Q&A | Stephan Aarstol: The Whatcom native and entrepreneur swims with the sharks on national TV

Stephan Aarstol swam with sharks, survived long enough to sell them an investment—and even got one to bite.

Aarstol, a Whatcom County native who now lives in San Diego, appeared on a March 16 episode of the ABC reality show “Shark Tank.” The show pits entrepreneurs against a panel of “sharks” – successful, well-known investors.

Entrepreneurs must sell their products or company ideas to the sharks and get at least one to agree to become partners.

The show, now in its third season, stars billionaire Mark Cuban, owner of the Dallas Mavericks; Daymond John, founder of urban clothing brand FUBU; Kevin O’Leary, an entrepreneur who sold his educational software company to Mattel for $3.7 billion; Barbara Corcoran, an investor who built a $5 billion real estate empire; and Robert Herjavec, a technology entrepreneur who sold his first company for more than $100 million.

Aarstol pitched his company Tower Paddle Boards, which sells stand-up paddle boards online.

Though he struggled through his pitch after a technology-related flub left him visibly flustered from the start – Corcoran even called him the worst presenter she’d ever met – Aarstol made it through and managed to wrangle deal with Cuban.

Now that he’s out of the tank, we asked Aarstol about his experience on the show and how well he thought it related to the real world of business.

BBJ: Tell us about your strategy. How did you plan to swim with the sharks?

Aarstol: There are a lot of unknowns going into the “Shark Tank.” To be honest, my strategy focused around just getting to the final pitch stage. My strategy was survival.

The audience doesn’t see the behind-the-scenes element to the show, but it’s like running the gauntlet to just get to the point where you actually do the live pitch to the sharks. For me, at least, the last six weeks leading up to the taping of the show were pretty intense.

You’re running a company at the same time this is all going on. I was running two. The show taped during my busy summer season, and I was on vacation for a big chunk in the middle. I was literally ducking out of family gatherings and taking conference calls with the producers.

To add to your disorientation, you only get information on a need-to-know basis, so you’re blind past the next few days or a week the whole time, and you’re always on the clock. You also can get knocked out at any stage. It’s always, “Congrats, you made it to the next stage. Now we need you to do this and this – you’ve got 48 hours.” It’s quite a ride. The process of getting on “Shark Tank” is ironically very similar to running a start-up.

When I actually walked through the doors to pitch to the sharks, my focus was to give them the elevator pitch and then give them honest answers to the Q&A. Like most owners, I know my business like the back of my hand. I felt the growth of my business and the industry would speak for themselves.

Unlike many entrepreneurs walking into the tank with everything riding on the line, I had another mature business I owned and I had a clear path to success in this business I was pitching, with or without an investment. I had no emotional attachment and a good backup plan, and from my negotiation courses in business school I knew that would give me an advantage.

BBJ: How did you prepare your pitch? Did you watch past episodes?

Aartsol: You get assigned a team of two producers from the show to help you prepare. They work with you for about 2-3 weeks leading up to the taping to refine your pitch.

I studied business at Western and I also got an MBA, so I basically know how to pitch a business. Nonetheless, pitching in “Shark Tank” is a little different as there is an element of entertainment they want you to add in. If it’s not entertaining, it’s not going to air.

Like it or not, that’s the game and you’ve got to adjust. I’m not really a natural at that, so it was challenging, but ultimately a fun experience.

The opening pitch is a 2-3 minute ordeal, followed by another 20 minutes to more than an hour of Q&A. The “Shark Tank” editors cut this all down to about 10 minutes.

During my preparations, I’d heard from producers and other entrepreneurs that too many entrepreneurs overly focus on the opening pitch at the sacrifice of preparing for Q&A. Obviously, if you look at the numbers, the Q&A is the bigger deal and that’s how I tried to prepare.

Again, there are many unknowns, and all of the situational stuff makes it hard to prepare for everything. It’s kind of like cramming for a test, but you’ve also got to keep an eye on making your answers entertaining.

I watched as many episodes as I could find online, but that’s only about 4-5. I’m guessing the owners of the show control what’s out there so they can syndicate things down the road. That makes it a lot harder to prepare.

BBJ: When we see the sharks on camera, how much of that is real, and how much do you think is ginned up? Is Kevin O’Leary really such a jerk? Is Mark Cuban really so cutthroat?

Aarstol: It’s pretty real. I can tell you that the sharks come across almost exactly the same on the set as they do on TV. It’s funny because I had the same questions before I was actually there in front of them.

The sharks all seem to have settled into a predictable role, but it really seems to me to be their natural role. I also think their respective roles buy them something at the negotiation table, and they understand this clearly. They’re all very bright.

