Is a deal on Shark Tank India beneficial for your equity?

If you go swimming with the sharks, a disproportionate share of your equity could end up as bait

A crisp cheque crammed with zeroes along with the lofty promise of direct mentorship from a titan of business—the premise of Shark Tank India is easy to love. The business reality television series has tempted many young entrepreneurs into carving out substantial chunks of their equity in the pursuit of landing an elusive ‘shark’. How life-changing really is the show, and is it worth kissing your precious equity goodbye? We take a closer look to find out more.  

A win-win proposition

When Rishika Nayak, founder of artisanal soapery The Sass Bar, walked on the first season of Shark Tank India looking for ₹40 lakh in exchange of eight per cent equity, she didn’t know she’d be handing away 35 per cent equity for an investment of ₹50 lakh from sharks Anupam Mittal and Ghazal Alagh. However, Nayak has no regrets when she looks back at the experience a year later. “People often ask me why I didn’t take an investment from the bank or from my family, but I have always believed that it is not about the money but the strategy, networking and intangible benefits of having a strategic investor. You can grow slowly over ten years and completely own a small company or you can grow your company in five years and have a share in a very big company—it’s all about perspective,” she shares. 

On the opposite end of the spectrum, sisters Parina and Puniya Chugh,  co-founders of luxury loungewear label Midnight Angels by PC, chose to hold firm on their offer of ₹75 lakh for 15 per cent equity despite having a tempting offer of ₹25 lakh for 20 per cent equity and ₹50 lakh debt at an interest rate of 12 per cent dangled in front of them by ‘sharks’ Anupam Mittal and Peyush Bansal.

“Shortly after our episode was broadcast, our entire store was sold out—a career-first for me and my sister,” raves Parina. Having decided they weren’t ready to go north of 15 per cent equity, the decision to stand their ground has reaped rich dividends for the brand. “If we tried to do this organically, it would have taken us years but the exposure on Shark Tank India gave it to us in a matter of months. The guidance of a ‘shark’ would have brought more change to the company, but our razor-sharp knowledge of the market means that we can manage on our own. It would have been a plus to have their help, but there is no minus for not having them either,” she iterates.

Grabbing eyeballs 

Chugh’s sentiment is echoed by Rajiv Talreja, investor and founder of Quantum Leap Learning Solutions, a prominent MSME business coaching company. “Any pitch that is broadcast on the show gets up to one crore viewers, making it a priceless asset. Think of it as free advertising,” he says, while urging young entrepreneurs to not undersell themselves as the show has a history of undervaluing prominent businesses. “In the early stages of a startup, the failure rates are so high that nobody is going to put in money just because they like the idea. In the real world, people put money on the person as someone they can build a relationship with, whose character, integrity, standards and authenticity they understand, and someone whose background they know of,” he elaborates. However, since most pitches on Shark Tank India run under an hour, Talreja believes that it neither provides enough time for the sharks to get an intimate understanding of the business, nor does it help the founder to come up with an appropriate valuation, thereby creating a cycle of deals that might be undervalued.

As the author of the bestselling title Lead or Bleed (2016), Talreja also believes that it is too early to evaluate the expertise of the ‘sharks’ themselves. “We still need to see the ‘sharks’ actively participating in the businesses that they’ve invested in, whether they are able to take those businesses to the next level by leveraging their connections, resources, and infrastructure. For now, it appears that the ‘sharks’ are also leveraging the show as a PR exercise for themselves. If they genuinely have a long-term view of building something sustainable, it would require them to get their hands dirty and work with the startups that they’ve invested in, open doors for them, and help them build internal capabilities. All of this is something that I cannot see proven yet on Shark Tank India,” he observes.  

Taking the plunge

For businesses standing on the crossroads of whether to hand away equity in lieu of a ‘shark’, Talreja recommends asking some pertinent questions: 

• If your business is at a raw idea and prototype stage, then giving away a large chunk of equity to a ‘shark’ and getting the visibility of being a Shark Tank-funded startup or business is a fair deal. But if you have a substantial model with a proven track record of sales and you just need some help with capital infusion for scaling up, then you can consider looking at investors who can give you a fair market value for your business.

• Before appearing on the show, it is important to be extremely clear about the boundary offer below which you will not accept a deal, or the ‘walk-away offer’. If you don’t get that offer, then just walk away to ensure that you don’t undervalue yourself and undersell your business.

Meanwhile, Nayak has a nugget of advice to offer when it comes to scaling your business. “When getting investors on board, you need to understand whether the business is scalable. Sometimes, a business can exist in a niche category and make money without requiring investment. Investors want to maximise their returns and they invest in businesses that are scalable. If they don’t want to invest, remember that it doesn’t mean your idea is not a good business—you can still accomplish what you want to,” she shares. 

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