So you wanna apply for Shark Tank?
Well, the idea is great, but applying is another thing altogether.
So, being an entrepreneurship school with one of our very own mentors being the red shark herself, Naomi Simson, we thought we’d walk you through exactly what you’ll need in your application and give you some inside tips on how to stand out. Naomi has also been kind enough to give a few pointers too.
On the whole, there are three main steps to the application: the written application form, a head shot and full-length body shot submission, and a three-minute video pitch.
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Below we outline our best practices for completing some of the trickier questions, and overall executing a killer application for those killer investors.
Before we start, the underlying notion from our guide is to just be 100% genuine and not weirdly “salesy”. You are trying to demonstrate who you are and build a business relationship with the sharks – so let your true colours form the basis of your application.
Write like you speak everyday, avoid jargon, and let your answers come from the heart.
Step 1: Application form
So, as per most things these days, you start off by jotting down your name and details.
But before long it gets to some of the real tricky questions – ones that actually need a bit of careful thought.
As mentioned by the Shark Tank panel in a recent post, you will need to make sure you’re diligent with your answers (no rushed answers or typos). So, grab your notebook and start brainstorming the questions below. Think of what could be the best possible answer for those five experienced (and kinda scary) investors.
Here are some of the more hairy questions with our tips on how to go about them:
‘What is your idea in one sentence?’
Here the old saying really speaks for itself: “If you can’t explain your idea in one sentence, you don’t know what you’re selling.”
Simplicity is key. If your grandma can’t understand this sentence then you need to rethink it. Think about explaining the problem you’re trying to solve and your idea’s solution for it in one simple sentence.
For example, if Uber was applying, we would suggest something along the lines of: “we are disrupting the taxi industry by connecting users to drivers through a cost-effective, real-time smartphone app”.
So avoid all that industry-heavy jargon, and explain what your idea genuinely is (and make it a little punchy).
‘What investment amount are you seeking, and what percentage of equity are you willing to give in exchange?’
Now this is a tricky one. A lot of thought needs to go into this, because you can easily ask for too much and just get knocked back in the blink of an eye.
The application clearly states after this question: “Please keep in mind that the panel of investors do not give their money away; they only make realistic investments. They will ask tough questions to justify the amount of money you are seeking.”
So it pays to think realistically. Of course the more money you get the better, however, when it comes to asking people for money you should try to ask for a smaller amount of money, and then use that as a springboard to grow towards the next investment opportunity.
We asked investment manager Matt Tominc from the Light Warrior Group and he agreed:
“I think the key mistake people make is asking for too much money too early on. Investors will have more faith in your reasonableness if you can articulate a clear set of funding ‘horizons’. For example, today I’m looking to raise $50,000 to do ‘X’. Once I’ve proven that ‘X’ works, I’ll subsequently raise another $100,000 to do ‘Y’. There is a financial advantage to the entrepreneur here too, because as the business meets each horizon, it becomes less risky. A less risky business can raise money more cheaply.”
So when it comes to finding that actual magical amount you should ask for, it’s a process of working backwards. Make sure you know what you’re going to do with the investment (which is the next question, so don’t worry) and then work backwards from this figure.
If you need $50,000, then ask for this amount and be realistic with your percentage of equity in exchange. If you’re ‘pre-revenue’ (yet to bring in money) then you’re essentially selling ‘blue sky’.
Don’t make big estimates on potential. Rather, place a value on your time and ‘sweat equity’ that you’re putting in.
For example, here’s an answer our GM Luke McInnes drafted up:
“I am asking for $50,000 in return for 25% of the business. I have already built a prototype and proved the concept for this idea, so the business has a level of traction. I have extensive knowledge in this field and my background includes ‘X’. I am working full time on this business and will not be drawing a wage for at least 12 months, which should fairly value my 75% share at $150,000.”
Be confident and let your business speak for itself. Long-winded justifications will give off the vibe you are unconfident, so keep it short and sweet. Your chance to explain what you intend to do with the funding comes in the next question, so just give it to ’em straight. Briefly state why that investment and equity is fair on both parties.
If you need something to measure against, from looking at the data, most of the investments made on Shark Tank tend to fall between the $50,000-$250,000 mark on average, with the biggest being a $300,000 investment.
