So as promised in first post True Confessions, I will make some comments re Shark Tank. If you have not heard of Shark Tank, than this post is of little interest. But if you have, an angel investor can learn from it as it makes you realize that ideally you would be sitting among the sharks, and that ideally you could ask for 15% to 25% of a company for a relatively modest investment as majority of startups that appear on Shark Tank have low valuations. The companies that present, generally, are product based companies and as such have frequently relied on kickstarter campaigns or the usual self/family/friends method of initial investing. And they are, as noted in previous post on Podcasts, lifestyle companies meaning they might become good sustainable businesses and if you own 25% as an investor you can get your money back and then some if you add the royalty payment option. But as individual unknown angel investor, or even as part of an angel group, you do not get these terms.
But there are times when I see lifestyle or product companies or companies that would do well on Shark Tank. And contrary to opinions by fellow angels, I don’t think it is a bad suggestion to say try to get on the show. There a lots of success stories, and at 7.5 Million viewers per episode simply getting in front of that many people can significantly boost sales even if no shark bites.
Digital Exits a company that finds buyers for online companies, studied 5 years of Shark Tank episodes and found that the average offer accepted by the entrepreneur was for $144,000 for 26% of the company, and the majority of the companies were in 5 consumer areas: food/beverage, household/kitchen, sports/fitness, clothing/shoes and toys.
Re this latter sector, below is the update episode on a toy company founded by two Stanford alums that was funded by Mark Cuban for different terms than were on the show, but still a good deal. Golden Seeds, correctly in my opinion, passed on investing in Roominate as it was not a good deal for angel investors but a great company for the founders and Mark Cuban’s daughters. As an aside, I think a lot of STEM products are unfortunately one trick ponies.