Shark Tank India: Commonly Used Terms

Nisha Rajput ✉

"Shark Tank India," like its global counterparts, is a treasure trove of business terms and jargon that both entrepreneurs and investors use to negotiate and articulate the value of a business proposition. 

Representative picture

Whether you're a budding entrepreneur, a student of business, or simply a fan of the show, understanding these terms can significantly enhance your grasp of the discussions and decisions unfolding on screen. Here's a breakdown of common business terms used in "Shark Tank India," tailored to engage a general audience with an interest in the entrepreneurial ecosystem.

Common Business Terms Used in Shark Tank India

Equity: Refers to an ownership part or interest in a company. Entrepreneurs offer a percentage of their company's equity to the sharks in exchange for investment.

Valuation: The process of determining the current worth of a company. It is often a point of negotiation, as entrepreneurs and sharks may have different views on the company's value.

Due Diligence: A comprehensive appraisal of a business undertaken by a prospective buyer (in this case, the sharks), especially to establish its assets and liabilities and evaluate its commercial potential.

Scalability: The potential of a business to grow and manage increased demand. A scalable business model implies the company can increase its revenue without a corresponding increase in costs.

Bootstrapping: Starting and growing a business without external help or capital. Entrepreneurs who bootstrap their ventures fund the development of their product or service through internal cash flow and are cautious with their expenses.

Pitch: A concise presentation aimed at convincing investors (sharks) to invest in a product or a business idea. It typically includes the business model, market opportunity, revenue model, and the ask.

ROI (Return on Investment): A measure used to evaluate the efficiency or profitability of an investment. It compares the magnitude and timing of gains from an investment directly to the magnitude and timing of investment costs.

Convertible Note: A form of short-term debt that converts into equity, typically in conjunction with a future financing round; essentially, the investor loans money to a startup and instead of getting the money back, gets stock in the company.

Term Sheet: A non-binding agreement setting forth the basic terms and conditions under which an investment will be made. It is a template to develop more detailed legal documents.

Minimum Viable Product (MVP): The most pared-down version of a product that can still be released. An MVP has enough features to attract early adopter customers and validate a product idea early in the product development cycle.

Market Saturation: A situation in which a product has become distributed within a market to the fullest possible extent. The presence of market saturation indicates there may be limited room for growth.

Leverage: In a business context, leveraging could mean using borrowed capital for investment, expecting the profits made to be greater than the interest payable. In negotiations, leverage is the advantage one party has to influence another party to move towards their position.

Burn Rate: The rate at which a new company spends its venture capital to finance overhead before generating positive cash flow from operations; essentially, it's how quickly a company goes through its capital.

Exit Strategy: The method by which an investor or business owner intends to exit their investment in a company. Common exit strategies include IPOs, acquisitions, or selling one's stake in the company.

Synergy: The potential additional value from combining two companies (often discussed in the context of mergers or acquisitions). It's the idea that the combined performance and financial results of two companies will be greater than the sum of the separate individual parts.

ROAS (Return on Advertising Spend): A metric that measures the revenue generated for every dollar spent on advertising. It helps businesses assess the effectiveness of their advertising campaigns. A higher ROAS indicates a more efficient ad spend.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a company's overall financial performance and is used as an alternative to net income in some circumstances. EBITDA highlights the profitability of a company's operations excluding the impact of financial and accounting decisions.

Net Profit: The actual profit after working expenses not included in the calculation of gross profit has been paid. It's what remains from revenue after all costs are subtracted. This figure indicates the overall profitability of a company.

Gross Profit: The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. It does not include overhead costs such as rent, utilities, payroll, etc.

Pivot: A strategic shift in a business model or product direction after receiving feedback from the market. This term is often used when a startup changes aspects of its business to pursue a more profitable or sustainable market opportunity.

Product-Market Fit: A scenario where a company's product satisfies strong market demand. It's often considered a critical early-stage achievement for a new product, indicating that the product is meeting the needs of its target market effectively.