‘Describe in one sentence what you intend to do with the investment funds’
Here clearly articulate why you want it – no sugar coating. Be specific with what you’re spending on and aim for milestones rather than building the ‘Taj Mahal’ with the first round of funding.
In other words, this funding shouldn’t build your whole business into an empire – instead, it should be your stepping stone to bigger and better things.
As our GM Luke McInnes mentioned in a recent post, the best pitch you could possibly deliver is one that proves its own worth – it has succeeded on a small level, and now funding is your way of keeping up with demand and expanding to bigger areas and markets.
It’s easy to talk about ‘potential’, but it doesn’t get you anywhere with an investor – they want the cold hard facts on why your business will make money for them, or a clear direction where success looks pretty reasonable. Someone who knows what every dollar will go towards is well worth listening to.
With only one sentence to inform them of your funding needs, again just give it to them straight. For example:
“With this $50,000 I will be building a smartphone app which I’ve been quoted at $25,000, the tone of voice and branding guidelines at a $10,000 quote, ‘X’ project which I’m outsourcing to a freelancer and expect will cost $5,000, and then the remaining $10,000 will be spent on a mix of Facebook and Google ads.”
‘Summarise in two sentences or less why you want to pitch your business’
There is no strategy to this question. Why do you honestly want to pitch on Shark Tank? If your answer isn’t convincing or you can’t think of one, should you really be applying?
Show that you have a passion for what you’re doing and identify your ‘stretch goal’ – what your long term looks like. Investors want to know that you’re 100% committed to the business, and will be turned off if you are already planning for your eventual exit. For example:
“I am passionate about the transport industry and I think we can solve a massive problem in a ‘X’ trillion dollar worldwide industry. My strengths are in ‘X’, ‘Y’ and ‘Z’, but I know that in order to achieve this goal, I need to bring expertise into my operations & raise the required amount of capital to get there.”
‘What is your unique selling proposition? What is your “hook,” and why is your business notable?’
Be honest, but be bold. Clearly articulate it, and don’t add too much fluff. Don’t justify your idea too much, just let it speak for itself.
Your hook doesn’t have to be an ultimate game-changer like the next Google or Facebook.
It just has to be good enough to have a sizeable market and differentiate from your competitors. No one ever said a modest hook is a bad thing – overhyping your business’ uniqueness and innovation could actually work against you (again, avoid being too salesy).
BSchool GM Luke McInnes encounters startups everyday, and he advises to avoid the cliche’s of ‘being first to market’ or ‘being the first of it’s kind’:
“If you’re early stage, focus on why ‘you as a person’ are the one that can make this happen. Avoid saying things like we’re the first to market and no one else has ever thought of this idea – unless you have a genuine patentable product, then steer clear of focusing on this aspect because the reality is they’ll see straight through it.”
After all, the idea is only 1% – the other 99% is hard work.
Note that in the application it does specifically ask for some numbers about your business, so before applying and scrambling with the calculator and spreadsheets, have these handy:
- Gross income
- Net income
- Sales projections for this year and next year
If your business doesn’t have these yet, for whatever reason, don’t be afraid to simply state that you don’t have them yet. If you feel like you need it, maybe outline a rough estimate, but make it clear that it is only speculative.
Step 2: Headshot and full body shot
Though this isn’t the most important part of the application, effort will always be appreciated.
Long story short – make sure you have good lighting, you look confident and look natural.
It is after all a TV show, so try to look very nice and approachable.
Step 3: A three-minute video
The final step is to pitch a three-minute video of your business. This is the make or break of your application, so this is where you should put your effort if you want to get in.
Luckily for you, we reached out to the red shark herself, Naomi Simson, and she has told us what she really looks for in pitches. So if you want to stand out in your application video, consider clearly articulating these points.
Your vision: Take people on your journey
Everyone has their own story, and a personal (but brief) recount of what lead you to start this business is more powerful than you think. Talking about your business from the heart and why you, the founder (or pitcher), really wants it to succeed shows passion and purpose.
This means speaking how you speak normally – casual, down-to-earth, and genuine. Everyday language that people can identify with, is always is the most interesting and inspiring thing.
