Hobbit Business Review

Why I Didn’t Go on Shark Tank — and How That Decision Actually Helped Me Scale

Key Takeaways

  • Know your investment options and understand the trade-offs involved in each one.

  • When it comes to pitching to investors, have a solid understanding of your financials.

  • By being ruthlessly accountable, you can stay on track and make necessary adjustments to your business strategy as needed.

One of the great misunderstandings that many entrepreneurs have is that all investment capital comes with the same strings attached, as you see on popular TV shows like Shark Tank. According to Crunchbase, global venture funding in Q2 2023 fell 18% quarter over quarter, down 49% from one year prior, making it more difficult than ever to land funding. Many startups wonder what avenues are available to them. If you are wondering the same thing, I have good news for you.

The Shark Tank-type of equity investment generally makes sense for a very specific type of business model — the ones that require massive upfront capital to start and scale. In reality, not all startups need to take on investment capital to succeed.

Even if you do need an injection of capital, there’s no inbuilt need to give up vast quantities of equity to an external investor. Know your options and understand the trade-offs involved in each one. As the CEO of an 8-figure consumer goods company, we knew early on that shows like Shark Tank were not the best path for us. There are key reasons why.

Before you start pitching to investors or appearing on reality TV shows, here are five crucial steps that can help you scale your business without taking on investment capital and know when you should:

1. Identify your business model

First, identify the type of business model — as well as the route to market — you have. Are you in the real estate industry? Are you a service provider, or do you sell products? This will help determine whether or not you actually need investment capital to launch and grow your startup.

Real estate businesses often require significant upfront investments, making it necessary to take on outside capital, but it is not always required. For example, a friend of mine operates multiple properties with storage units. For him, it made sense to start brick by brick and begin creating a foundation. At this point, he can continue to build brick by brick, or there could be an alternate route where he would bring on investors to help him scale quicker, making sure not to get over-leveraged. However, if your business involves selling a product like ours with Carbliss, there may be other options available to you, such as crowdfunding or bootstrapping.

Bootstrapping can be risky. It allows you to maintain complete control of your company and avoid giving up equity. This is what we did for our first two years prior to bringing in an angel Investor. Crowdfunding can be a great way to raise capital without giving up too much control as long as the infrastructure is set up correctly.

Many times, founders can start by bootstrapping to gain traction and prove the proof of concept for the business. They raise funds later to maintain control of the company and give less equity to the other stakeholders. This is how Carbliss was able to scale. We ensured the product and market were a fit, and our angel investor continues to add value beyond their financial means almost three years later, which has kept us from having to raise other outside funds. There may come a time when we have to raise funds. Even though we are profitable and growing fast, that scares many banks, and cash will always be our biggest challenge to ensure we have enough product to support our growth.

2. Test your product and market

No matter what type of business you have, thoroughly test your product and market before seeking outside investment. This not only helps you understand your customers and their needs but also gives potential investors more confidence in your business. Additionally, it forces you to learn on your own dollar. I’ve seen many founders raise money, then not respect it as much because it was given to them.

Investors want to see that there is a demand for your product or service and that you have a solid understanding of your target market. By testing your product and market beforehand, you can fine-tune your offerings and increase the chances of securing investment capital in the future.

3. Know your numbers

When it comes to pitching to investors, have a solid understanding of your financials. Know your numbers inside and out, including revenue projections, expenses, and potential risks. Investors want to see that you have a sound financial plan in place and that you are making informed decisions based on your data.

This also helps you avoid overestimating your finances and setting unrealistic expectations for growth. At Carbliss, we made sure to understand the production costs, timelines to distribution, and our margins across the board. If we wanted to raise funding, we knew we were not putting ourselves in a risky situation to take on debt without a clear understanding of what the business fundamentals could bear.

4. Hold yourself ruthlessly accountable

As a startup founder, hold yourself accountable for the success of your business. This means setting clear goals and regularly monitoring your progress towards achieving them.

By being ruthlessly accountable, you can stay on track and make necessary adjustments to your business strategy as needed. This also demonstrates to potential investors that you are committed and capable of making your startup successful.

You will often see people take accountability when things are going well, and then point fingers when they don’t. I still recall taking some advice in the second year of our business that had me forecast about 10x what we actually hit for that year. I had to take a hard look in the mirror and analyze what I missed so we could get better at planning for inventory and finances.

5. Invest in scaling what is working

Finally, when scaling your business, many startups make the mistake of spending too much time and energy on fixing problems instead of investing in what is already gaining traction.

To accelerate your growth and attract more investors, invest in scaling what is working. Avoid wasting resources on trying to fix something that may not be essential for the long-term success of your business.

Albert Einstein said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Put money where you know you will get a return rather than where you think it might start something.

Bringing it all together

Taking on investment capital is not the only way to scale a startup. By identifying your business model, testing your product and market, knowing your numbers, holding yourself accountable, and investing in what is working, you can achieve success without giving up too much equity.

While appearing on Shark Tank may seem like a dream for many entrepreneurs, I did not want to go on the show. It would have been contrary to our business growth plan; our sales plan at retail was to build backyard to backyard, and National exposure would not have been as beneficial as it could be in about 5-7 years.

Understand that there are other options available. By following these steps and being strategic about your business decisions, you can build a successful startup without relying on too much external investment. Ultimately, what matters most is finding the right path for your business, staying accountable to your numbers, having the right partners and being confident in the direction your choices take you.

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