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14 Tips for Raising Money for Your Business — from Shark Tank

By   /   May 17, 2012  /   16 Comments

Guest post by Brad Aronson. Brad is an angel investor, entrepreneur and author. He blogs about entrepreneurship, business and life here. Follow @bradaronson on Twitter

The Sharks offer some great tips for raising money for your business. Here are 14 of them:

1. Be completely honest in your pitch. It may be tempting to stretch things when you’re raising money, but don’t. A lot of deals that are made on the show never get completed. My guess is that due diligence led to surprises and sometimes contradicted what entrepreneurs said. Trust is critically important to investors and the Sharks aren’t going to trust someone who doesn’t tell them the truth. We may agree on a deal, but it’s not done until I do my due diligence and we sign the papers.

2. Provide proof. When James Pittman, CEO of AIrBedz truck bed air mattresses, said he would use the money to hire a sales team, because that would drive his business, the Sharks weren’t impressed. He had no proof that would work. Entrepreneurs often talk about building a team and selling more products. Prove it. Test on even an extremely small scale, so you have more than your belief to back up why the money will drive revenue and profits. Small scale testing could be getting your product in a few stores, hiring a part time sales person, doing a limited ad campaign in a targeted geographic area and so on.

3. If you have low sales volume demonstrate scale. Low sales are bad. Low sales that prove a specific rollout will work is valuable when you are raising money for your business. This is similar to the prior piece of advice. It’s not: “we will sell more because we have director of sales.” It’s: “We will sell more because we have tested this one market and know we can rollout…”

4. Focus on the investor who knows your industry. The other investors look to that person for cues. For example, when the CEO of Duality Cosmetics was pitching her all in one nail polish bottle, Kevin waited to see if Lori was interested before he decided to make an offer. The expert in the group is the person you need to convince when you are raising money. If she’s out, the other Sharks are likely to follow.

5. Your first pitch won’t be your best pitch. I’ve found this every time I have been raising money for a business, or selling a product. So, find some local people to pitch first – other entrepreneurs and even your accountants and lawyers. Get practice. Based on their inability to answer some questions it seems like some entrepreneurs on Shark Tank didn’t find the right people for practice.

A businessman swims into the Shark Tank

6. Present what you’ve achieved and not how much you’ve worked. These are business deals. It doesn’t matter a lot to an investor that you’ve spent two years of your life dedicated to your business. That isn’t relevant to the value they put on your business. They want to know what you’ve accomplished.

7. On the other hand, demonstrate commitment to your business. That means you don’t have multiple businesses and your attention is focused. They want to know that if they help you in raising money for your business, 100% of your time will be spent on growing their investment. Sharks specifically said this to Boot Illusions and inventor Jared Joyce (Five Minute Furniture).

8. Having spent a lot of money with little revenue isn’t a good thing. Entrepreneurs sometimes think it’s a good thing that they invested $250K and have $10K in revenue. The Sharks always look disappointed. They want entrepreneurs who have proven they are good at raising money with little investment. Then they believe their money will most likely be well managed.

9. Sob stories don’t help. These are business deals, and it probably results in worse terms, because investors know you’re desperate.

10. Know your market size. It isn’t every woman in America. There is a specific audience, and the sharks want to know what it is. Pretending it’s bigger hurts your credibility.

11. Don’t make absolutes. When people say, “I have to manufacture in the US” it bothers the Sharks. It is better to say, “I’d like to continue to manufacture in the US, because it will provide jobs and consumers appreciate that.” Stating it that way demonstrates that you’d be willing to listen to their advice – which you should be. Investors want to know that you’ll listen and be a partner.

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About the author

Guest Author

Brad is an angel investor, entrepreneur and author. He blogs about entrepreneurship, business and life here. Also, be sure to follow @bradaronson on Twitter.

16 Comments

  1. Anita T says:

    This is excellent information and should be taught as part of a curriculum in Business schools (and high schools) across the world!

  2. Andrew says:

    I agree, Anita! Thanks for stopping by

    Andrew

  3. Jon says:

    @Anita what you really need to impress the sharks can’t be taught in school ;)

    Jon
    The Third Agency

  4. Hello! I love Shark Tank and this is a great post. Thanks for sharing. I cannot wait for my business to be SHARK READY!! Lisa

  5. Brad Aronson says:

    Thanks for the feedback on the post. I appreciate it! Brad

  6. Andrew says:

    Thanks again, Brad, for sharing your post — it’s truly a must-read for Shark Tank applicants!

    Andrew

  7. Jon says:

    I find it disturbing that Kevin is even allowed on the show. It seems that “Mr. Wonderful” had a bit of a valuation problem when he sold his software company to Mattel. It’s no coincidence that he irreverently questions the value of prospective “shark feed” businesses. I find him greedy and pompous due mainly to the fact that he still overvalues his own worth. I wonder how anyone with a legitimate idea would be desperate enough to take a deal from him.

  8. Andrew says:

    Hi Jon,

    Wouldn’t the world be boring if ying didn’t have a yang, if Superman had no one plotting his demise, etc? Kevin’s role on the show and blunt and honest (to him, of course) assessment of businesses keeps things interesting to say the least. He’s unapologetic about his goal to make money. If I were looking for an investor, that’s something I’d pay attention to. My .02.

    Andrew

  9. Jay says:

    Thanks for posting this article. I’ve been following Shark Tank a lot lately, and I see folks who’s pitch is wrong from the very minute they utter their first word. Looking forward to the next season.

  10. Mike Sevigny says:

    Great post Brad, thank you for the tips!
    I sure hope we get to use them. Haven’t heard anything since we sent in our video, but we have our fingers crossed.
    Mike
    Boo Boo Bling LLC

  11. Brad Aronson says:

    Hey Mike,

    I must have missed your video. Please resend it and DM me on Twitter.

    Thanks.
    Brad

  12. Andrew says:

    Hi Mike, good luck moving through the casting process!

    Have a great weekend,

    Andrew

  13. Brad, what about start up opportunities? The wine gadget mkt is very hot. Our product enhances the flavors etc of red wine. All development is completed w/ prototype in hand. Is this a potential play for the sharks?
    thank you

  14. Brad Aronson says:

    Mark, I don’t know what the producers specifically look for, but I imagine they want: a good product, a dynamic entrepreneur who would do well on TV and a compelling story. As for the sharks, it seems to help to have some sort of business besides a prototype — through partners, clients, etc. Good luck.

  15. John Penney says:

    I’,m very pleased that the Casting Group for the Shark Tank contacted me after five
    year of applying to appear on the Skark Tank. They indicated that they will contant
    me in the Spring of 2013 and talk with me after reviewing my submission. That is
    very good new to one who has one great product. STATIC-OUT SOFTNESS-IN (r)
    Spongettes for your cloths dryer. I am looking forward in talking to the Casting Group.

  16. Andrew says:

    Congrats, John, and best of luck!

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