Shark Tank US focuses on five people aptly labelled sharks to potentially invest in aspiring entrepreneurs and also help provide advice and business acumen to the table in growing the company. Effectively, they are acting as engaged angel investors as many of the entrepreneurs cannot get funding through traditional means. Alternatively, some of the entrepreneurs can but believe in the value of one or multiple sharks in helping the business grow faster than without. Created in 2009, it now is airing its 14th season, including various guest sharks that also step in.
Here are some of the lessons I’ve learned in regards to startups and investing
Robert Herjavec — is the product going to evoke positive emotional feelings? As time goes on, memories lose accuracy of what happened or what didn’t happen. People do remember strong feelings that were triggered, the positive and the negative. If a product or service can trigger strong positive feelings, that will likely lead to repurchases and sustained success for the company. Given that people make decisions based 90% in feelings and only 10% in facts and logic, it would make sense to look for companies that can generate a strong positive feeling. Commercials showing products usually end up having happy customers and users, not grumpy pissed off people.
Mark Cuban — be certain of the claims that are made of the product, particularly in areas of approval. Is very skeptical of investors who make claims without any proofs or approvals, such as various health claims without any FDA approval. Validate the claims that are being made of a product, especially if it doesn’t appear obvious how those claims could be true.
Barbara Corcoran — find the right founders. Uses intuition to determine if someone is going to be a winner or not. Likes entrepreneurs who came from severely disadvantaged odds and overcome them to succeed, as it shows they may have a greater source of motivation due to a need rather than option to succeed. The ones who have a particular determination to succeed.
Lori Greiner — A product must be better, faster or more innovative. Otherwise, it doesn’t stand out and won’t survive the test of competition and won’t yield superior profits, only middling profits. What makes that product stand out?
Daymond John — Invest in products that would change your life for the better, and where if the product didn’t exist, life would be worse. Would you notice the effect of not having that product in your life? If so, there suggests an importance to it
Kevin O’Leary — focus on the path towards making money and profitability. Don’t let emotions mix with business, it’s bad for business. Unique structures such as royalties are a good way to recoup investment and reduce downside risk. In practicality, this could also look like preferred shares, dividend payments.
Red flags of founders
-Argues with the Sharks
-Insults the sharks, either directly or indirectly
-Is living in denial about a weakness of the business or product
-Getting angry, on screen, or off screen, about the sharks and taking the lack of offers personal
-Confuses interest with actual orders
-Has a shady character and could prove untrustworthy
-Sky high valuation
-Unlikely to reach future projections
-Is using copyrighted names, trademarks, material
-Is arrogant and cannot take advice
-Misrepresents details and spins narratives of the actual facts; at worst, outright lying or committing deceit and fraud
-Does not know what they are doing and is looking at investors to try and save them
-Treats not taking salary as if it were an unpaid liability and actually putting that onto the balance sheet
-Has a product that doesn’t work or it wasn’t thoroughly checked before bringing onto the presentation
-Product does not do what it claims to do
-No research and development expenses for scientific or health-based products
-No clear path to profitability
-Is doing it for the fame, attention, money, glamor, prestige, status
Green flags of founders
-Knows the numbers of the business; revenue, gross margins, net margins, units sold, where units are sold and how, cash left
-Is committed to the business and isn’t checking in and out of it; e.g., visiting and living in the factory manufacturing the product
-Aware of competitors offerings, and has a product that offers a better alternative
-Has registered intellectual property
-Responds to inquiries respectfully and directly; does not ignore or deflect them
-Has not sold a lot of equity; will maintain control of company after sales
-Has little or no debt
-Revenue and income are consistently increasing
-Has good margins
-Has come prepared for the presentation
-Is singularly focused and working towards one vision
-Bootstrapped business
-Solving a personal problem due to not finding the market product
-Knows how to pivot the business
-Product exceeds customer expectations
-Knows what the invested money will be used for
Disclaimer
This is not Financial Advice. This article is meant only for educational and perhaps entertainment purposes.