Have you ever watched an episode of Shark Tank, listened to what you thought was a killer pitch, and then dropped your jaw when that entrepreneur left the Tank empty handed? It doesn’t happen often, but sometimes even the perfect, most well-researched and articulated pitch just doesn’t hook any Sharks.
When we’re watching the pitch live, it can take up to two hours compared to the eight minute pitch you see on TV, so viewers are sometimes left scratching their heads wondering why an entrepreneur didn’t get a deal.
No shade to the producers - it would be impossible to fit in every detail for a TV segment! But for those of you who want to learn more about some of the explanations that don’t get broadcast for why Sharks don’t bite on a pitch, read on
You’ve provided an unrealistic valuation. Nothing gets us Sharks more turned off to a pitch than hearing a valuation that’s based on where your company might be in a few years when you’re asking for the money now.
How to avoid this: Your business is your baby, and you want to see that potential that you know your baby has - we get it! It’s important to come prepared with your financial projections to show us where the business could be, but don’t be unrealistic with where your business currently is.
- We aren’t the right partner for you. If we don’t have experience or proven success in the areas in which you need our help, we know to step back and stay out of your way - trust me, you’re better off without us!
How to avoid this: Do your homework. Most investors have public portfolios, so you can look into what industries they tend to invest in, what businesses they may or may not have helped, and sometimes what businesses or industries they’ve passed on. This can be tricky (like in my case, people tend to assume I’ll go for any clothing brand because of my experience with FUBU, but that’s actually why I don’t tend to go for clothing partners), but it will help you in the long run by guiding how you angle your pitch.
- You’re too early in the company. If you haven’t made the mistakes that every entrepreneur inevitably faces, then you’ll end up using an investment to pay for those mistakes once you make them. Plus, you don’t want to give up equity in your company while you’re still figuring it out - the last thing you want is an investor who doesn’t share the same passion as you for your business telling you what to do.
How to avoid this: When it comes to Shark Tank, we completely understand why companies who are a little too early come into the Tank. It’s a huge opportunity! But outside of the show, it’s often worth it to wait just a little longer and get your business more established before seeking an investor or partner.
- There isn’t proof of efficacy. For products that relate to performance, health, etc., not having proof of efficacy from clinical trials and approval from all necessary agencies and regulators puts an investor at legal risk.
How to avoid this: This one’s easy - if you have a performance-based product, get it tested!
- You’re pitching to someone who has already invested in a competitor. Investors, especially Sharks who are also offering mentorship, press opportunities, and operational guidance can not in good faith invest in competing companies - don’t take it personally!
How to avoid this: Just like in the case where I might not be the best partner for you, I also might not be able to ethically invest in you because of an existing partner in my portfolio. So do your homework and research who you’re potential investor has already started working with so you don’t waste your time on a pitch that’s bound to fail from the start.
- This last point is really just about the Sharks, but if you come into the Tank offering us the same equity option and valuation that you offer to investors in a financing round, it shows that you don’t value us as anything more than a straight investor. We want to know that you’re coming into the Tank for the unique perspective and opportunities we can bring to the table for your business.
How to avoid this: Give us the Shark deal, baby! In your pitch, make it clear to us where you see our value and how much you want to work with us. At the end of the day, if you don’t actually want a Shark on board for our experiences and connections and all you’re looking for is an investor, we’ll be able to tell. And there’s nothing like an angry Shark!