Decoding Shark Tank Guide to the Show’s Unique Phrases
For any entrepreneur seeking investment, knowing the right terms and mastering the “language of startups” can make all the difference in a pitch. When entrepreneurs know their metrics, have a strong business model, and can field investor questions confidently, it leaves a lasting impression. Below, we’ll go through the most critical terms investors look for, breaking each down with purpose, examples, and even the pros and cons.
1. Valuation
Definition: Valuation represents the estimated worth of your company, based on market conditions, revenue, assets, and growth potential.
Brief Details: Calculating valuation helps determine what percentage of the company investors receive for their investment.
Components: Revenue, profits, intellectual property, market trends.
Purpose: Valuation anchors negotiations and determines how much equity you’re giving up.
Importance: It helps set realistic expectations with investors.
Example: A startup with a valuation of $1 million offers 10% equity to an investor in exchange for $100,000.
Pros & Cons:
Pros: High valuations can attract more investor interest.
Cons: Overvaluation can lead to challenges in future funding rounds.
2. ARR (Annual Recurring Revenue) / MRR (Monthly Recurring Revenue)
Definition: ARR is the annual revenue from recurring sources, and MRR is the monthly equivalent.
Brief Details: ARR/MRR are metrics primarily for subscription-based models, indicating predictable revenue.
Components: Subscription fees, customer retention, churn rate.
Purpose: ARR/MRR shows stability in recurring revenue, which is attractive to investors.
Importance: Investors use ARR/MRR to assess financial health and growth potential.
Example: If your MRR is $10,000, your ARR is $120,000.
Pros & Cons:
Pros: Provides a predictable income stream.
Cons: Heavily influenced by customer retention rates.
3. MOA (Memorandum of Association) and AOA (Articles of Association)
Definition: MOA outlines the company’s objectives, while AOA contains internal rules
Brief Details: These legal documents form the foundation of a company’s constitution.
Components: Objectives, board roles, company rules.
Purpose: Set guidelines for operation and governance
Importance: Essential for defining rights, responsibilities, and the legal structure.
Example: The MOA for a tech startup may specify software development as the core objective
Pros & Cons:
Pros: Ensures legal protection and governance.
Cons: Requires expert legal setup.
4. Pre-Funding and Post-Funding
Definition: Pre-funding refers to the phase before securing investment; post-funding is after
Brief Details: These terms help investors gauge a company’s progress.
Components: Funding stage, investor confidence, valuation
Purpose: Set milestones for growth and development.
Importance: Helps investors understand the company’s readiness.
Example: Pre-funding rounds often involve friends, family, and angel investors
Pros & Cons
Pros: Post-funding usually means increased resources.
Cons: Equity may be diluted post-funding.
5. Business Model
Definition: The strategy by which a company generates revenue and profits.
Brief Details: Lays out how a company will attract customers and make money.
Components: Value proposition, revenue streams, target market.
Purpose: Provides a roadmap to financial success.
Importance: A solid business model is key for investor confidence.
Example: Subscription model for SaaS businesses
Pros & Cons:
Pros: Clear business model can attract investment.
Cons: Rigid models can stifle growth in evolving markets.
6. Pitch Deck
Definition: A concise presentation highlighting your business’s value to investors.
Brief Details: Contains all essential information in an appealing, easy-to-digest format.
Components: Problem, solution, market size, financials
Purpose: Capture investor interest and encourage funding.
Importance: First impressions matter, and a pitch deck is often the first
Example: Airbnb’s original pitch deck is famous for its simplicity and clarity.
Pros & Cons
Pros: Summarizes business effectively
Cons: Limited space for details.
7. Fundraising
Definition: The process of seeking capital to grow the business.
Brief Details: Entails pitching to potential investors, negotiating terms, and structuring deals.
Components: Funding rounds, equity dilution, investor relations.
Purpose: Acquire the financial resources needed to scale.
Importance: Determines a startup’s ability to expand and reach new milestones
Example: Series A, B, C fundraising rounds.
Pros & Cons:
Pros: Provides essential growth capital.
