26_2506871For those who have watched ABC’s ‘Shark Tank,’ it might seem like simply having a great business idea is enough to get a venture capitalist to invest millions in your brand. Not so. Just like with any “reality” television program, viewers don’t see what’s really going on behind the scenes. Nor is the program indicative of what real “sharks” are like.

Myth 1: It’s That Easy to Get in Front of Investors

You’ve seen footage of the long lines of would-be stars who wait in line all day to audition for ‘American Idol.’ It’s no different for ‘Shark Tank.’ Thousands of entrepreneurs submit their ideas, and only a handful are chosen. Even fewer of those that pitch the Sharks are actually aired online.

Getting in front of a non-celebrity investor can be just as hard. Before the Recession, VCs were eager to discover the next Facebook or eBay, but now they’ve backed off, and are extremely picky about the companies they invest in.   They’ve also reduced the average deal size, and the number of seed-stage deals.  Many startups will be better off searching for an angel (i.e., a business person willing to make investments, often in your local community), rather than approaching a professional venture capital firm.

Myth 2: Having Just an Idea is Enough

If you really pay attention to the show, you’ll notice that the Sharks slaughter anyone who dares to come in the Tank without a strong sense of financials, sales, and other important data. And given that show participants have months to prepare and practice their pitches, there’s simply no excuse for not having this information.

Not only do investors want to know if your numbers look good for getting a solid return, but they also want to know that you as the business owner are savvy enough to know what your cost for production, revenue, and profit margins are. If you don’t know, they might feel like you wouldn’t be a smart founder for them to partner with.

Myth 3: All You’re Getting is Money

The participants who make the best deals pitch to the best Shark to help them open doors and get a foothold in a given industry. If it’s clothing-related, they pitch Daymond John. If they want to get on a TV shopping channel, they pitch Lori Greiner. They seek more than just funding; they want the connections and expertise of the Shark they pitch.

If you were looking for just money, you could go to a bank. You’re willing to give a venture capitalist or angel investor a percent of your business because you want help in starting a business. Because so many investors specialize in a niche industry, they know a lot of people who can help make your business a success. Choose the best investor for what you want to accomplish.

Myth 4: A 5-Minute Pitch will Suffice

As television viewers, we like our content in manageable chunks. That’s why ‘Shark Tank’ edits the pitches to fewer than 10 minutes. But in reality, successful pitches take a lot longer to prepare for.  They are not off-the-cuff.

It takes time to dive into your business’ history, future plans, and number crunching. Investors (ones who are interested, anyway) will ask questions. You have to be prepared for any and every possible subject to come up. What is your projected revenue for this year? What’s your exit strategy? Have you considered licensing? While it makes for good TV, having a dumbfounded look on your face is something you never want to happen during a pitch, so be prepared.

If you’ve decided to seek funding from an investor, you can’t prepare enough. Practice your pitch until is stops sounding stilted and rehearsed. Be confident in your numbers. Know what you want, as well as what you’ll be willing to take. Then reach out to investors until you find a few willing to hear your pitch.

 

Image: PhotoSpin