Kevin O’Leary isn’t a jerk, he just a bit of a callous realist. If he thinks your business sucks, he’ll tell you it sucks. If he thinks you’re a bozo, he’ll make a point to tell you that you’re a bozo and why. Most people in life just don’t do this, even if they are thinking it. Life can be callous.

Kevin is like life. At the negotiation table, this positions him as the serious, no-nonsense money maker you want on your side.

Mark Cuban isn’t cutthroat, he’s just ultra competitive. When you’re a billionaire, I think you probably tend to get bored with the usual stuff. Obviously, Mark’s chosen game in “Shark Tank” is getting the best deals and stealing deals from the other sharks, but not just by out-bidding everyone because he can afford to. He wants to earn it through superior negotiation skills.

He’s good and his celebrity serves as kind of a trump card in “Shark Tank.” This is a game to him, but it’s fun to watch and I think his presence forces the other sharks to offer more realistic valuations to the entrepreneurs, not just cherry pick. So, that’s actually a good thing for the entrepreneurs.

The others play a role too. Daymond John plays kind of the cool, connected guy in “Shark Tank.” He’s like the “godfather.” He’s all about his connections.

Barbara Corcoran plays kind of a motherly role where she’ll take you under her wings. Robert Herjavec plays the nice guy and seems to approach it all from a more emotional level. He tries to be your buddy, and it’s compelling when you’re in the “Shark Tank” under that immense pressure.

The combination of them all coming at you with a different angle is a surreal experience.

BBJ: Obviously the show employs some theatrics, but how realistic do you think “Shark Tank” is compared to the real world of investing?

Aarstol: I’m an entrepreneur involved in start-ups, and the unfortunate reality is that outside of extremely rare aberrations, funding doesn’t exist for start-ups.

Banks don’t touch them, or really any company less than two years old. And the reality is in this economy, banks don’t really fund the growth of any small businesses in a meaningful manner.

That’s my experience and that of my peers, many of whom have started “Inc. 500” companies from nothing and turned small companies into $5 million to $10 million firms.

There is a lot of theory you get taught in business school about valuations, VCs, angels, planned harvest, IPOs, etc., but in my experience that’s too close to science fiction to even waste time on.

My guess is the only way 99.9 percent of ideas get funded is through friends and family and extended connections. Of that other 0.1 percent who are actually involved in the “real world of investing”, I’ve heard the number 1 indicator of getting funding is if you got it before. The actual substance of the business idea is secondary.

That being said, the primary difference of “Shark Tank” investing and “real world investing” (in theory) is how valuations are calculated. On “Shark Tank,” the sharks decree that your value is 100 percent based on historical revenues, as if nothing is growing.

In the real world, entrepreneurs and investors tend to base valuations on the net present value of future earnings. So, it’s all about arguing about projections.

The beauty of “Shark Tank” is that it’s an absolute master class on negotiation. Every business school out there should be dissecting these negotiations, and it would be even better to watch the full pitches, not just the edit downs.

BBJ: Having essentially given a pitch in front of millions of viewers, what advice would you give to start-up entrepreneurs seeking to sell investors on their companies or product ideas?

Aarstol: The only possibility of money for start-ups is from friends and family, so I’d strongly recommend you don’t even waste any time on chasing funding outside of that, because you can waste a lot of time chasing that rainbow. Use that time in other pursuits.

Once you’ve internalized that depressing reality, the two things I’d recommend you do are actively expand the number of people in your friends and family circle and generously share whatever expertise you do acquire with as many people as you can.

The good news is that once you have a thriving business, you have less time for stuff like this, but before you have that business you tend to have to devote a lot of time to this stuff.

I’m not talking about networking, which all seems kind of superficial to me, but instead really expanding the number of people that you have meaningful relationships with in your life.

College and grad school are great ways to do that. I’ve found that extended travel is also a good way to both meet more interesting people and develop more meaningful relationships with existing friends who will be your travelling cohorts.

If you’re a small time entrepreneur, hang with other entrepreneurs as much as possible, learn from each other and help each other as much as you can.

By expanding your circle, you’ll increase the number of good ideas you’ll come across and you’ll increase the number of friends and family that may actually be able to fund them.

Note that I didn’t say “willing” to fund them. When you have a good enough business concept, people will try on their own accord to get involved. It’s not something you go out and pitch to them. That never really works so well.

Paddle board entrepreneur Stephan Aarstol and his assistant in the middle of his “Shark Tank” pitch. Photo courtesy of ABC Television




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