Shark Tank -Thoughts?
Any thoughts on Shark Tank? Is it bullshit and how do you perceive their approach to evaluating the startups/entrepreneurs? Any similarities with PE/VC?
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Shark Tank is to investing as The Bachelor is to dating.
All seriousness though, each of the sharks admit that they take higher stakes or more generous offers because of their contacts. The majority of the time, it's safer to go with traditional VC.
If I had that much money, I would be a hsark and invest that much too hehe
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Don't put those two words together. Thought Demi is coming after me for our relationship from a few yaers ago. You better not be Demetria, faker!
There are quite a few "behind the scenes" videos online, I find it interesting that the Sharks don't get any other briefing before they meet the startups. There are scouting teams that do that for them when the companies apply for the show.
When we approach companies or they email us, it is just... more dry. It is not as funny or entertaining like it is made for TV. There are also fewer emotional stories and CEOs who cry, unlike on the show. Most founders we meet are just entrepreneurs who had a great idea and good execution.
It is entertainment supplemented with some VC. I have been watching the show regularly lately because there are no live sports to watch.
mark cuban is el dorado
Having perosnally known someone who's firm was invested in on shark tank, it's 50% bs 50% real. what you see if obviously scripted. there is a real DD process prior to the filmed pitch. but what happens after is the entrepreneurs are given a contract with the shark's offers and pressured to sign on the spot without having lawyers review. so rarely are any of the offers actually accepted as the businessowners pass such offers up.
It is real in the sense that the sharks see it for the first time(you can only go on the show if none of the sharks have heard of your product). The actual presentation is about an hour long, but they only show a small part of it for the show.
The shitty part is in the first few seasons, in order to go on the show, you had to give the show owners a few % of equity in your company as a fee.. After some season, they switched the fee structure but I don't know what entrepreneurs have to pay now..
Sadly, most deals fall through after a deal is made due to something coming up in the diligence process or the sharks just changing their minds.
Personally, I would go on the show to market my product but I probably wouldn't take any deals. The sharks have become so ruthless and greedy in the past few seasons. Affluent entrepreneurs had a lot more leverage and received much better offers in earlier seasons than what's offered now.
I recommend the show, good way to learn how to ask and answer questions, and what to avoid.
It's great television - although sometimes they get a bit preachy about entrepreneurship being the holy grail of the universe. They've mostly settled into playing different investor 'roles' that will appeal to different audiences.
It's a great way to get a broad exposure to a variety of companies, business plans, industries and see the variety of ways people choose to make a living. Much of that is fascinating to me, looking at the ideas people come up with that work - and the ones that you think should be a slam dunk, but fail miserably. It's also wild to see how much money you can make with one, good idea and some great branding (i.e. Scrub daddy - although I'll admit, their sponges are really, really good).
On the deal side - I think it approximates some of what you see in the VC/PE/angel investing world - but they are designing it to illustrate different things. They generally always have a few 'tech' companies - that aren't really tech - but teach the lesson that you need to value your business appropriately for what it is rather than jump on the high tech valuation train. The structures are cute but, again, they can't get really complex because - well - please shoot me if they started talking about cap tables for hours on end. I do think they tend to get a bit fast and loose on the valuation side - either too overbearing to prove a point, or too loose the other way to prove a point - see my comment about characters. Cuban could give a shit if the vision is good because he can - and O'Leary plays the 'realistic' bring them back to earth cash flow guy.
But it's not a finance show. It's not trying to be one. It's inspirational. At it's best, it gives you a very rudimentary framework to help you evaluate your own business - I do think some of the advice, comments, perspectives they give are really valuable. Whether it be to stay small, not take investment, switching models, etc. I've also found the industry commentary to be very interesting and really hammer home the realities of the spaces people are trying to get into.
My view is that at the end of the day it's fun to watch, interesting to consider what you would do with the businesses in question and along the way you get to look at a surface level thought process of some pretty successful people. I wouldn't put it on your resume as a qualification for a VC job, but hey, who knows nowadays.
Tangent - I do think these shows, and especially the profit, does really well is give people a better understanding of the actually operations of the businesses and just how much that part matters. It's really easy in finance to forget that there's actual businesses, despite all the jokes we make about the Fed, underlying all the markets and investments. It's the old 'take it from paper to practice' and it looks a lot different once you are doing it.
The profit is a good example of this. I'm fascinated by how he has built out his small business portfolio to stack his businesses to create synergies - sign companies that his other ones can use, furniture companies that he can use to build furniture for his restaurants - etc, etc. I've no idea how the money works as he invests X - spends like 100x of that - then says it'll pay off.... bu the thinking and strategy is fun to see and, I think, helps to give further perspective.
Well thought out response - searched for your post on the individual sharks but couldn't find it (would love to read). Wanted to share some thoughts and get yours on saviness (as generalist VC investors of the 5). My ranking would be:
Daymond John - Guy is careful to stick to his lane or adjacent lanes where he can add value. Makes his points concisely, knows he adds a lot of value on design / distribution / etc and asks for suitable equity to justify the risk / value-add he provides. Whenever he shares his points on a biz, there's usually always something valuable to learn. Don't love that he operates on apparel but he has a pulse on all parts of the value chain & operates successfully.
