Marketing in the Shark Tank

Hopefully, you have had a chance to watch Shark Tank, which airs Friday nights at 8:00 Eastern time on ABC.  The show features entrepreneurs who pitch their business ideas to a panel of investors.  The investors ask very pointed questions about the entrepreneur’s product/service and decide if they will invest their own money for a stake in the entrepreneur’s company.  If the investors really like the idea, they get into a bidding war over how much they will invest for what equity position.  That is the Shark Tank feeding frenzy.  For me, it is the best of reality TV.

The entrepreneurs who pitch their concepts have to be prepared to answer a lot of questions either in their presentation or directly from the investors before any offers are made:

  • Who is the market for this product/service?
  • How big is the market?
  • What other products are in the market?
  • What makes this product/service unique?
  • What is the distribution model for this product/service?
  • What are the direct and indirect costs for the product/service?
  • What is the current or proposed price for the product/service and how does that compare to competitive products?

Most of the questions focus on the value proposition for the company and its product/service.

As marketers, we confront these questions everyday in trying to attract and sell to customers.   I wonder how many of us could explain our company’s value proposition compellingly enough to get a seasoned investor to put up tens of thousands, hundreds of thousands or even millions of dollars in financing.  It is one thing to get a consumer to spend a few dollars on a product, but could you secure the financial future of your company if you had to?

The other thing I find interesting about the show is how poorly some of these entrepreneurs explain their value proposition to the investors.  I wonder:  Have they not thought about the value proposition? Are they simply unable to articulate it well? Sometimes it is downright painful to watch an entrepreneur crash and burn.  Of course, if they thought through the value proposition in advance, they might not have gone on the show and supplied us with the occasional “train wreck” that keeps us watching reality TV.

I am currently working with a friend from college to help him attract investors to his fast-serve food concept.  He and his wife have an established sit-down restaurant that has done well and they have opened two fast-serve outlets based on a reduced number of items from the restaurant menu.  He is looking for financing to expand his fast-serve outlets in his geographic area.  Our first work is preparing the document that lays out the value proposition and brand for the fast-serve concept.  Most of this is information you would expect to see in a typical marketing plan.  But the document also includes the financial model to show investors the anticipated payback.  This company has the advantage of experienced management and a track record, so the plan is based on actual figures.

Our goal is to build a persuasive case for investors so my friend receives a range of offers and he can choose the one that best meets his objectives.  If all goes well, it will be a virtual Shark Tank.

 

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