Ye meri expertise nahi hai. I am out!” — Shark Tank India judge Namita Thapar has said it so many times on the TV reality show that it sparked a meme fest on social media.
The phrase “expertise Nahi hai” might sound naive to some but it is nothing short of a very important mental model in the business of investing propagated by none other than Warren Buffett and Charlie Munger.
Although the show is designed as a platform for budding entrepreneurs to raise funds, new investors in the stock market can learn a lot from investing strategies from the sharks.
Five lessons from Shark
1) Take your expertise seriously Each time Thapar, Executive Director of Emcure Pharmaceuticals, rejects an investment proposal citing lack of expertise, all she is doing, knowingly or unknowingly, is following the Buffett-Munger’s circle of competence theory. “You don’t have to be an expert in every company or even many.
You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital,” Buffett had written in his 1996 letter to Berkshire Hathaway shareholders.
Like Thapar, stock investors too should not get into a business they do not understand.
2) Bhav Bhagwan Che When Delhi-based businessman Gaurav Goyal, who runs a Delhi-based ice cream business called Gopal’s 56, walked onto the sets of Shark Tank India seeking an astronomical valuation of Rs 1,200 crore against an annual sales of just Rs 4.5 crore, he learned about valuations the hard way.
If you are making sales of Rs 4.5 crore in a year, it will take you 70 years to achieve sales of Rs 300 crore from one shop. And you are asking Rs 300 crore from us for a 25 percent stake. This makes us feel like you are being silly. There is no business in this.
Even if you come to us 10 more times, I will say no,” BharatPe founder Ashneer Grover told the contestant in a rather harsh tone. On the other hand, when three Hyderabad-based entrepreneurs who sell coconut-based products under the brand name Coco fit offered a 5 percent stake in their company at a nominal Rs 5, three sharks jumped to bag the deal.
Whether it is a listed company or an unlisted startup, the golden principle of “Bhav Bhagwan Che (Price is God)” holds true.
3) Don’t be a copycat There have been several instances in the show where one judge found the business opportunity attractive while the shark sitting next to this person has rejected it.
In the business of investing, it is crucial to have a mind of your own. You don’t buy a stock just because a Rakesh Jhunjhunwala or Radhakishan Damani has bought it. What may work for a star investor might not work for you and vice versa.
4) Hunt for scalable businesses During their interactions, sharks grill budding entrepreneurs to understand how scalable their business models are. “I think what you are doing is a lifestyle business and not an investable and scalable business.
I want to be out of this (pitch),” Grover told Delhi entrepreneur Riya Khattar who runs a clothing business, Heart Up My Sleeves. In fact, one of the common reasons for rejecting a pitch on the show has been the instability factor for sharks looking for multi-bagger returns.
Whether you are hunting for a microcap or a Nifty50 stock, think about how scalable the business is and the runway for growth ahead.
5) Management matters Shark Tank India contestants were cross-questioned not just about the product and the revenue model but also about their motivation, confidence, and capability to scale up the business.
The raw entrepreneurial energy of several participants impressed the tycoons. “I always bet on two things. One is the entrepreneur and the other, the business.
Five lessons from Shark.
I do not have much idea about the business in this case. But I have faith that you will achieve something,” Aman Gupta, Co-founder, and CMO at boAt Lifestyle told Krishnan Sundararajan who had come up with metaverse startup Loka. In the stock market, too, you need to keep a hawk’s eye on what the company’s management is doing. Competent and honest management holds the key to a successful business.
