The #DSMUSA business community had the distinct opportunity to listen to Barbara Corcoran of Shark Tank fame at their Annual Greater Des Moines Partnership Dinner. For me, the talk was extremely insightful and also confirmed many of the lessons I have tried to teach on this blog and to clients over the years. I have always been naturally cautious about founders seeking venture capital and angel investors. After all, over the years I have seen my fair share of legal issues between those founders and investors. Corcoran talk did nothing to change my views but I do understand that investment is often necessary and helpful so let’s get straight to some of the key points I gleaned from her talk:
- If you are seeking venture capital be honest and be prepared. Corcoran explained that only about 50 percent of the deals on Shark Tank get funded (with the exception of Mark Cuban who apparently funds 100 percent of his deals). Why? Because the show works in reverse order. The Sharks hear the presentations and come to a deal before due diligence is conducted. What does due diligence reveal? Quite often reality is much different than the presentations. Due diligence may reveal that the company does not actually hold its patent, the business may not actually even have sales or perhaps there is no real business plan in place. The key take away is that you must have your ducks in a row if you expect to seek venture capital. A promise from someone to buy your product is not the same as actual sales. Be honest and prepared!
- Even if you get funding, your business is likely to fail. Yes, let’s repeat that. Even if you get funding, your business is likely to fail. Corcoran gave a startling statistic. She said that only about 10 percent of the businesses funded on Shark Tank actually are in business just three years later. I’ll admit, I thought with the Shark Tank marketing machine, and access to some great entrepreneurs, the number of successful businesses would have been much higher. But it is critical for people to know, being an entrepreneur is not for the faint of heart. When the lights of Shark Tank dim, and the hard part begins, most entrepreneurs can’t make it work. Same is true for businesses outside of the Shark Tank realm. Far more entrepreneurs fail than succeed. But what is one way to increase your chances of success? Actually sell your product before starting your business. Is there a prototype you can build? Is there truly a market for what you want to sell? Pre-sell your product!
- Entrepreneurs must be tough and resilient. Corcoran says she is always looking for the tough entrepreneurs who can stand their ground. Don’t just cave to investors whims. Stick to your guns! I have seen founders cave time and time again just to get investment. And rarely do those situations work out. Have a plan, be prepared and be willing to walk away if you don’t get the right deal. Corcoran says she has had the most success with people who have been “injured” because these people know failure but have the ability to bounce back when the going gets tough. And inevitably there will always be a rough patch. Those who are unable to bounce back quickly are rarely successful, no matter how smart they might be or how prestigious the school was that they attended.
Overall, I really enjoyed Corcoran’s story about her career and her insights. If you don’t already attend, I encourage you to attend the Des Moines Partnership dinners in the future. There is always a great speaker and its always a great networking event as well.