Last night I got to go on a new web-based show called Shark Tank JV, modeled after the TV show, on which people pitch their products to a group of independent investors (sharks) to try to get someone to invest in their company.
On the TV show people usually have a physical product and are looking for a shark to invest a certain amount of money in exchange for a percentage of the company. Some of them make deals that can make them rich and some don’t get a deal at all for various reasons. It’s interesting and educational to watch the negotiations to see what it takes to get one of the high net worth sharks to invest some money.
I’m a big fan of the TV show, which features sharks like Mark Cuban, Daymond John, Robert Herjavec, Kevin O’Leary, and Barbara Corcoran, people who have made hundreds of millions or even billions of dollars in business and are looking for places to invest their money.
I was invited to go on Shark Tank JV as a vendor, someone looking to get a shark involved with his project. I was in uncharted territory, since this was the first episode of Shark Tank JV, so no one really knew what would happen or what a “normal” deal would look like.
What was it like going on Shark Tank JV and what lessons can be learned from it?
What Happened in the Shark Tank
It was definitely a huge advantage that I’ve seen most or all of the episodes of Shark Tank on TV, because that helped me avoid the mistakes a lot of people make. Here are a few of them.
They get greedy and ask for too much by overvaluing their business. A lot of vendors use logic like “Soft drinks are a $10 billion dollar industry, and if we could get just 1% of that, we’d make a fortune.” The big word there is IF. Just because an industry is huge doesn’t mean your personal brand of cola is going to be able to compete with Coke, Pepsi, and all the other well-established drinks in that market, or even get 1% of the market share.
Some people seem to think that if they make an outrageous offer, the other person will just negotiate something more reasonable, but what usually happens is that people just laugh and walk away. It’s like if you listed your house for sale for $1 million when the real market value is $200,000. People will see you’re so far from reality that they won’t bother to make an offer.
A sign of a successful negotiation is when everyone involved thinks they got a good deal, even a better deal than the others. To me that means you should generally start somewhere close to what you think the others will accept.
I’m not going to say here what my starting offer was; you’ll have to watch Shark Tank JV when it airs to find out, but let’s just say it got the job done.
Many people screw up by going into the shark tank when they don’t know their numbers. Sometimes vendors are asked what their sales are or what their profit is per unit and they don’t know the answer, or there is more than one person doing the presentation and they don’t agree on the answer.
It looks pretty bad to a shark if their basic questions like that can’t be answered. It’s hard to make a rational business decision without the numbers, and it makes the person look unprepared or unprofessional. It’s like going on a job interview and not knowing what a typical salary is for that job.
I had that one covered by doing a little digging before the show and looking up my number of sales and refunds, conversion rates, etc. I had some of the numbers in my presentation and had the others handy assuming someone might ask. It wasn’t hard to do, but if I hadn’t done that little bit of preparation beforehand, it wouldn’t have gone so well.
If someone asks how many copies of your product you’ve sold and you don’t know, that looks pretty bad, since it’s something you should expect to be asked in the shark tank. Sales numbers help show you have a real product that people will buy, not just an idea that may or may not work.
Another big mistake people make on Shark Tank is that they go in too early with an unproven idea. They’ve invented something or created a product that they think is great, but all they have is a prototype or not even that, with no sales. Sharks don’t usually invest in ideas; they want products or services that have been tested in the marketplace and have some sales to show their potential. A crazy idea with proven sales record is usually better than a good idea with none.
Some people go into the shark tank too late. I’ve seen some people on there whose products had been on the market for years with few sales, and that makes sharks think there’s not much demand for the product. Of course it could just be poor marketing, but the feeling seems to be that if the vendor hasn’t made something happen with their product after several years, something is wrong with either them or the product.
I got lucky there on the timing aspect of it, in that my product has made enough sales to show it’s viable and been around long enough for the sharks to get an idea of what refund rates will be, yet only a small fraction of the potential market has heard of the product. That’s just about perfect. If I had just released it last week, that’s not long enough to see if people like it, and if I had already sold 50,000 copies it might look like the market is getting saturated and most of the people who might buy it already have done so.
Or was the timing really luck? Shark Tank JV just started, so I couldn’t have gone on it a few months ago, and I certainly wasn’t going to wait a long time to apply for it. However, I did have complete control over which product I submitted, so if I had used one that’s not finished yet or has already been heavily promoted, I probably wouldn’t have done too well with that.
Like they say, you often make your own luck.
One final mistake people make on Shark Tank is they just assume they will get a deal and the only issue is what the details will be and which shark(s) will sign on. It’s great to be confident, but assuming a deal will happen is borderline arrogant. I think people do that because they desperately want or need to make a deal, but that doesn’t mean a shark will want to make a deal.
You never really know til you go in the shark tank what each shark is looking for or what kind of deal they might do. Having a great product with a proven track record isn’t enough; it has to make sense with the shark’s business. It’s quite common for a shark to say they love the product but are going to pass on it because it’s not what they’re looking for or they’re not an expert in that area.
If you’re going to get a deal, especially working with a shark, rather than just getting an investment of cash, it should be with a person who can help you the most, like someone who specializes in the industry or niche your product is in, or who already has a list of contacts in that area.
I think the sharks can smell when someone just assumes they will get a deal, and they find that insulting. Sharks don’t like being taken for granted. Just because someone has a lot of money or is an expert in what you need or is a major player in your industry, doesn’t mean they will want to work with you, especially if you come across like you think you’re entitled to it.
It’s a delicate balance, but I went into the shark tank with the attitude that no one there owed me anything, that they would give me a fair shot if I made a good presentation, that I have a good product that people like, and that probably at least one shark would be interested enough to make some sort of deal, but that it was possible I would get nothing but at least learn something from the experience.
When I found out I was going to be on Shark Tank JV, I didn’t know how many other vendors would be on or what order we would be on. I was relieved that someone else went first, so I had a chance to see what they did right or wrong and how the sharks reacted. I even made some adjustments to my presentation based on what I saw. I didn’t know when I would be on until they put up the slide with my bio, then I knew I had about a minute before going on.
So What Happened in the Shark Tank?
Since the show hasn’t aired yet, I can’t say too much, but I will say that I made a deal that I’m pretty happy with. (You don’t think I would write a long post about it if I had crashed and burned, do you?) In fact I had multiple offers and got more than I asked for, but I’m not going to say any more about the details or the people involved. You’ll have to watch the show to find out exactly what went down on Shark Tank JV.
The reality of what happened in the shark tank didn’t quite hit me til this morning, when I woke up thinking did I really just go on a show where top people competed to work with me, or was that some crazy dream?
I can also say that not every vendor got a deal; some went away empty handed. (I’m grateful to not be one of them, and I can only imagine how bad that must feel.) I saw people make some of the mistakes I’ve discussed here, and I’m wondering how many of them have seen the TV show Shark Tank to at least get a rough idea of what to expect. Watch Shark Tank JV Episode 1 online to find out what happened to everyone.
Thanks to the guys at Shark Tank JV for having me on, all the sharks for giving up a couple hours of their valuable time to sit through our presentations, and especially to my friends who did their best to help me get ready for my stint on Shark Tank JV.
BTW, be sure to catch Shark Tank Friday nights on ABC.