The Shark Tank Guide to Surviving the Treacherous Waters of Entrepreneurship
It’s called Shark Tank for a reason.
For starters, consider the slim odds of landing a spot on the Emmy-winning ABC show. Last year, 45,000 entrepreneurs applied for an audience with some of the world’s most famous investors. Only 150 were selected, and just 115 made it to air. For Season 7, which begins Sept. 25, the competition is even steeper. Fans of Shark Tank or its various highly rated formats in 25 other countries (including Dragons’ Den in Canada and England, Money Tigers in Japan, Your Opportunity in Spain, Den D in the Czech Republic and Lions’ Den in Germany) have watched business founders tremble, stammer, stumble, sweat and sometimes seem—like Tough Mudder obstacle race participants—on the verge of collapse as they pitched their products and businesses. The show—produced by United Artists Media Group in association with Sony Pictures Television—is far and away the world’s leader in the business entertainment genre.
The soundstage on the Sony lot in Culver City, Calif., where the American show shoots, contains no obvious perils. The temperature is comfortable. There are soothing abstract paintings in pastel colors. And then the entrepreneurs step onstage and face Mark Cuban, owner of the 2011 NBA champion Dallas Mavericks and owner and chairman of AXS TV; venture capitalist Kevin O’Leary, aka “Mr. Wonderful”; FUBU clothing founder and branding expert Daymond John; Robert Herjavec, founder of the global IT security company the Herjavec Group; real estate mogul Barbara Corcoran and QVC home-shopping queen Lori Greiner.
Once the entrepreneurs march to the set, they must stand in front of the Sharks with strict directions not to speak for a solid minute while camera angles are established. That can seem an eternity when the Sharks assess you with blank stares. (Greiner is the most likely to offer a warm grin.) The investors are already making mental notes. “I know which deals I want even before anyone opens their mouths,” Corcoran says. “All I have to do is watch them during those silent first minutes, see how they make eye contact and how they deal with the pressure.”
The pressure only increases. Edited segments on the show run a speedy eight to 10 minutes, but the actual pitches can last a grueling hour or longer. From 9 a.m. to 7 p.m. the day that SUCCESS cameras and pens were on hand, the Sharks heard only eight pitches; half received deals, and half didn’t.
The Sharks’ questions seem rapid-fire when you watch an episode. During the actual negotiations, they’re a blitzkrieg, with the Sharks talking over each other, their voices becoming more insistent the longer the pitch goes on. It’s easy to become flustered or respond to the loudest voice or the most recent question first.
But contestants do so at their peril: The Sharks are not accustomed to being ignored. Last season Mark Aramli, pitching a product called BedJet, frustrated Greiner when he ignored a question she asked several times. “Mark, if you don’t listen, I’m out,” she warned. When she didn’t get an immediate response, she kept her word: “I’m out.” Looking back, Greiner says, “I’m not interested in a partner like that. When you’re in the Shark Tank, as in life, you need to be respectful and listen, no matter who’s talking to you, because otherwise people don’t want to work with you. And the funny thing is, this guy said, ‘Oh, you’re the Shark I wanted.’ ” Aramli walked away without a deal.
In the end, Shark Tank (and entrepreneurship in general) is more punishing and more rewarding than winning a Tough Mudder because there’s no finish line.
“Being on Shark Tank is like having gasoline poured onto an already burning fire,” O’Leary says. “The exposure and growth are explosive even if entrepreneurs don’t get a deal, but that’s only the beginning. As I tell every entrepreneur, stuff is going to happen. They’re going to have traumatic challenges. Even with a deal that turns out to be a phenomenal success, there will be moments of near-catastrophic failure. There’s no easy path.” (The companion series Beyond the Tank, which launched in the spring, follows what happens after the Sharks strike a deal, and the action is every bit as nail-biting as the original show.)
Even extraordinary wealth isn’t protection from the vicissitudes of the business world. “I never stop learning,” Cuban says. “Bank accounts are a reflection of success that happened before, not a reflection of what’s happening right now.”
As treacherous as climbing a barbed-wire fence might be, at least you see it ahead of you, while the road to successful entrepreneurship is a land mine of hidden obstacles. In fact, the Sharks tell SUCCESS that detours or dead ends may be disguised as expressways. And vice versa.
Here’s advice from the Sharks on how to tell the difference between what will accelerate growth and what will impede it, and how to exploit both.
Everyone you know thinks your idea is terrific.
