As one of the most popular programs on television, “Shark Tank” is helping the public hear the term “angel
Consider the recent news article, “Dallas Health Startup Investors Are Angels, Not Sharks.” I like the distinctions it makes between everyday angel investors vs. the maneuvering and drama on the TV show. This statement nails it:
On television, entrepreneurs who need money enter the Shark Tank. In real life, they turn to angels.
Like Mark Cuban and his fellow sharks on the popular television show, angel investors hear pitches from budding business owners hoping to create the next big thing. But unlike TV’s sharks, these local financiers don’t try to outmaneuver each other to snag the best deal. Instead, they put their heads together to discover the best opportunity.
Don’t get me wrong. I am glad Shark Tank exists. It is helping more people understand and get excited about early-stage investing and entrepreneurship. Heck, my mom, finally (sort of) understands what I do. Also, because of the show, more Congressional offices I talk to have heard of angels. This awareness helps efforts to promote public policies that might support the startup ecosystem.
It is also great to hear about entrepreneurs who benefitted from participating on the show. This article highlights a Seattle entrepreneur who received an investment offer - and excellent mentoring from a shark, propelling his business to the next level.
Even so, there are huge differences between what the public sees on Shark Tank and how angel investors - especially those in angel groups - actually operate. Here are a few:
- Shark bite: The sharks are far more aggressive than most angels when communicating with entrepreneurs and with each other. It creates great drama but isn’t respectful of the entrepreneurs. Most smart angels provide entrepreneurs constructive criticism and are collaborative with other angels. They ask a lot of challenging questions they need answers to, but they do it respectfully. Egos are also set aside. Angels who try to look like the smartest person in the room will be run out of their angel groups pretty quickly. This is part of an angel group's brand and code of conduct. If there is competition among angels, especially in groups, it happens behind the scenes, not in front of an entrepreneur. Real life angels focus on working together to make everyone successful.
- Wham bam thank you ma’am: Compared to real life, Shark Tank deals are compressed for “TV time.” I'm not sure most viewers recognize that what we see on TV is only part of the process the sharks go through before offering a deal. Smart angels rarely sign up for a deal after a two-minute pitch. They make smart investments by taking time for to vet deals and do due diligence. Follow up meetings with entrepreneurs can last hours, as can initial vetting. It takes time and deep questioning to find enough people who like the deal. The due diligence process can take a couple of weeks or longer. This provides time for the investors and entrepreneurs to get to know each other, building the basis for long-term success.
- Smaller tank: The types of companies that present on Shark Tank are limited and TV viewer friendly (often focused on consumer products that most can easily understand). On the other hand, angel groups and accredited platforms see a wide variety of companies. The focus spans complex medical devices and biotech, to business-to-business solutions to niche tech and more. Many of these products and markets are more difficult to understand than consumer products.
So are there any areas that sharks and angels agree on? You bet. Both look for entrepreneurial qualities and leadership in the entrepreneurs they support. Both run into starting valuation differences with entrepreneurs, and walk away from otherwise interesting deals when valuations are too high. Negotiation approaches might be different, but the result is often the same.
The reality of experienced angels might not make for exciting television, but “real world” angel investing is exciting for so many of us. Angels make huge differences for entrepreneurs and their communities by providing both money and expertise. It’s also thrilling to collaborate with other investors and entrepreneurs to bring the needed capital together with deal terms aimed at making all involved successful.
Maybe Shark Tank has inspired you to become an angel. If so, I encourage you to explore the “real world” of angel investing. Learn all you can from angel investors close to you. Angels and resources exist to help you learn best practices and smart angel investing processes.
Find some of these resources at the Angel Capital Association’s website, Investor IQ, Webinars, and events. Or take the fast track by joining the world’s largest gathering of angels April 14-16 in San Diego. Most importantly, remember that angels have fun by doing good and doing well.
