Shark Tank Lessons and Common Founder Q&As Answered
Shark Tank and Common Q&As
I’ve been following Shark Tank since season 1, since the “Ava the Elephant” episode.
Apart from the fact that its super amazing TV - I’ve shed tears, laughed, felt awe and anger - sometimes all in one episode - I’ve also picked up quite a few insights as to how investors & entrepreneurs think.
Below are my observations on common questions the Sharks would ask and what answers they like and do not like.
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PRODUCT
1. 🦈: What is the problem the product is solving?
👍: Products that demonstrate a clear need and solution to a big pain point.
👎: Products that are a fad, trendy, short term, seasonal.
2. 🦈: What’s the difference between you and the competition?
👍: Products that have some form of proprietary technology, patent or influence.
👎: Products that have low barriers to entry.
3. 🦈: How did you come up with the idea?
👍: The entrepreneurs themselves face the problem, wish to create huge impact, inspiring & touching founding story
👎: Unclear founding story or mission.
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MARKET
1. 🦈: How big is the market for this problem?
👍: Big market with millions facing the problem.
👎: Small/niche market.
2. 🦈: Who are you selling it to?
👍: Clear & focused customer segment.
👎: Selling to everyone and targeting too many customers at once.
3. 🦈: What’s your brand/product positioning in this market?
👍: Unique positioning that creates a new space altogether.
👎: Similar positioning to the big boys.
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BUSINESS MODEL
1. 🦈: Where are you selling them?
👍: Depending on the product, a channel that would make sense - online/retail/b2b/licensing.
👎: A channel that doesn’t make sense, costly, tough to beat the big boys
2. 🦈: How do you plan to make money? (For online-based businesses)
👍: A model that makes sense for customers to pay, saves money and time.
👎: Unclear monetization model.
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FINANCIALS
1. 🦈: What are your sales?
👍: Strong yearly sales of $500k and above.
👎: Weak yearly sales below $100k.
2. 🦈: How much are you selling them for?
👍: A reasonable price point for the customer segment.
👎: Too cheap or too expensive.
3. 🦈: How much does it cost to produce? And what are the margins?
👍: Low cost and high margins - above 50%
👎: High cost and low margins - 10-20% range
4. 🦈: Why do you need the money?
👍: To navigate through complex deals with the Shark’s help, mentorship, scaling up, expand
👎: Unclear reason or strategy on what the money will be used for
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VALUATION
1. 🦈: How did you come up with the valuation?
👍: Justification of certain multiple of revenue/net profit, patent value, projections, independent valuation
👎: Unclear explanation as to why the company is valued as much.
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NEGOTIATION
No Q&A here but I noticed Sharks will almost always value the business at half the asking price and negotiate to arrive at the middle.