Lessons for aspiring entrepreneurs from Shark Tank
I'm not a big fan of reality TV, but there's one show that I watch without fail since it started airing in India (every weeknight at 9 on Colors Infinity) – Shark Tank. For the uninitiated, Shark Tank provides aspiring entrepreneurs a platform to seek capital in exchange of equity to a panel of 'Sharks,' which includes billionaire investors Mark Cuban and Kevin O'Leary (aka "Mr. Wonderful").
I haven't been to any business school and have never ventured out, but I try to pick up valuable lessons from real-life stories, so that I can play a devil's advocate to perfection whenever a wannabe entrepreneur friend or acquaintance seeks my advice for their next game-changing idea. Being a skeptic by training (from my journalism days) and an optimist since birth help strike a balance.
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Shark Tank provides valuable lessons through a bunch of case studies, albeit chopped and spliced into ten-minute melodramas to suit the demands of entertainment television. Yet, this is one reality show that's the closest to reality because the money the Sharks invest are real and the ideas that either get scooped up or eviscerated are real as well. Without much ado, let's outline what I learnt after watching four seasons:
Passion is overrated…
"I have a passion for sports – a passion for music. That doesn’t make it a business, and that doesn’t make you qualified to run the business,” says Cuban. Passion often blinds entrepreneurial vision and clouds judgement. Have you ever wondered why so many Indian foodtech startups are struggling to stay afloat? Most founders have no hands-on knowledge on how the industry operates and only a handful knows how to prepare food that tastes good. The shared vision rests on the 'we all love to eat' narrative. At the end of the day, a business is all about making money. As O'Leary often says, “Any business that after three years isn’t profitable isn’t a business, it’s a hobby."
…and so is venture funding
Unfortunately, the Indian startup ecosystem has intentionally or otherwise embraced the culture of glorifying million-dollar venture deals. But behind this glitz of million-dollar funds and billion-dollar valuations lurks stories of doom on steroids. Do we really need outside funding? If so, are we inviting too many cooks to eventually spoil the broth? An investor will be concerned about the bottom line (for Indian startups, it's all about rapidly scaling up users and, in turn, valuations). The Sharks often opt out of an idea, not because it's a bad idea, but because it's not an investable one as some businesses cannot be rapidly scaled up or expanded.
The idea works, but am I right person to execute it?
Every aspiring entrepreneur must ask themselves this question before taking the plunge. The Sharks often buy into people as much as the idea. Sometimes an idea catches their fancy but not the entrepreneur or inventor pitching it. In such cases, they either seek a controlling interest in the company or even offer a complete buyout. “Most people think it's all about the idea. It's not. Everyone has ideas. The hard part is doing the homework to know if the idea could work in an industry, then doing the preparation to be able to execute on the idea," says Cuban.
Most important: Know the industry inside out
Several entrepreneurs come to the tank with big dreams of becoming a nationwide phenomenon, but have no idea how those industries actually work. Cuban says, “Know your business and industry better than anyone else in the world.” First, you need to know your numbers — sales, cash flow, debt, margin, and so on. Numbers almost always tell the real story. And for any businesses to be successful, what matters most is the visibility on free cash flow – present as well as future.
The Sage of Omaha once said, “The investor of today doesn’t profit from yesterday’s growth” – which in essence means historical numbers – user growth, traction et al – are nothing but vanity metrics. The cold, hard truth lies in a company’s ability and potential to generate free cash. It is all about sticking to the fundamentals.
Have a great story – share it with the world confidently
Forget the Tank for a moment. This is true for any real-world marketing. But what’s exactly a “story”? To quote Dr. Brené Brown, “Maybe stories are just data with a soul.” We are almost always telling stories – be it while pitching to investors, or selling products or services to customers, or even while appearing for job interviews. Recall Steve Jobs’ keynote during the 2001 launch of the iPod, featuring a 5GB hard-drive, Firewire connectivity and synchronisation with iTunes. Jobs didn’t get into the tech specs. He simply introduced the product by saying, “Thousand songs in your pocket.”
Above all, believe that the sun will rise again tomorrow
I'd rather invest in an entrepreneur who has failed before than one who assumes success from day one,” says O’Leary. Entrepreneurship is a 24/7 battle where someone or the other is out there to kick your ass. The idea is to remain prepared for the inevitable bumps ahead on the road. Odds will stack up against you more often than not. To quote Cuban, "If you're prepared and you know what it takes, it's not a risk. You just have to figure out how to get there. There is always a way to get there."
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
