.

 

[finances5]

I'm pretty sure Mark Cuban, a man worth $5bn knows how to invest wisely

I know what you're saying. But I'm also kinda wondering, why not also give other investors a shot?

 

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[G-Man]

I know what you're saying. But I'm also kinda wondering, why not also give other investors a shot?

Of course you can give other investors a shot. A big reason people go on shark tank isn't just for the money, it's for the national exposure the show and it's apparatus give your product.

In the life of a startup there will be multiple rounds usually, and the people that go on Shark Tank are still usually in the seed stage.

 

[MidwestLandlord]

I Am Alpha M

^^^ I'm a customer of this guy (his Tiege Hanley brand) and he has several videos about his being on Shark Tank twice, and explains why he turned down the investment offer both times.

His Tiege Hanley brand is a great example of subscription based fastlane too.

 

[Scot]

I feel like at the end of this thread @finances5 youre going to ask how to get investors.

So let's skip to there.

Why do you think you need an investor for your business/concept?

 

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[G-Man]

Why do you think you need an investor for your business/concept?

"Because I believe it will be easier to get an investor than a customer."

Just my best stab at what seems to float around on these discussions a lot.

 

[finances5]

Just trying to learn how the whole investing thing works. While we're on the topic of Shark Tank, another thing is that when the owner asks for $100,000 for 10% equity (i.e. just an example), they would say that the company is worth one million. I could figure out the math and all that. But am also wondering what's the reasoning or explanation behind it? Thanks again!

 

[Scot]

Try this.

LMGTFY

 

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[TheDillon__]

Just trying to learn how the whole investing thing works. While we're on the topic of Shark Tank, another thing is that when the owner asks for $100,000 for 10% equity (i.e. just an example), they would say that the company is worth one million. I could figure out the math and all that. But am also wondering what's the reasoning or explanation behind it? Thanks again!

You seem very interested in Shark Tank - let me make this easy for you.

Let's assume you've done your research, due diligence, all that good stuff. You've found a hole in a market somewhere - and you're confident in your ability to fill that space. Wonderful!

The next step is to create a product - don't get too hung up on this either. We know what space we're trying to fill, so we're going to release a decent version of our product to the public. This is to test the waters, make sure the customers even want a solution, and if they do to help us grow to meet and exceed their expectations.

What this means is if you believe the market for vegan everything bagels is horribly underserved (it is) - you want to make sure you have a good recipe before you try to go national. Bake a few batches of your bagels and sell them at a Farmer's Market before you try to purchase an industrial bakery and try to get in the door at Whole Foods.

Okay - cool! You sold out of bagels and people want more! I'm really proud of you. We can't just leave people hanging, imagine all of these upset, bagel-less hipsters meandering about their cafes with your money in their pockets! So let's go ahead and bake some more bagels while we figure out a growth plan. By this point - the Farmer's Market has become a hassle, so we decided to set up a website. Your customer pays online, and you ship them a beautifully wrapped box of delicious bagels.

Expanding from your local Farmer's Market to the online space has been good for you! Now you're shipping bagels across the country instead of selling at a stand in the courthouse parking lot. You've even hit your first milestone - 1000 bagels sold! Good work!

You've made yourself some decent money - and you start doing some work on social media, working with targeted advertisements, and you've landed your first few deals to get your bagels inside of a few cafes in Colorado. Things are really starting to heat up! Maybe you've expanded and also released a few new flavors: cinnamon raisin, chocolate delight, and blueberry bliss! Now you're selling a few thousand bagels every month! You might be stressing yourself out about it, but your product is gaining some good traction!

You have a few more cafes that want your bagels in their shops, a few of your key flavors are out of stock online and orders are backed up two weeks because you simply can't keep up with demand! It's a good problem to have - but a problem nonetheless! We can't let this ship sink now!

This is where investors start getting happy. Right now - you have more than bagels. You have more than a product. You have an audience of customers (the hipsters on your website and in these cafes) who love your product (vegan everything bagels) and are more than willing to part with their money ($2.50/piece) to enjoy them! Plus - you're already contracted in a small string of cafes in Colorado, your social following is growing, you're making good sales and your name is still just getting out the door! This is the time where you're likely to secure some good funding to make your Vegals really kick off!

However - note one key thing. Sure - you have an investor, but it didn't come without blood, sweat, and tears on your part as well. You may have an investor now, but it didn't come without work, risk, and due diligence on your part to grow your brand itself. Investors, pardon the blanket statement, don't want to see that the success of your business hangs on their involvement. They want to see that regardless of whether you have their capital or not, you're going to pull through to victory.

If you want an investor - I'll give you one. Invest in yourself. Invest in your knowledge. Invest in your ability to identify markets, build and test products, and execute them well.
Whether you need to start from ground zero and build the Mindset of a Champion, or if you need to know how to scale the project you've got in the works right now - it's never too late nor too early to begin investing in yourself.

Adure.

 

[DG Calabasas]

Just trying to learn how the whole investing thing works. While we're on the topic of Shark Tank, another thing is that when the owner asks for $100,000 for 10% equity (i.e. just an example), they would say that the company is worth one million. I could figure out the math and all that. But am also wondering what's the reasoning or explanation behind it? Thanks again!

"Value of the company" is a pretty vague concept to begin with.

The "Shark Tank valuation" goes like this:

$100,000 for a 10% stake
means that the owner is valuing his entire company at
100,000 times 10 =1,000,0000

This is correct, as far as pre-money valuation is concerned, which means that the company was worth $1,000,000 before the investor and the business owner signed a contract. The important valuation, however, is post-money valuation, which is the pre-money valuation cash plus the money that was just invested.