Shark Hark: Investments in Shark Tank India

What data reveals about the deals in Shark Tank India

Shark Tank is a show where innovators, entrepreneurs, and business owners get an audience of investors on TV. I had always admired the American version of the show and was obsessed with watching the negotiation part of deals. This is why I was super ecstatic when the news of India's version of Shark Tank was announced. 

The collection of Sharks was interesting; Some were outspoken & harsh, while some conservative and cautious. Here are the descriptions of the Sharks' businesses so that you get an idea of this eclectic blend of investors. 

• Anupam Mittal: CEO and Co-founder of People Group, although he is mainly known for founding Shaadi.com (an Indian matchmaking online platform). 

• Aman Gupta: CMO and Co-founder of BoAt Lifestyle (a very fast-growing audio and wearables brand)

• Vineeta Singh: Co-founder & CEO of Sugar Cosmetics. 

• Ashneer Grover: (Past) MD & CEO of BharatPe, a fintech company involved in digital payments. 

• Namita Thapar: Executive Director of Emcure Pharmaceuticals. She is the only one who is a second-generation entrepreneur on the panel. 

• Ghazal Alagh: CEO and Cheif Innovation Officer of Mamaearth (skincare company)

• Peyush Bansal: Founder & CEO of Lenskart (online eyewear company)

With this edition of the newsletter, I want to, using data from the first season of Shark Tank India, give you an insight into these Sharks' investment styles and strategies. 

Although there isn't any official limit on the company size or investment amount listed anywhere, we can see in the histograms below that small companies and early stage start-ups are the most preferred investment for the Sharks. 

Figure 1 & 2: Investment Amount and Size in Shark Tank India. Y-axis is the frequency

Now using some of the econometrics I learned as an undergraduate, I wanted to look at their investment and negotiation strategies with statistical precision. So, I ran a regression with equity as the dependent variable and the sharks' decision to invest as independent variables while controlling for the investment amount. 

For those from a non-math background, I simply compared how much equity each Shark got on average from the same investment amount. 

Consider this hypothetical for my rationale: If Namita gets more equity on average than Peyush for the same investment amount, it could perhaps be the case that Namita is a more assertive negotiator. Founders are willing to cash in more equity for her money than other investors. So, I wanted to get some idea of their negotiation styles using this analysis. 

The graph below shows that Peyush and Vineeta got the most bang (equity) for their buck (investment). They got almost 10% more equity than the average Shark for the same investment. Ashneer, on the other hand, gets 4% less equity for the same investment than the average Shark. 

Figure 3: Average equity purchased by the sharks (values in %). Ghazal was the baseline here; read her as ‘(intercept)’

These differences are huge and cannot be accounted for by only one reason. It might not be the case that Vineeta and Peyush are star negotiators, while Ashneer isn't. After all, we live in a multicausal world! To investigate this puzzle, I look at company valuations across investors.

Figure 4: Average valuation of the companies after the Sharks invested in them

Now, this is where it gets interesting. The graph above shows the average valuations of the companies when the respective sharks invest in them. Ashneer and Aman tend to invest in higher valuations, whereas Vineeta, Ghazal, and Peyush are drawn to companies with lower valuations. These preferences give us some clues to solve the puzzle. Bigger companies tend to only give away a small portion of their equity, unlike smaller companies, who attract more equity from Sharks. This might be because smaller companies need more direction, so the Sharks want a bigger seat at the decision table for the same investment amount. Similarly, Sharks in big companies are more silent than strategic, so their equity demands are lower for the same investment amount. It is as if the Sharks tend to charge a 'premium' for investing in small companies¹. It is the premium that these sharks charge which could be driving trends in Figure 3.

So, Shark Tank, for all its intrigue about unknown, real-time, and high-stakes pitches, does follow some patterns in terms of investment amount & equity buying. Some stark individual preferences of the Sharks may go unnoticed on TV, but not in data. 

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Trivia: My favorite Shark Tank pitch was from a company called 'Hoovu Fresh,' which aired in the 1st episode of Season 2. Comment your favorite pitch down below!

All of the data analysis and visualization was done in RStudio.

If you are a subscriber, you can access the code files by emailing me at akshar.k11@gmail.com 

1. Thanks to Amaan Andicot who helped me thoerize the story behind this chart