Investors love people who can show this, because it is evidence that they will persist with the idea through the ups and downs and never give up.
“The most important thing you need to do, is make sure that you know who you’re pitching to and that you’re speaking a language they understand and identify with.”
A great way to do this is to start with a story. This will help provide context and background to your business idea and it will also help demonstrate what makes you uniquely qualified (and also passionate enough) to be doing what you do.
The vision part of your pitch, should be all about inspiration. It should be about taking people on your journey. You need to make sure that people see what you see and feel what you feel. If you can do that, you will come across as both authentic and trustworthy.
Remember this: business pitches don’t have to be game-changing or filled with props and slides. In fact, one of the very best pitches I ever heard was when somebody got on the stand and started with: “I was standing at my clothes-line, frustrated…”
I got it, I felt like I was there and I was in their world. This pitch was one of the most successful I’ve seen on Shark Tank.”
Networks – Are you surrounding yourself with the right resources?
Although startups can often feel like a one-man-band, if you’re playing your cards right you’ll be building a nice network of team members, mentors and friends across industries who can lend you a favour or join you for a ‘coffee’.
But in your three minutes, all that the Shark Tank team has to go by is what you tell them, and if they’re on the fence as to if you’re completely ready for Shark Tank, name dropping and communicating the support you have around you is very persuasive.
Casually mentioning you were featured on a website or in a magazine, or have some connections in some areas that could be of use in case of an expansion (subtly, of course) will help your chances of being considered.
The idea itself is one thing, but the real challenge of building a business is making sure you are surrounded by the right people and resources to succeed.
If you’re going to mention people or groups, make sure that you provide images and names where possible. It will help your pitch to be more transparent and believable.
As a judge, Naomi deems social proof as a big deal breaker:
“It’s important that you demonstrate to the judges that you are actively surrounding yourself with the right people to turn your business into a success.
If you’re operating a business already, you will already have connections, so it’s about demonstrating how you plan to leverage them to grow the business. If you are not yet running or still in Beta, it’s about showing that you have network of people that can help you get it off the ground.
This part of the pitch is where you should bring your team to life, as well as ALL the people around you that can help you achieve your success. Remember, no one can be successful all on their own.”
Commercialisation – How will this make money?
When it comes down to it, all an investor cares about is “will my investment pay off?” The sharks will want to see just how your business will make money, realistically. If you’ve already launched your business, this is easy enough.
If your business is still at the ideas stage, don’t stress – successful pitches can be made without having to demonstrate the business model.
For you, it’s much more important that you can demonstrate that you are offering something appealing to a market, which has commercial potential. Show your market value and then provide an indication of how a business model could potentially work.
Naomi specifically highlights that knowing and showing your costs is a big indicator for commercial potential in the eyes of an investor:
“The main thing that I want to understand in any pitch, is how are you going to make money? I want to see how money moves throughout the business. If applicable, I want you to show me the business model and how this is scalable.
You should know every critical number in the business, accurately and upon request. Key numbers to know are: the cost of acquisition of a customer, the cost to serve a customer (this is more than your cost of goods sold), the number of unique customers, conversion rates, cash burn and time to profit at current run rates pre and post investment.”
The finishing touches
It is well worth investing and putting lots of time into your video.
A rough video with poor sound quality won’t do your business justice, and it won’t stand out the way you’d like. So make time to invest in your pitch – find the perfect lighting, location, and programs to edit and really make it stand out.
You can, if you want to, buy a good camera, microphones etc, and enlist the services of some production professionals to edit and put together a real polished pitch. But this isn’t a necessity; it can be done on a shoestring budget too.
We found a good list of apps you can get on your iPhone to help with your video production which are all essentially free or next to nothing, so get planning.
Ham it up
Shark Tank is a TV show, so really jazz up your pitch and your approach.
Be bold, have some fun but also keep in mind that the Shark Tank judges want to be intrigued with a unique message and approach, let alone a great business. Think outside the box, and let this video be a sample of what innovations your business stands for.
Also, don’t be afraid to be bold and create tension or be playful with the judges – the more memorable Shark Tank contestants tend to build drama or rapport with the panel, so keep this in mind.
So there you go, hopefully this helps you get on that TV screen and give those sharks something to drool over.