When start-ups dive into Shark Tank, anything is possible. From the belly-button enhancer to the glass ka mask, no idea is too bizarre for India’s Sharks. And the mundane done-to-death ideas are often ignored.
That’s what happened to Uma and Anjali Jha who made a pitch for Rs 50 lakh for their pickle business, JhaJi, on the first season of the reality show, Shark Tank India. The two sisters-in-law were sent packing to their hometown Darbhanga, Bihar.
But a year later, Shark Tank India’s judges— Emcure Pharmaceuticals’ executive director Namita Thapar and Sugar Cosmetics CEO Vineeta Singh— went all the way to Darbhanga to invest in their business. They paid the sister-in-law duo Rs 85 lakh, more than the amount they had asked for in the show.
That’s the magic of Shark Tank India. For thousands of hopeful entrepreneurs with big dreams, the TV show dangles the carrot of funding. It holds the promise of guiding them to the pot of gold at the end of the rainbow.
The market reality, however, is grimmer. In 2022, more than 2,000 start-ups failed, a fact nobody likes to focus on.
But Shark Tank India, according to its judges, gives that extra boost of confidence to aspiring entrepreneurs from pockets of India where business is never the first choice for a child’s future. After all, Darbhanga is not the first name that would pop up in anyone’s mind as a start-up hub.
Between the first and second seasons of the reality show, there’s been a noticeable shift. The playground has expanded beyond Mumbai, Delhi and Bengaluru to include Jaipur, Darjeeling, Pune and even Darbhanga. Shark Namita’s start-up is also based in Pune.
“When I started in 2008, I was probably the only start-up in Jaipur. But the success of CarDekho has encouraged people to take up business as a career, and now there are 500 startups in Jaipur alone. That’s what a successful startup does in a tier 2 city—create an ecosystem for others to come up,” says Amit Jain, the CEO and co-founder of GirnarSoft, an IT externalising company that launched the popular start-up CarDekho.
The latest report, ‘Indian Tech Start-up Funding Report 2022’ documents this trend. It found that Chennai is the emerging space for start-ups, followed by Pune, Hyderabad, Ahmedabad and Jaipur. In 2022, the top five start-up hubs in India were Bengaluru, Delhi-NCR, Mumbai, Chennai and Hyderabad. Chennai registered the highest year-on-year change in terms of total funding amount (182 per cent) and deal count (129 per cent).
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Small-town heroes
JhaJi’s story may seem like a fairytale in the way the business picked up, and how the Sharks decided to ‘rectify’ their mistake of not investing in it. There are advantages to launching a start-up in a small town. “You can start with less capital, and also be closer to your immediate resources,” says Jain.
Amit Jain started his journey as an entrepreneur in 2007 in Jaipur, a city not usually associated with start-ups.
His success story is the result of constant and elaborate customer feedback, which is a feature of Tier 2 and Tier 3 cities. “People have the time to give customised feedback of your service/product. In a metro, we do not even know who our next-door neighbour is,” he adds.
For JhaJi products, the prime procurement is vegetables and ingredients sourced directly from farmers, so being closer to the farmlands is an advantage.
A founder often has to multitask, from being a coder to a problem-solver to managing human resources. In a smaller town or a rural space, there is less competition. The cost of running operations is not debilitating.
But the lure of finding an investor conveniently in a metro city often propels founders to set up their companies there. This has its advantages such as stronger networking and easier access to resources of a wider variety.
But the flip side is the high cost of doing business. With the cost of renting commercial spaces in cities like Bengaluru, Delhi or Mumbai, one has to cut bigger corners or have a bigger investment. Networking can often become about just keeping up appearances as opposed to it actually benefiting the start-up. In a Tier 1 city, the competition is also stiffer because multiple similar startups are vying for capital and the market.
Though the US version of Shark Tank has been around for 14 seasons, its Indian avatar released in 2021. Suddenly, terms like ‘unicorns’ (not the mythical creature) became dinner table conversations as Indians took notice of the start-up economy.
“The show is great to spread awareness about start-ups and expand the base of young people who might want to do start-ups especially down the socio-economic strata and to smaller towns and rural areas,” says Sanjeev Bikhchandani, co-founder and executive vice chairman of Info Edge.
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Incubation period business
But what happens after pitchers get the money in Shark Tank? That’s the part you don’t often get to see on the show.
The ‘cheques’ offered on the show are just a token of agreement. The documentation and further discussions between companies and Sharks, who are investing in it, take place much later.
What comes after a startup gets funding is referred to as the incubation period. It is not very different from the incubation period in a chemistry laboratory. It essentially gives time to companies to design and conduct experiments, and use the results to get as close to a viable and valuable manifestation of a new artifact as possible.
“It’s always better to start pitching in the early stages of the business as investors gradually get to know you. There is a timeframe for you to make them understand your idea, you have to cater to that timeline in an effective way,” says Ayush Atul Mishra, CEO and co-founder of Tattvan E-Clinics.
Without incubation, the metaphorical baby that is the start-up cannot fully develop. It has generated a whole new market of incubator organisations that help start-ups to develop sufficient financial, human, and physical resources to function on their own. An incubator firm offers services like office space, administrative functions, mentorship, access to investors and capital, and idea generation.
While some incubator firms work for a fee, some work to gain equity in the company in exchange for services or seed capital. The latter is what Sharks do once they like an idea and invest in it.
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How do the Sharks do it
Once a Shark gives a cheque to a pitcher, it is not a ‘happily ever after’ scenario like in a typical Bollywood movie.
“I like to be a sounding board, a coach and a mentor after investment. As someone who also had prominent investors investing in my company, I have learnt that an investor should not overburden. They should empower but not suffocate the start-up,” says Namita Thapar.
As the incubation period plays a crucial role in the success or failure of a start-up, investors tend to keep a close watch on the fledgling company they decide to invest in. This also helps a relatively new group of people who may have an exciting new idea to get the necessary support from a more seasoned player in the market.
“In the incubation stage, an investor needs to spend time to figure out where the start-up needs help and the areas in which it is strong, and help them expand their horizons,” says Jain.
Both Namita and Amit started out in Tier 2 cities, and have successfully helmed businesses that are now brands to reckon with. This also makes them the perfect candidates for helping out pitchers with their innovative ideas.
“You have to break the experience and check with your customers constantly what they like or dislike about what you are creating,” says Jain.
Start-ups usually don’t have the luxury of spending too much money. They have to be bootstrapped to ensure that they don’t bleed to death before taking off.
A successful startup is not decided by the cheque handed out to its founder, but by how well they utilise its strengths and manoeuvre its weak points.
“You should not aim for a perfect product, but for a better version than the last one,” says Jain.
(Edited by Ratan Priya)