When watching a marathon of classic Shark Tank episodes syndicated on CBNC, this becomes a familiar pattern: Business founders who failed to win a deal look forlornly at the investors and whine, in so many words, “But everyone I know loves the idea.”
No doubt. But the problem here, budding entrepreneur, is your focus group: people you know. Their unqualified enthusiasm can blind you to the realities of the marketplace. “There’s a common vein that runs through all entrepreneurs,” Greiner says. “They all think their idea is the best thing ever. And that’s one of the most common obstacles I see: Entrepreneurs get ahead of themselves. They forge ahead and spend a lot of time, money and effort on their idea before they’ve found out if the world is as in love with it as they are.”
Cuban agrees, adding that he gets nervous when someone describes his or her product with an adjective that ends in -er or -est, as in better or greatest. “Everyone thinks they have some advantage,” he says. “But you need to be brutally honest with yourself. Entrepreneurs face the challenge of being self-aware.” Your mother, best friend or neighbor is not going to offer an honest assessment of whether your new doohickey is, as Greiner would say, “a hero or a zero.”
The fix is objective market research. As is now QVC lore, Greiner developed her first product, an earring organizer made of clear acrylic resin, in 1996. Startup manufacturing would require $300,000. “I was terrified about taking that step without actually knowing if people really wanted it,” she says.
Greiner spent $10,000 to have a prototype made and then pounded the pavement to measure reactions. In parks and streets throughout Chicago, she stopped women and politely asked for two minutes of their time and then showed the sample. “I’d definitely buy that,” was the nearly universal response. A few months later, in five minutes on QVC, Greiner sold all 2,000 units of the product, and an empire was born.
“If you’re polite and respectful and approach people with humor, they’re happy to help,” she says. To encourage honest opinions, don’t tell people you’re the inventor. If you get more thumbs-down than thumbs-up, don’t give up. Instead, to borrow from Shark vernacular, pivot. “Don’t stop there,” Greiner says. “If you’re inventive, you’re going to have more than one idea in your life.”
You’re plagued by insecurity.
Corcoran says deep-seated insecurity has been the driving force of her success. From a nun in the fifth grade who told Corcoran she would always be stupid because she couldn’t read (she’s dyslexic), to the boyfriend and real estate business partner who left her for her secretary, to every fancy cocktail party that’s made her feel less educated than other guests, a fear of not measuring up has been a great motivator. It remains so to this day, more than a decade after Corcoran sold her real estate company for $66 million.
“As you get older, you get tougher skin,” says Corcoran, 66. “But in my experience, all that does is wrap the insecurity a little tighter. It never goes away. If it did, I’d be relaxing and enjoying all of the riches of my wonderful life with my healthy family and the people who love me instead of working as hard as I do.”
How you respond to insecurity is most important. It causes some people to retreat but has the opposite effect on Corcoran. “I would call it standing up to be counted instead of fading into the background like a nice girl.”
A few years ago, when it looked like Corcoran might miss out on the opportunity to join the cast of Shark Tank, she emailed executive producer Mark Burnett saying, “I’ve had all my big successes on the heels of rejection, and frankly, it’s right up my alley.” She proposed further consideration for the spot, an example of her tenacity that greatly impressed Burnett and his fellow executive producer Clay Newbill. The rest is Shark Tank history.
Today Corcoran welcomes evidence of insecurity in potential protégés. “My most successful entrepreneurs, the really hard-driving ones who can’t take no or maybe, all come from a dark place.”
Your very early startup is flush with cash.
When it comes to launching a company, “too much cash” may seem like an oxymoron. But the Sharks disagree. One reason they sometimes decline to fund even products they like is that they feel the entrepreneurs still need to find their footing and refine their vision.
Daymond John, for example, believes in what he calls “the power of broke.” It’s the title of his January 2016 book. “Whether you’re a struggling entrepreneur or running a huge corporation, money is never the answer to a problem,” John says. “It’s the byproduct of finding a solution.” When he started FUBU in 1992, funds were so tight that for two years he took the same 10 shirts with him whenever he could sneak his way onto a music video shoot. If he could convince a rapper or dancer to wear the shirt in a video, he’d take it back when the shoot was over. “We didn’t have money to give shirts away, but we were in about 30 videos, and the perception grew that we were this huge clothing company.”
A lean budget leads to innovative problem-solving and lessons in managing resources that will serve you well even after your company becomes wildly successful. John advocates “taking the affordable next step,” an approach that keeps you from growing at a faster rate than you can manage or giving away too much of the company in its early stages. “By growing slowly, I was able to learn new lessons when I failed and start again from a wiser place. That wouldn’t have happened if I had done a throw-it-all-on-the-table roll of the dice.” FUBU would close three times in its early years before scoring $350 million in sales in 1998.