Barbara Corcoran - She makes smaller investments and tends to focus on defensible niches. Not making the hero plays but careful to invest in areas that feel higher-conviction and where she can bring a lot of value to the table. Respect that she builds up a lot of higher-probability small things to get something big out it. That said, one thing I don't know that I like is she over-indexes her experiences to some deals (ex. her time as a waitress, being dirt poor) such that she has a vision of a certain type of entrepreneur which adds blind spots. Hard to say its discipline as I've invested in several very successful companies with different founder backgrounds and while there are certain big green and red flags, you don't need to slice out a mgmt team only one way.
Lori Grenier - Adds lot of exposure via QVC and knows that area very well. Doesn't have the degree of bias Barbara has but comparable track record. Definitely in the Top 3, but her reasons for bowing out aren't always consistent. Definitely a case to be made between Lori and Barbara as #2.
Robert Herjavac - Other that Kevin, probably the shark that adds the least value for majority of companies. Definitely smart and uses his "nice guy" reputation to couch aggressive offers, but not convinced he has a ton of expertise to add to consumer VC investing.
Mark Cuban - Where do I start with this guy? On one hand, he is the Russ Hanneman of the world (or more accurately vice versa) as he did one thing once & got lucky (selling his company 6 months later during dot com boom would mean he gets nothing vs. billions of dollars). Guy reads a lot and has some good knowledge on the other hand and can add value via connections & Mavericks-related stuff. However, he is way, way to set in his own beliefs. One thing I've learned at my shop is how careful the sharpest investors are. They don't leap to certainties, but keep an open mind throughout the process while appropriately applying lessons they've learned over the years & domain expertise. Cuban seems to think he knows everything even while he's successfully invested in very little, a dangerous combination for an investor to have.
Kevin O'Leary - Jesus, he should not be on the tank. Would make a fantastic bond investor given his intense focus on valuation & cash flow generation. But VC is not the setting for this, and a premature focus on cash flows is naive. Maybe more so true in tech VC but typically fast-growing companies can grow into their valuation (matters a a lot less in early-stage companies vs. mature ones) and need to be reinvesting their capital to grow their business, not paying out royalties or focusing on FCF generation. Sure he brings a degree of realism but this really constrains the vision.
Your post inspired me to go back and rewatch shark tank. Used to watch it in high school but didn't get much out of it, but after several years in a LO equity shop, there are many lessons (ex. human element and reinforcing value of founder-led public company teams / types of challenges these businesses face in this infancy & how some are relevant even to larger peers). What are your thoughts on any of this?
Fair points.
I think we need to remember Shark Tank is first and foremost an entertainment show, and therefore they need the sharks to fill every niche. Not saying the people on there aren't great or successful, just than if you lined up the top VC/investors they aren't the top 6. Its part they are there because they provide entertainment, fill niches, and are the ones who said yes to being on the show. It's like any other broadcast show, take CNBC and the people they have on. If you really wanted the best of the best, it would probably star like Buffet, Munger, Steve Cohen and the like, but would prob be a boring show and turn some people off.
Shark tank did go through a couple iterations before it became what it is. The first couple episodes were almost structured like American idol, in the sense they brought in some people who knew their businesses and other people who were jokes. Additionally, Cuban was never suppose to be on full time, his seat was suppose to a rotating "celebrity" seat, but people liked him so much he stuck.
It’s pretty real at its core, with some fake TV stuff layered on top. I’ve been lightly involved with two businesses that got deals on the show.
One of them got an offer on the air, but it fell apart in post-show diligence because Cuban was the investor and the business is an app that helps fight parking tickets. Story I heard was that Cuban backed out because his “people” told him that due to his then-recent SEC troubles, that kind of a business would be an image problem.
So don’t buy into his persona of being a regular guy who goes with his gut. He lets the suits tell him what’s up.
More recently I’m a very small investor in a company that Lori invested in and is doing well. Haven’t met Lori, but the CEO tells me she is great to work with and really involved.
I love it when people come on the show with zero sales and hockey stick projections to make millions by the following year. The Sharks jump on it every time and it’s highly entertaining to watch.
What’s even more entertaining is when the Sharks take the leap of faith with these companies with little to no sales, effectively being a sort of prophet in a certain area.
The Sharks seem pretty diversified overall so can afford to make these bets.
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Richard Branson excepting, all the Sharks are pure hacks who made their money through peculiar means undeserving of even a modicum of respect. I'd rather be poor than be a Shark
Someone from my high school class went on Shark Tank I think last year with the dumbest product ever and was offered a number of deals from the Sharks. She turned them all down. She and her partner are doing well--they didn't become mega billionaires, but back of the envelope, their company is probably worth $20 million, so she's worth, like, $10 million.
It makes me sick because the product is just so stupid. High income hippie idiots pay 10x normal prices to pretend like they are "environmentalists." The product aside, that's the product. Selling sh*t to overeducated morons. Makes me want to puke.
Two of the crazies things of shark tank I think about when I watch:
1. Sometimes sharks go after deals that seem not great in my opinion and dont on good ones. Just from watching, I feel they always go in on moms who have a bakery or some guy who makes his own beef jerky, but I feel those are low barrier businesses. But I also rarely watch.
2. Its amazing the amount of money some of the people put into these businesses. Sometimes they are solving a problem that really isn't a problem. Its like "does it take you too long to put on your belt? I invested $2.8M that cuts down on that time", did they really think thats a problem worth solving?
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