Dancing With the Sharks
There are a lot of entertaining moments in the ABC reality show Shark Tank, in which entrepreneurs try to persuade a table full of deep-pockets business moguls to invest in their great ideas. But my recent favorite was the one in which the exasperated marketer of a cat toilet-training system hissed at a scoffing judge: "Just remember, if you don't have cats, you won't understand." That extemporaneous parry-and-riposte could be the ideal advertising slogan for her product, if not a fitting all-purpose mantra for those millions of extreme feline fanciers who treat little Fluffy with the sort of deference once lavished upon Bastet, the ancient Egyptian cat deity.
But in my excitement about sneaking in an arcane mythological reference, I digress. The really important point is that the story ultimately has a happy ending. The cat toilet-training contestant, 31-year-old Morrisville, Pa., mompreneur Rebecca Rescate, managed to secure a $100,000 investment for her company, CitiKitty, from one of the venture capitalist judges, infomercial producer Kevin Harrington. The deal came after a tough bargaining session in which Harrington initially sought a 40 percent equity stake, instead of the 15 percent she was willing to offer. (BTW, If you missed Rescate's moment in the spotlight, the episode re-airs on Friday, July 22.)
Rescate exemplifies the appeal of Shark Tank. Deep down, all of us -- even those who've worked for wages all their lives and never seriously tried to start a business -- are would-be entrepreneurs. We've all got some dream -- a gadget, product or service that we're certain would be huge, if only we caught a break and were introduced to someone with the juice to make it happen. Shark Tank actually provides that opportunity, putting contestants in front of a panel of deep-pockets judges, to whom they have to first sell their idea and then -- and usually this is the most interesting part -- negotiate a deal without signing away too much of their business. And for those midlifers who actually aspire to create a viable second-act business, Shark Tank actually provides some useful inspiration and insights, in addition to the entertainment value. But business experts caution it's also important to remember that Shark Tank is primarily intended as entertainment, and that its premise also offers a few red herrings that you should avoid imitating.
So here are a few points I've gleaned from the show:
1. You can draw from observations and insights from your first career as inspiration for your second act. One great example this season is the Ride-On Carry-On, a device dreamed up by successful contestant Darryl Lenz, a 28-year-veteran American Airlines flight attendant from Atlanta, and her husband Randy. (From YouTube, here's a video clip of the couple being interviewed prior to their appearance on the show.) Lenz watched people struggle to manage their small children and their luggage in airports, and figured there had to be a better way. So she and her husband designed an attachment that enabled roll-on luggage to double as a travel stroller.
2. Don't be unnerved by negativity. Reality shows draw in viewers in part by giving them a chance to see what characters do when they're embarrassed or outright humiliated, so inevitably, at least one of the judges on Shark Tank will not just dismiss an entrepreneur's pitch or the product itself with a disgusted frown, but outright mock it for laughs. Even so, many of those contestants still go on to get the investment they need from another judge. That shows how important it is to keep one's cool under fire, and to even show a sense of humor about it to disarm detractors. (Here's a video presentation from one of the judges, real estate entrepreneur Barbara Corcoran, who talks about how she handled rejection during her rise to building a $66 million real estate empire.)
3. Strive to be flexible, and learn to be a savvy gambler. CitiKitty founder Rescate quickly went from being derided to being offered $100,000 by one of the judges. The catch, of course, was that Harrington wanted a much larger equity stake in the company than she originally intended to offer. Nevertheless, Rescate decided to go with his offer, rather than one with more favorable terms from Corcoran, because she decided Harrington's TV connections and leverage had more potential, and his experience with marketing similar products made him a good fit for her business.
But it's also important to keep in mind that a few things about Shark Tank are totally unrealistic, says Steven Rosenbaum, founder and chief executive of the web video-curation firm Magnify.net and a blogger for FastCompany.com. Rosenbaum points out in his blog that in real life, individual investors don't sit down together to hear entrepreneurs' pitches and then either bid against one another or pool their money and collude to force you to take a deal. Instead, venture capitalists and angel groups usually hear presentations and act as single groups, giving either an up or down vote on a pitch.
And once the negotiations start on Shark Tank, Rosenbaum notes, the judges frequently try to get a bigger equity stake for their money by equating the business's overall value with its current revenues. "That's the math of every show," he says.
Sometimes, contestants win just by playing the game on national television. As The Wall Street Journal recently reported, in the weeks since Rescate appeared on the show in mid-May, CitiKitty has racked up more sales than it garnered in all of 2010 and is on track to break the $1 million mark this year, which would represent roughly a 300 percent upward bump.
So enjoy Shark Tank, and look to it for inspiration -- but also use it as a guide to what not to do.
BTW, last season's most colorful, provocative guest judge, NBA Dallas Mavericks owner and high-tech entrepreneur Mark Cuban, has signed on as a regular for next season, according to this Entertainment Weekly report. With the state of the NBA season in flux, due the current labor dispute, Cuban may end up venting his high-powered competitive urges for viewers' entertainment.
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