Cuban shares this keep-it-lean philosophy. “Entrepreneurs think that raising money is an accomplishment,” he says. “It’s not an accomplishment. It’s an obligation.” Instead of just doing what you need to do for your company, you have a responsibility to someone else. Those two things can be at odds.
After being fired from a job with a software company, Cuban launched his first company, MicroSolutions, which was profitable after the first month. But Cuban still lived like a college student, sharing a three-bedroom apartment with five other guys. “I just kept going and going. I didn’t have a lot of expenses, so what was the downside? I mean, I’m sleeping on the floor. Worst case, I could always get a job as a bartender or go back into sales.”
Instead of mixing margaritas, Cuban cashed out in 1990; he sold MicroSolutions to CompuServe and walked away with $2.2 million.
You want to be right all the time.
“I think I’ve lost business opportunities by wanting to be right all the time,” Cuban says. “I could have invested in Uber, and I didn’t because I told them, ‘You guys are going to be fighting the taxi commissions everywhere, and that’s going to be a helluva battle.’ Then others came in and said, ‘I don’t care, whatever, it’s a great idea.’ And so I limited my vision by being afraid to be wrong.”
O’Leary says one of the great lessons he’s learned is that no one—not even “Mr. Wonderful”—can have an unbroken string of hits. “I have failures, too. I try to learn from them. I lost $2.5 million on the Home Game Channel. You can’t get it right all the time. Being wrong isn’t a crime. The crime is making the same mistake twice.”
You refuse to quit despite clearly unsolvable problems.
Perseverance is an essential attribute when starting a business, but so are firm deadlines that measure your progress. As Herjavec likes to say, “A goal without a time line is just a dream.” The first thing he does when he buys a small company is to sit down the founders and ask them, “Do you have a forecast? What are you going to sell next year?” The nature of their business doesn’t matter. “I say, ‘By when?’ ”
People are afraid to put time lines around their aspirations because they’re measurable.” And when they do set time lines, they often mistake launching a business for a sprint rather than the marathon it is. “People overestimate what they can achieve in one year and underestimate what they can achieve in 10,” Herjavec says.
John also believes in setting goals by the calendar. He keeps a list of seven to nine goals. A half-dozen expire in six months and the rest in five or 10 years. “I read them as soon as I wake up so they’re the first thing I think about, and I read them before I go to sleep so they’re what I dream about. When I’m off on achieving my goals by a week or a month, that tells me I’ve stopped spending my time in the way I’ve prioritized, and I make adjustments.”
The Sharks may seem like a fearless bunch, but they’ve experienced the same sleep-wrecking, butterflies-in-the-belly trepidation as anyone else. Fear is the emotional recognition of what’s at stake. It motivates us to be diligent, hardworking and reasonably cautious.
“People have a funny relationship with fear,” Herjavec says. “They think that courage is doing what needs to be done without fear. In fact, it’s doing the things you need to do in spite of fear. I’m scared every day. I worry about my business every single day.”
The Sharks can move forward with confidence despite their fear because they have faith in their own resilience, the ability to recoup from failure and move on to new challenges. “You get a lot of chances in life,” Herjavec says. “Even if you fail in one, you’ve got to keep going.”
You’re not a people person.
You don’t need to have the charisma of George Clooney to snare a Shark Tank investment. The biggest deal in the show’s history is Scrub Daddy, created by Aaron Krause, who came across as an earnest nerd when he pitched. But to entice an investor on the show or off, “you need the ability to be extremely persuasive,” Corcoran says. “I want to see right from the get-go that someone is coming from a comfortable place.” A little flop sweat is fine. Corcoran says she’s wary of people who are so polished that they seem like con artists.
Another deal-breaker, especially for complex products or businesses, is going too far into the weeds. When SUCCESS was on the Shark Tank set, an entrepreneur with a doctorate in engineering was pitching a high-tech device, but the founder was unclear about his target market and became overly technical. “Talk to me in a way that I can understand,” John implored.
“The entrepreneur needs to be the jockey riding the horse,” he says later, explaining the importance of telling the story of your product in an engaging way and understanding why the customer will care about it. “During our country’s financial crisis in 2008, people weren’t buying shirts from me because they couldn’t afford to pay their mortgages. But someone decides to cut two holes in a blanket and call it a Snuggie, and they do $100 million in business.”
And that’s how you move up the food chain.