Daybreak - Why even well-funded startups can't resist the lure of Shark Tank India

Episode Date: May 20, 2024

The lure of appearing on the popular reality show on national television is so strong that even startups that already have been funded by VCs and institutional investors want to get on Shark Tank. In fact, investors themselves are asking their founders to go on the show.Money or funding is not the goal for these startups. It's the marketing opportunity they want.But Sony, the producer of the Shark Tank is trying its best to make sure that the show doesn't lose its real purpose: to be an investment platform.Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.P.S. Daybreak episodes drop daily now:)

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Do you know Aman Gupta, the co-founder of Boat, the audio and wearables brand? He's one of the judges on Shark Tank India. And you know what he said once about being on the show?

He said that his brand boat gets so much free promotion when Shark Tank is on air. air that they literally stopped spending on marketing for a good three months. Now, of course, this also holds true for all the startup founders that are featured on the show. Take Jainty Bhattacharya, the co-founder of India Hemp and Company, for example. It is a four-year-old startup that makes cannabis-based wellness products. She said, at the time when no newspaper would write about us, Shark Tank India put us on national television. and that really makes a big difference to these companies that are just starting out

irrespective of whether they get funding on the show or not. Again, take the case of Namya Foods. It is an Ayurvedic company that was featured on season one of the show. Rhythm Arora, the co-founder of the company, claimed that the firm's monthly revenue saw a 12 times jump after that. So you see how the lure of this reality show on national television and what it can do for a brand is so strong. It's come to a point where even startups that have already been funded by VCs

and institutional investors want to get on Shark Tank. In fact, investors themselves are asking their founders to get on the show. So money is not the real goal for these startups. It is the marketing opportunity from the show that they want. But Sony, the producer of Shark Tank is not liking this one bit. and it's doing everything that it can to make sure that the show does not lose its real purpose, which is to be an investment platform. Welcome to Daybreak, a business podcast from the Ken.

I'm your host, Nagda Sharma, and I don't chase the news cycle. Instead, every day of the week, my colleague Rahil Filippos and I will come to you with one business story that is worth understanding and worth your time. Today is Monday, the 20th of May. Let's begin the story with Sony. My colleague the Ken reporter Gaurov Buggers spoke to three people who work in Shark Tank's production team. They told him that the company does not give any specific instructions on the deals and the terms that can be offered on the show. That is mainly just between the sharks or the panel of investors on the show and the participants.

But Sony has obviously noticed the growing trend of funded startups looking to make it to the show. So it's trying to prevent the platform from the show. being misused. For starters, it's recently been sending out copyright notices to startups which have been using the Shark Tank branding in their promotions. Sony has banned at least 18 startups from using Shark Tank India, Sony Live, Sony Entertainment Television logo, pictures, fonts and videos on their websites and social media. The only thing that these startups are allowed to do is mentioned as seen on Shark Tank India. To give you context, in season one of the show, only less than a fourth of the featured startups came with existing funding.

But in season two, close to half of them already came with funding. Now, Sony is the one that decides on the selection of certain startups from the pool of applicants for the show. So it can avoid taking startups that already have funding. But the problem is that even the number of eligible startups applying is falling down. For example, in season one, the show had a big pool of founders who did not want to raise money from VCs or didn't even have access to them. But now that is gone. So, the number of startups that can both appeal to Sony's audience profile and also be impacted by the typical shock tank size deal is limited. But how does this whole thing work?

Stay tuned to find out. You see, the thing with Shark Tank is that it's not. like the startups that do get on the show get a life-changing amount of investment from the shocks. According to Red Sears report, the average amount is around 60 lakh rupees. And even the valuations are not as per the expectations of the startups and their existing investors. A venture capitalist who has invested in some Shock Tank India featured startups in their personal capacity spoke to the Ken. And they said that the valuations you see on Shock Tank are very notional. And they don't really match up to the revenue. And that is a part of the cost of visibility. These VCs

are often also not very sure about the startups giving extra generous deals to the sharks. Redseer's report also points out that in nearly all the deals that were closed on the show, the sharks charged a premium for the platform that the show offers. Founders have had to typically dilute more than twice the equity at half the valuation compared to their original ask. So, we're well-funded start-ups have little to gain from Shark Tank in terms of capital. And even if they accept an offer, there is a lot of uncertainty and confusion about the deal closure after the camera stop rolling. Shark Tank's production team members told us that once a deal is done on the show, it is the shark's individual family offices that carry out the follow-ups. There is no involvement from the show's producer after the filming.

And because these are small investment teams that handle the portfolios of all, Over 30 to 40 startups, the due diligence process takes time. So it can become quite a headache for the founders and their investors also. For example, one food brand saw the shocks back out of the deal during the due diligence process. But its founder told again that they were not told why. But the founders also told us how they had anyway raised some money because they knew that deals do not often happen after the show is it. So they wanted to make sure that they were.

were not left high and dry. But they also confessed to us that they got what they wanted from the show, which was publicity, of course. And now going back to what Aman Gupta, the founder of boat and one of the sharks on the show had said about the kind of exposure that his brand got through Shark Tank. So it's not just well-funded startups that want to get on the show for publicity. Even the sharks see Shark Tank as a platform more for marketing than investment.

And that is where the irony lies. The sharks, who are already a well-established set of founders, can enjoy the free publicity that their brands get from the show. But startups trying to do the same are under Sony scanner. That is all for today. Also, I had done another daybreak episode on how Shark Tank has spawned an ecosystem of risky investments in India. You should really listen to it. I'll add the link to the show notes of this episode.

Thank you for listening. and remember the next episode will be dropping tomorrow because daybreak is now a daily. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. To subscribe, head to the Ken.com and click on the red subscribe button on top of the Kenberg. website. Today's episode was hosted by Snigda Sharma and edited by Rajiv Seele.