First Rule of Shark Tank

The First Rule of Shark Tank is to never cite the size of the market in which a company or product wants to enter as validation for the idea that the product will become a success.

As an example, Company A makes baby clothes. In order to entice the sharks into investing into a company that will be entering a market with fierce competition and a few large dominating brands, the entrepreneur(s) says that the entire baby market is worth "$100 billion dollars". The implication of this statement is that even a small percentage of this large market would make the company a success that would earn back the sharks' investment.

Even worse, is when an entrepreneur explicitly says, "If we can get even half of a percent". This is considered a bad thing to do because it is misleading.

Consider the idea that the commercial aircraft market is estimated to be $202,000,000,000 by the year 2022.[1] If an entrepreneur said that by getting "even just 1%" of that market, they would earn $10,000,000 in yearly revenue. Which... sounds great! Except that the commercial aircraft market is dominated by Boeing, Airbus, and a few smaller manufacturers. Breaking into the commercial aircraft market is almost impossible so that 1% of the market they hope to siphon off is illusory at best.

This is why, especially in the later seasons, the sharks groan whenever an entrepreneur cites the total market size and Mark Cuban has designated not saying this as the "First Rule of Shark Tank."

References

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This page was last edited on 5 February 2020, at 11:19.