Cash Flow: The total amount of money being transferred in and out of a business, especially as affecting liquidity. It's critical for daily operations, taxes, purchasing inventory, and paying employees and operating costs.

Burn Rate: The rate at which a company is spending its capital to finance overhead before reaching profitability. It's a measure of negative cash flow, particularly important for startups.

Customer Acquisition Cost (CAC): The cost associated with convincing a consumer to buy your product or service, including marketing and sales expenses. Lowering CAC can significantly impact a company's profitability.

Lifetime Value (LTV): The total revenue a business can reasonably expect from a single customer account throughout the business relationship. Focusing on increasing LTV can drive sustainable business growth.

Founder: The individual or individuals who start a company. They are the ones with the original idea, vision, and drive to create the business. Founders are often involved in the day-to-day operations and the strategic direction of the company.

Co-Founder: These are the individuals who, alongside the founder, help start the company. They share the responsibilities of launching the business, including contributing to the original idea, business plan, and early development of the company. The distinction between a founder and a co-founder is sometimes fluid and can be based on the level of contribution to the company's creation.

Founding Member: This term can be broader than founder or co-founder and might include the initial core team members who were there at the inception or very early stages of the company. They may not have been involved in the original conception but played a crucial role in the early development and growth of the company.

Angel Investor: An angel investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. Angels are important for startups because they may invest at stages when other investors are not ready to take the risk.

Venture Capitalist (VC): VCs are investors or investment firms that provide capital to companies showing high growth potential in exchange for an equity stake. They usually come in after angel investors, during later stages of growth, and can provide larger amounts of capital.

Strategic Partner: A strategic partner is an individual or organization with whom a company forms an alliance to share resources, information, technology, or products to advance mutual goals. These partnerships can provide critical market access, capabilities, or funding and are often key to scaling the business.

Seed Fund: This is an initial investment aimed at helping a startup grow and generate its own capital. Seed funding is typically used to support early-stage companies for product development, market research, and setting up their operations.

Series A, B, C, etc.: These are rounds of financing a company goes through to help with scaling operations, entering new markets, and further developing products. Each round is a progression, with Series A being an early stage where the business model is being proven, Series B is about taking the business to the next level, and Series C and beyond are usually about scaling rapidly. Investors in these rounds can include venture capital firms, angel investors, and strategic partners. Each round comes with a reassessment of the company's valuation, and investors receive equity in exchange for their capital.

Unicorn

In the world of business and finance, a "unicorn" refers to a privately held startup company valued at over $1 billion. The term was coined by venture capitalist Aileen Lee in 2013, choosing the mythical animal to represent the statistical rarity of such successful ventures. Unicorns are noted for their rapid growth, often driven by innovation, disruptive business models, or unique technology. They span across various industries, including technology, healthcare, and finance. Examples of unicorns include big names that have become household names, even before going public or being acquired.

Initial Public Offering (IPO)

An Initial Public Offering (IPO) is the process by which a private company becomes a publicly traded company by offering its shares to the public for the first time. An IPO allows a company to raise equity capital from public investors, with the shares being listed on a stock exchange. This process involves a transition from being privately owned, where a small group of shareholders holds all the equity, to being publicly owned, where members of the general public can buy, sell, and hold the company's shares. Going public is a significant step for a company, as it provides access to capital markets for funds to fuel growth, increases the company's visibility, and may allow original investors and founders to realize some of their gains. However, it also comes with greater regulatory scrutiny, the need for transparency, and the pressure of quarterly earnings reports.

These terms collectively represent the ecosystem around startups and high-growth companies, involving the individuals who found and built the companies, as well as the various forms of capital and strategic relationships that help these companies grow.

Understanding these terms can significantly enhance your viewing experience of "Shark Tank India," providing deeper insights into the strategies, negotiations, and decisions of entrepreneurs and investors. Whether you're considering starting your own venture or simply enjoying the dynamics of business negotiations, this glossary is a handy guide to the complex yet fascinating world of entrepreneurship showcased on the show.