The Shark Tank is my favorite television show.
On the show, hopeful entrepreneurs pitch their business ideas to five sharks (investors). The sharks then decide if they want to invest in the idea or not. The show is obviously made for TV so there are many bozo’s that pitch dumb ideas. However, many great entrepreneurs have come on the show and received a “deal” with one of the sharks.
After watching every episode of this show, I have discovered three mistakes entrepreneurs make when they are looking for someone to invest in their idea.
1. Vision Intoxication
Here is how vision intoxication works:
- The entrepreneur has an idea
- The entrepreneur believes in the idea deeply
- The entrepreneur invests all of their time, effort & money into the idea
- The entrepreneur is emotionally involved in the idea
- The entrepreneur believes everyone should think this is a good idea
- The entrepreneur tries to “sell” the idea to REAL customers & they don’t buy
- The entrepreneur starts blaming “the economy”, “the market”, and any number of excuses for the idea not working
- The entrepreneur fails & believes it was someone else’s fault
So many entrepreneurs enter the Shark Tank at this point. They have tested their idea in the real world & it didn’t work, but they somehow believe if they had more money it would fix the bad idea.
More money makes bad ideas worse.
Solution: If you want someone to believe in your idea, create a track record.
You don’t have to create a long track record, but at least get some wins under your belt. It is amazing how much the Shark Tank lights up when the entrepreneur has created some real sales with their idea. I believe that dollars attract dollars. The more cash-flow you have coming in, the more likely people are to invest in you.
2. Over Inflation
This one kills me.
The sharks (investors) are NOT stupid people. I watched a lady go on the show the other night and try to convince Mark Cuban that her cookie business was worth $9 Million, yet she was LOSING MONEY at $2 million in revenue & had $800,000in debt. This lady may be a nice lady, but she can’t count.
The quickest way to fail at getting an investor is believing your business is worth more money than it’s worth. I’m ALL for believing in what you do, but understand this…
The Shark Tank (or real life investors) don’t NEED you! You NEED them.
Solution: Give the sharks a GOOD deal & you will make a fortune.
They are investors for a reason. They know how to expand ideas & influence. Enter into negotiations with fair numbers that create a win-win & STOP BEING SO STINKING GREEDY!
3. Lacking Information
So many entrepreneurs walk into the Shark Tank & don’t know their market or financials. I can’t fathom this, but it’s true.
The sharks want to know all financial information from the top of your head. You have time to prepare for this meeting, why wouldn’t you know every single financial fact about your company? Knowing the numbers will create believability in your idea & company. I would NEVER invest any of my own money into someone that wasn’t up to date on the numbers.
Solution: Know all financial facts at ALL TIMES!
I could write entire articles on each of the three above, but I just wanted to give you an overview of what NOT to do if you are pitching your idea, vision, or insights to potential investors.
Do you like the show? What are other mistakes you see entrepreneurs make when pitching their idea?