A Silicon Valley Take on ABC’s Shark Tank
lsvp.com
lsvp.com
What could they do? It's not the money.
I consulted for someone who was on Shark Tank and got funded.
The reason you go on Shark Tank is:
a) You get national publicity and that national publicity gets you sales as well as all sort of attention. In the particular case that I am familiar with, sales increased 3 to 5x iirc. And that national publicity opens doors with companies and individuals in the business world. (We aren't talking about being featured on Techcrunch here - big deal.)
b) The Sharks really do have contacts, real world contacts, and do and did seal deals and get the particular product in question national distribution. Just like that.
Of course you try to make the best deal you can it is almost a sure bet given the right product and fit with the right Shark (which is generally taken care of by the Shark since they don't put money into what they don't know about or can't help with.)
And when you get a shot at being on a TV show with a national audience, you don't wait 9 months and hope you get picked for the next season. You jump at the opportunity. Even if you don't get funded the publicity alone is a no brainer.
By the way, originally that was not the case it changed at some point. But that's a good thing as it motivates them to a) show follow ups "how are they doing?" (which cause a bump in sales) b) include the company in re-runs (which causes a bump in sales as well (I've correlated it).
What worries me though is its only a matter of time until someone figures out they can do this with a startup reality show. If you think the prospect of a silicon valley reality show is bad now (glorifying the supposed "startup lifestyle", launch parties, founder drama, etc.) just wait until the network has a significant stake in the startups that they are promoting...
It depends what your goal is. If you need more funding or are looking for an exit then yes. If you need partnerships and your target companies lurk in the area you're getting publicity, then yes.
But if you don't need funding, an exit and aren't looking for partners, but are focusing 100% on your customers, then often this kind of publicity is an unhelpful distraction.
It's rare that when you get publicity among entrepreneurs and investors, you are also reaching your customers.
So for many businesses who don't need investment and don't need/want an exit, getting on HN, TC, Shark Tank, etc is less than unhelpful, it's a distraction and a waste of valuable time.
So why do so many young companies spend so much time courting the Arringtons and Cubans of this world? Because they are gagging for recognition, acknowledgement and the social proof that they're not completely wasting their time. It's a little like the need that most humans have for the existence of a God or big-daddy-in-the-sky that tells them they're doing OK and that it's OK to screw up occasionally.
Almost always, having one major investor with a lot of skin in the game is better
than a “party round” with lots of people in for a small amount. When the company
needs help with a “party round” no one has enough at stake to do real work to help.
Conversely, when a single investor has real money at stake, then they have real
upside to help the company grow, and real money at risk if the company is in
trouble, so will be there when help is needed.You may be able to watch the episode here: http://abc.go.com/shows/shark-tank
Impressive to see how many countries the show has been brought to: http://en.wikipedia.org/wiki/Dragons_Den (Afghanistan!)
I've also watched all of the UK Dragon's Den one summer.
Lets look at the valuations first, in any open market where prices are flexible buyers tend to feel folks ask to much and sellers tend to thing folks offer too little. If you walk away from a deal feeling like you didn't pay enough for something or that you sold it for too much money, then that market is out of balance. There are three sharks, I've not seen any credible evidence that they have any anticompetitive agreements in place, basically they seem able (and willing) to jump into another shark's negotiation and screw it up to gain leverage. So of the three of them the valuations are no doubt precisely correct. You might find an investor who is willing to give a higher valuation, but if you did that with full disclosure that these three would not agree to a higher valuation you might find it hard to justify. This disparity often arises from emotional involvement with the concept or the company. The wine-by-the-glass[1][2] guy is a classic example. They disagreed on value, he turned them down, and kept cranking. Were they 'wrong' ? No, the valuation to them was $x and to the owner $y, but they see a different business than the owner does.
As for arrogance, these folks seem to get a lot of pitches, I'm sure being on TV doesn't help with reducing the volume. The weird thing is, they still listen. You can hear that in their analysis. Arrogance would have them not listening and just telling the person pitching is wrong, but they give them a chance to explain, sometimes repeatedly. Its clear that some of the people coming on the show have done exactly zero homework, haven't even done a network search for starting a business or what it takes to run a business. I am really impatient with folks like that but the sharks take it in stride.
[1] http://www.copadivino.com/
[2] http://www.aoltv.com/2011/03/21/shark-tank-inventor-wine-by-... WARNING HUFFPO Category 5 MONETIZATION
I don't think their valuations are crazy, they're aggressive but they usually have plausible justifications for them. What is crazy is the gulf between what they do and the kind of startups here - just imagine a couple tweeners with half an iphone app successfully raising a million bucks on Shark Tank.
always wondered why it didn't provoke much discussion in Silicon Valley... at least that I was aware of. most of my friends don't even know about the show. Until now at least :)
What's been most interesting are the types of companies and the investor perspectives that seem to vary enough from what you hear about here in Silicon Valley that it makes you think...
The bar for positive reactions from the sharks is definitely to have "traction" in terms of real revenue/sales... going in front of them and saying you have thousands or millions of users probably won't cut it (except maybe with Cuban) but who knows, haven't seen that sort of company present yet...
on one of the past seasons, there was a Silicon Valley type startup that got acquired by Chegg in 2011 called NoteHall