What I Learned From "Shark Tank" — by Dan Lynn
By Dan Lynn
One of the greatest challenges for a technology entrepreneur is scaling sales. Even if you have an incredible application, it can take far too much time and money to create awareness and win customers. Most startups don't have the funding to build a real sales organization — and even if they did, the cost to acquire each new customer can be extremely high. This is exactly the challenge we face right now with one of the companies we're building, in the marketing technology space.
Marketing is going through an incredible transformation driven by technology — both the technologies customers use to engage with companies (internet, mobile, social) and the technologies companies use to engage with customers (the "marketing stack": marketing automation platforms, CRMs, demand-side platforms, and more).
Much like Apple did when it created the App Store for the iPhone, many of these platforms have recently "opened up" to let entrepreneurs build applications on top of them. It's a smart move: rather than doing all the innovation themselves, the platforms let outside entrepreneurs drive it for them. And that creates a tremendous opportunity — suddenly you can tap into these much larger players and grow through their customers, their sales teams, and their marketing. Honestly, this isn't something I was smart enough to focus on twelve months ago.
As an entrepreneur, I love watching Shark Tank. The business ideas, the passion of the founders, the back-and-forth between the sharks and the entrepreneurs, the valuations, the negotiations, the deal structures, the deals — all of it fascinates me.
I was recently watching an episode featuring Lord Nut Levington, a company innovating in the peanut market with seasoned peanuts. During the questioning, Kevin O'Leary challenged the company's ability to scale: "You are going to have to replace some linear footage in major retailers against a guy that has 80% of the market." In classic Mr. Wonderful fashion, he was essentially telling them he'd "crush you like the cockroach that you are."
In response, the company's founder, Sanjiv Patel, fired back: "In fact, in our industry, it is very common that entrepreneurs (people like me) create brands. It is the role of the multinationals, the larger companies, to then scale those brands."
Mark Cuban responded, "Well said." Robert Herjavec added, "That's a great answer."
And it really was a great answer. Although he was talking about the food industry, he had described exactly the opportunity in front of us and every other technology entrepreneur. It's precisely what's happening in our space right now with these platform integrations. Every application can take advantage of it — and the best, most innovative ones, the ones that add the most value, will become acquisition targets for the larger players.
So thank you, Shark Tank, for helping me see it.
Questions this Key Learning answers
How can a startup scale sales without building a sales team?
The author learned that a startup can build on established platforms and grow through their customers, sales teams, and marketing. Rather than recreating expensive sales machinery, entrepreneurs can use integrations and marketplaces as distribution. Our analysis describes this division of labor simply: startups create and prove valuable products, while larger companies provide scale.
How do I choose the right platform for my product?
Our analysis points to platforms whose existing customers already experience the problem the product solves. The author saw an opportunity in marketing platforms that had opened themselves to outside applications. A strong integration makes the platform more valuable while giving the startup access to customers and distribution that would otherwise take substantial time and money to build.
What makes a startup attractive for acquisition by a larger company?
The author argues that the best and most innovative applications—especially those adding the most value—can become acquisition targets for larger platform companies. Our analysis adds that evidence of customer demand is crucial. The larger company is not merely buying a product; it is acquiring proven demand and an innovation it did not have to discover or fund internally.