The Shark Repellent: 5 Mistakes That Drive Investors Away

Every year, over 40,000 companies devote months to pursuing a coveted spot on Shark Tank, one of the world's most popular shows. Yet, less than 1% of these companies can pitch their ideas in front of the Sharks.

Yet, if you've ever watched the show, you know the hype surrounding it is justified. In fact, after airing, approximately 94% of businesses see their sales skyrocket, becoming overnight successes.

But imagine finally getting the chance to pitch after a relentless struggle, only to find your presentation falling short and your business becoming one of the 6% Shark Tank failures.

No, don't be scared; this article is here to help. It discusses some of the most common mistakes that the Sharks hate, errors that might snatch your dream deal. So read on until the end to avoid being one of the products on Shark Tank that failed!

Mistakes That You Should Avoid on Shark Tank to Get a Deal

You have arrived in front of the Sharks with complete confidence (yes, the first mistake to avoid is being underconfident. It is your business; talk about it with pride).

In that moment, remember the following things to avoid becoming one of the biggest shark tank failures:

1. Not Knowing Your Numbers

The Sharks love numbers! They provide a solid foundation of confidence in you as an entrepreneur and demonstrate that you know your business from the inside out. However, not knowing your numbers can be fatal when pitching on Shark Tank. On Shark Tank India Season 3, a brand called Bombay Closet Cleanse came up, and they needed to be made aware of their business numbers, which disappointed the Sharks.

So here's what you should know:

• Sales numbers, including last month's last year's, year-to-date, and expected sales for the current and upcoming years.
• Cost of goods sold (COGS) to showcase your understanding of your business's financial complexities and profitability.
• Scalability and potential cost savings with increased volume.
• Customer acquisition cost (CAC) to showcase your marketing and customer acquisition strategies.

2. Not Enough Sales

If you're starting your business and haven't made any sales yet or are a pre-revenue company, Sharks might get disheartened. And the chances of becoming one of the Shark Tank misses are high. On Shark Tank India Season 3, a brand called Melooha came up. They launched their app just before the Shark Tank pitch and have yet to generate significant revenue. Hence, they didn't get the funding from the sharks.

But this doesn't mean the chances are zero. You can still highlight your business's potential and showcase other success indicators.

You can also demonstrate that you've already achieved success in other areas. If you have relevant experience, excellent sales projections, or past successful ventures, it can significantly boost your credibility and earn the trust of the Sharks.

3. Unreasonably High Valuation

Presenting an unreasonably high valuation can quickly make your business a Shark Tank failure. In recent seasons on Shark Tank India, many entrepreneurs have come in with astronomical valuations, such as ₹ 300 Crore or more. While some businesses may justify such valuations, many do not.

One common issue is that these high valuations are often based on projected revenue or net income rather than current figures.

Some Sharks may be willing to pay a premium if they see strong growth potential or synergy with their existing businesses. However, primarily inflated valuations make securing a deal very challenging.

4. Offering Penny Equity

Some entrepreneurs make the mistake of arriving in the Tank offering only a tiny percentage of equity, ranging from 0.5% to 1.5%. However, the Sharks frequently discuss the importance of "skin in the game." They want to see that entrepreneurs are fully invested in the success of their businesses. On Shark Tank Season 3, one company called Bacca Bucci's ask was astronomically high, ₹ 2.5 Crores for 1% Equity.

Offering such minimal equity doesn't show a significant commitment to the venture. Thus, it can take you one step closer to having a failed shark tank deal.

Like the Sharks, active investors don't invest merely to recoup their money at market interest rates. They aim for substantial returns within a relatively short timeframe, often 3X to 4X or more. Achieving this success requires significant control over the company's direction and operations. This can only be obtained with a meaningful equity stake.

5. Over-Negotiation

Negotiation is a fundamental aspect of striking Shark Tank deals, and the Sharks respect entrepreneurs who negotiate effectively. However, over-negotiation can quickly sour the deal-making process and ultimately lead to missed opportunities. In Shark Tank Season 3, Zorko made this mistake.

Over-negotiation occurs when deal-seekers engage in prolonged haggling over small amounts of equity, often 5% or less. While you may believe you're safeguarding your interests, the Sharks generally view this behaviour unfavourably.

From the Sharks' perspective, excessive negotiation suggests a lack of commitment on the part of the entrepreneur. It can also be perceived as undervaluing the Sharks' time, expertise, and financial investment. Moreover, when contestants entertain offers from multiple Sharks or excessively push for favourable terms, it can erode trust and goodwill, making it less likely for a deal to materialize. So, remember to identify and take a good deal when you get one.

So, What Does an Ideal Pitch Look Like?

An ideal pitch comes together when you avoid the mistakes listed above. But you'll understand it better with an example. So, on Shark Tank India Season 3, a brand called Dil Foods came up, and it is one of the best pitches you can consider.

First, the entrepreneur Arpita Aditi was humble and confident during her pitch. She knew her numbers well. Radhika Gupta, the CEO and Managing Director of Edelweiss Mutual Fund, said, "Your handle over your numbers is outstanding." Well, wouldn't you want to hear that on national television?

The best part was that all Sharks were interested in Dil Foods and said the valuation needed to be reduced since all Sharks were coming. Her ask was 0.5% equity for ₹50 lakhs. However, the Sharks asked for 2.67% equity for ₹2 crores at a ₹75 crore valuation (as per the last round). Arpita didn't blink once and said yes because she knew the value of Sharks' expertise.

Refer to All Sharks Deals and Funded Companies of Shark Tank India Season 3 for insights into how the sharks decide to fund companies.

A successful pitch on Shark Tank requires preparation, confidence, and strategic communication. And, if you plan to go to the upcoming Shark Tank season, remember these tips to land the deal you deserve.