Getting a Shark to Bite
I’m a fan of ABC’s Shark Tank—a show where entrepreneurs present their million-dollar ideas in hopes of coaxing the “sharks” into a deal for start-up capital in exchange for a piece of their business. I was reflecting on some of the previous guests who have been successful—looking at where they started, where they are now, and the lessons learned from their journeys. In my analysis, value was the thread that connected all of the successful entrepreneurs.
One episode in particular featured Dominique of One Sole. Her pitch brought out some key business points that stuck with me. Let’s take a look.
I was blown away by her presentation! Without even trying, she had the sharks snapping at her feet.
Her stats speak for themselves:
- 20 million in revenue over 4 yrs at 30% average profit
- 2,000 stores in over 30 countries
- 6 QVC runs
Oh, and did I mention she…
- Started this as a hobby
- Had no experience in the shoe industry
- Has a 1.5 million dollar order waiting (just to name one)
Oh, to be in her position! Her hobby just took off on its own and turned into a dream business. Why? She had the one thing every entrepreneur needs—a brilliant idea that can sell itself. She simply made a decision to fix her own problem, and millions of others bought into her solution.
What’s it Worth?
So, what can the average Jane learn from this show? Granted, many criticize the Shark Tank model saying that deals are never made this way in the real world, and that investors would never engage in a bidding war over a startup idea. In fact, Fast Company wrote an article on this subject around the time this episode originally aired.
However, if you pay attention, you get a great lesson in valuation. Whether or not these savvy (or not-so-savvy) entrepreneurs cut a deal, they walk away with a good feel for what their idea is really worth. Dominique showed me how to build a business that will make an investor drool, even after I’m already filthy rich!
The sharks’ concrete formula of value as an analysis of past revenue is quite unforgiving, especially since many billion-dollar companies don’t break even for a few years. In fact, quite a few Shark Tank rejects have left the show and blown up from the exposure. For instance, look at Jeff and Josh with Voyage-Air Guitar. They rejected a million dollar offer to license their patented hinge to other guitar companies. People thought they were crazy, but less than a year later, they exceeded 1.5 million in sales and their strings were being plucked by the biggest musicians in the industry. By knowing their value and making their product proprietary, they secured the sustainability of their business and kept 100% equity and profits. You can’t buy a foldable guitar outside of Voyage-Air—that’s value.
Despite its flaws, I find the Shark Tank presents a good learning experience. Even if the shark doesn’t bite, falling off your board and getting scratched is well worth the painful experience.
What do you think? Does the show’s format have merit, or is it way off base? What other lessons did you learn from these successful entrepreneurs? Post your thoughts in the comments.