Cons: Risk of founder equity dilution
8. Monetization Models
Definition: Strategies for generating revenue from products or services.
Brief Details: Determines how the company makes money
Components: Subscription, freemium, ads.
Purpose: Establish consistent income streams.
Importance: Shows investors that there is a clear path to profitability.
Example: Ad-supported or subscription-based models for apps.
Pros & Cons
Pros: Clear revenue generation.
Cons: Changing models can be difficult.
11. Pre and Post Money Valuation
Definition: The value of a company before (pre-money) and after (post-money) investment.
Brief Details: Crucial for understanding ownership stakes.
Components: Pre-money valuation, investment amount.
Purpose: Determine how much equity is exchanged for capital.
Importance: Key for negotiating with investors.
Example: $2 million pre-money, $500k investment, leads to $2.5 million post-money.
Pros & Cons
Pros: Transparent equity calculation.
Cons: Founder ownership dilution.
12. Debt
Definition: Borrowed funds that must be repaid with interest.
Brief Details: Common financing without equity exchange.
Components: Principal, interest rate, repayment terms.
Purpose: Finance growth without giving up equity.
Importance: Helps avoid equity dilution
Example: Bank loans, venture debt.
Pros & Cons:
Pros: Retain ownership
Cons: Repayment obligations can strain cash flow.
13. Equity
Definition: Ownership stake in the company.
Brief Details: Key in startup financing, as it represents shares.
Components: Common shares, preferred shares.
Purpose: Allow ownership and control distribution.
Importance: Helps attract investors.
Example: Common stock issued to employees, preferred to investors.
Pros & Cons:
Pros: Can attract committed stakeholders.
Cons: Dilution risk for founders.
Additional Terms to Know
Other valuable terms to explore include :
Runway, Churn Rate
Customer Acquisition Cost (CAC)
Lifetime Value (LTV)
Product is king
The art of Branding And Storytelling
Building a loyal Customer Base (Retention ,CRM, and Support)
Omnichannel Growth
Building Your 0-1 Team
Figure Out Investors Internal Returns Mechanism
Plan Financial Instruments & Deal Structuring
Learn Fundraising & Treasury
Types of Investors , Organisation, Major Steps of Fundraising,
Legal Landscape
Debt vs Equity – Make informed Decisions
Common Questions in Fundraising &Financing any many more….
These concepts play a crucial role in understanding and planning a business’s financial and growth trajectory.
To dive deeper into these and unlock personalized resources, sign up at IMCORD.com for exclusive insights tailored for entrepreneurs and startup enthusiasts.
Decoding Shark Tank: A Comprehensive Guide to the Show’s Unique Phrases
- Introduction: The Language of the Tank
Brief overview of Shark Tank
Importance of understanding the show’s terminology
- Valuation Vernacular: Understanding the Number
“What’s your valuation?”
“You’re asking for too much equity”
“Pre-revenue vs. post-revenue valuation”
III. Deal-Making Dialogue: Negotiation Phrases Explained
“I’ll make you an offer, but I need an answer right now”
“I’m going to make you an offer you can’t refuse”
“Let’s sweeten the deal”
- Red Flags and Deal Breakers: Phrases That Spell Trouble
“You’re dead to me
“You have too much inventory”
“Your customer acquisition cost is too high”
- Shark-Specific Catchphrases: Trademark Terms of the Investors
Kevin O’Leary: “You’re dead to me” and “It’s all about the money
Mark Cuban: “I’m out” and “That’s a gold-digger, not a business
Lori Greiner: “Hero or zero” and “I can take this business to the moon”
- Investment Strategy Lingo: Understanding the Sharks’ Approac
“Is this scalable?
“What’s your customer lifetime value?”
“How defensible is your product?”
VII. Pitching Perfection: Key Phrases for Entrepreneur
“We’re seeking [amount] for [equity percentage]
“Our sales have doubled year over year
We have a patent/proprietary technology”
VIII. Conclusion: Mastering the Shark Tank Lexicon
Recap of key phrase categories
Importance of understanding these terms for entrepreneurs and viewers
