Posted by: Contributing columnist, Clarion-Ledger, Business, June 2, 2016
I’m a big fan of the ABC show “Shark Tank” for a lot of reasons.
When it first came on, I quickly noticed how much it resembled our entrepreneurial development work at Innovate Mississippi. Now that the show has become so popular (and is on CNBC all the time in addition to ABC), it’s easy to use it as an example to explain to people that Innovate Mississippi is like a “Mississippi Shark Tank” organization. The show, in fact, has featured some really great Mississippi startup companies, including Lockerbones of Clinton and Muddy Water Camo of Mathiston.
While I love “Shark Tank” and encourage anyone who hasn’t seen it to watch it, there are some important differences between the show’s version and what I see in real-world entrepreneurship. The first obvious difference is that the show’s investors tend to “perform” for the cameras, creating a source of dramatic entertainment in the form of confrontation or humor. Then, they must exclaim “I’m out” or charge toward a fast-paced negotiation; whereas, our network of investors is likely to nod politely even when they aren’t interested. In all reality, investors do become interested in a company from their initial pitch, but several meetings are usually needed to seal the deal. Unfortunately that timing just doesn’t make for a compelling television show.
The most dramatic difference, though, is the type of companies that appear on the show and the way the entrepreneurs present their pitch. The show has an astounding audience of around 7 million viewers, so the big opportunity for entrepreneurs is the ability to demonstrate their products to that many people — whether or not they get or even want investment. That element alone greatly skews the types of entrepreneurs who want to audition for and appear on “Shark Tank,” and it results in a much larger number of startups with consumer products being pitched on the show than would normally be seen pitching to investors. Interestingly, many of the greatest business opportunities are behind the scenes with data analysis or help with business productivity, but those just don’t make for good television.
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We at Innovate Mississippi always coach our entrepreneurs to not pitch to investors as if they are selling their products. The fact is, investors don’t want to buy the product; they want to invest in the company that happens to sell the product. That means that the other business plan items — including management, go-to-market plan, contracts, etc. — are much more important than convincing the investor that the product is innovative and cool. Entrepreneurs have to show investors that the market wants the product but not try to sell it to investors. Since entrepreneurs love their products and are usually natural sales
The entrepreneurs pitching on “Shark Tank” clearly ignore that advice — and they are right to do so under the circumstances. Whether or not they get investment, a pitch that sells their product will be seen by millions of viewers and can launch the company. Entrepreneurs realize this and spend a lot of time on the coolness of the product. Many of them even have investment terms that are clearly not intended to close a deal — like offering $500,000 for 5 percent of their company or similar. Many companies have not closed deals on the show and have still parlayed that exposure into valuable sales and success.
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While there are key differences and even some critical similarities between the pitches seen on “Shark Tank” and at Innovate Mississippi, the fact remains that “Shark Tank” is a compelling look into America’s — and Mississippi’s — rich entrepreneurial activity and potential. We’ll explore more of these comparisons in future articles, so if you’re not familiar with the show, please check it out and come back for next week’s article.
Tony Jeff is the president and CEO of Innovate Mississippi. He can be reached at tjeff@innovate.ms.