Shark Tank india attracts a lot of viewer and media attention. What lessons for IPO investors does it hold?
The sharks have turned celebrities overnight, with their style and personalities under the scanner. Stand-up comedy artists have a gala time spoofing the sharks along with their pet raves and rants.
Startup enthusiasts follow it in the hope of making a killing some day. Those who are selected to make a pitch walk out with brand visibility at the least. That is, if they do get not the desired investment. The promos show previous participants report a spike in sales after their appearance on the show.
I invite you to view it as an IPO investor. All you need to do is keenly follow the questions asked.
Those who have missed previous episodes of the show can watch it on SonyLiv.
QUESTIONS ASKED BY SHARKS TO STARTUP FOUNDERS
- How much is your sales?
- What were your sales in the previous month or year?
- Tell us about your background.
- What are the number of users or customers so far?
- How will you scale it up?
- What is your investment in the business?
- Why do you need money from us?
- What is the per unit cost of production?
- How much is the selling price?
- Cost of customer acquisition?
- How do you (co-founders) know each other?
- Why don’t you let him speak?
- Whose money is invested, and who calls the shots?
- How much equity do each of you hold?
- Good to see you complete each other’s sentences
- How are you spreading the word?
- How much have you sold so far, and how?
- What is your promotional cost?
- Is the idea or service unique?
- Whom do you consider as competition?
- If the product exists in other countries, how do you see it performing in the Indian ethos?
- Why should a customer buy from you?
- What need does it fulfil?
THE BUSINESS MODEL
- Can it be mass produced without diluting the quality?
- How will the product be delivered to the customer?
- Will expansion of the user base be a problem, when customer acquisition cost increases?
LESSONS FOR IPO INVESTORS FROM SHARK TANK INDIA
You get a fair idea of what you look for in a company before investing.
What is not important?
The format of the show needs an entertaining introduction, song-and-dance sequences with models, product demos and emotional stories. You are not privy to any of these, but the entertainment is not really important.
Nevertheless, enjoy this video from Shark Tank USA on the best pitch made. Watch the theatrics.
You cannot grill the startup founders in the same manner, but look at the following.
What is it that you can check?
- Social media handles of founders
- Videos to show their personal style and interactions
- Media reports
- Financials in the red herring prospectus – focus on present numbers, historical data and projections. Does it connect well?
- Consumer reviews of the product
- Physical outlets and/or web presence
- Have you used the product? What is your experience?
- How does it compare with similar product or service you experienced abroad?
- Do you visualise a demand, and the age group of prospective users?
- Business ethics
And then, a gem from Anupam Mittal of SHAADI.COM
We will look for 100X returns. Many of the companies we invest in will fail, and we’ll earn from the one company that gives 100X.
MOST IMPORTANT LESSONS FOR IPO INVESTORS
- If you are investing in startups, spread your money over a large number of companies. Needless to say, that one company which outperforms others will give you return on investment. It will amply compensate for the loss in others.
2. The appreciation in value of the total portfolio matters, not individual companies.
How does startup valuation work?