Diving into the Financial Concepts of Shark Tank India.

Every one know about Shark tank India show featuring on TV now a days. Actually. "Shark Tank" is a popular American reality TV show that has gained a lot of popularity worldwide, including in India. The show features aspiring entrepreneurs presenting their business ideas to a panel of investors, known as "sharks," who decide whether to invest in the idea or not.

In 2016, a version of "Shark Tank" was launched in India called "Shark Tank India: Nayi Baat," which translates to "New Idea." The show follows the same format as the American version, with aspiring entrepreneurs pitching their ideas to a panel of investors in hopes of securing an investment to help grow their business.

"Shark Tank India" has gained a lot of popularity in the country, and several well-known Indian investors have been featured on the show, including Ratan Tata, Anand Mahindra, and Kiran Mazumdar-Shaw. The show has also helped to bring attention to the growing startup scene in India and has provided a platform for entrepreneurs to showcase their ideas and gain valuable insights and feedback from experienced investors.

In this blog, I am going to explain terminology  uses while pitching in front of sharks. It is important for viewers to understand that financial terms and concepts. This article of Concept Mitra gathered some financial concept and explain it which definitely help you. Here are some terms and concepts.

Start up: A startup is a newly established company that is usually founded by one or more entrepreneurs with a unique business idea or product. The goal of a startup is to grow rapidly and disrupt an industry or market with its innovative approach.

For example, a startup in the technology industry might develop a new app that solves a problem or meets a need that has not been addressed by existing products. The founders of the startup would develop the app, build a team, and seek funding from investors to help bring the product to market.

Angel Investor: An angel investor is an individual who provides funding to a startup company in exchange for equity or ownership in the company. Angel investors typically invest in the early stages of a company's development, when it may be difficult to secure funding from other sources, such as venture capitalists or banks. Angel investors are often high-net-worth individuals with a strong business acumen and experience in the industry in which they are investing. Well-known angel investor is Ron Conway, who has invested in companies such as Google, PayPal, and Facebook. Conway is also known for his advocacy for policies that support entrepreneurship and innovation, and has been a vocal supporter of initiatives such as net neutrality and immigration reform.

Portfolio: In the context of startups, a portfolio typically refers to a collection of investments made by an individual or organization in multiple startup companies. A startup portfolio is designed to help diversify risk and increase the potential for a high return on investment.

For example, an angel investor or venture capitalist may create a portfolio of investments in a range of startup companies across different industries or sectors. By investing in multiple startups, the investor can spread their risk across a range of companies, rather than placing all of their bets on a single startup.

Gross Margin: Gross margin is a financial metric that measures the profitability of a company's sales, by subtracting the cost of goods sold (COGS) from the total revenue earned from those sales, and expressing that amount as a percentage of total revenue.

The formula for calculating gross margin is:

Gross Margin = (Total Revenue - Cost of Goods Sold) / Total Revenue

For example, if a company generates $1,000 in revenue from the sale of a product, and the cost of producing and selling that product is $600, then the gross margin would be:

Gross Margin = ($1,000 - $600) / $1,000 = 40%

EBITA: EBITA is a financial metric that stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's operating profitability that adds back non-cash expenses such as depreciation and amortization, as well as interest and taxes, to earnings. 

The formula for calculating EBITA is:

EBITA = Operating Revenue - Operating Expenses + Depreciation + Amortization

EBITA is useful because it provides insight into a company's ability to generate profits from its core business operations, regardless of factors such as taxes, interest, or depreciation. By focusing on EBITA, investors can evaluate a company's operating performance in a more straightforward way, and can compare the profitability of different companies more easily.

Financial Cycle: The financial cycle refers to the cyclical fluctuations of financial conditions in an economy. It is characterized by periods of expansion and contraction in credit, asset prices, and other financial indicators, which can have significant impacts on the broader economy.

The financial cycle is typically characterized by four phases: expansion, excess, contraction, and recovery. During the expansion phase, financial conditions are loose, credit is readily available, and asset prices are rising. During the excess phase, credit and asset prices become overextended, leading to speculative bubbles and other forms of excess.

Runway Capital: Runway capital, also known as runway financing, refers to the amount of time that a startup or early-stage company can operate before it runs out of cash. It represents the length of time that a company can "runway" on its current cash reserves before it needs to generate additional revenue or secure additional funding.

For example, if a startup has $500,000 in cash reserves and is spending $100,000 per month, its runway capital would be 5 months. This means that the company has 5 months to generate revenue or secure additional funding before it runs out of cash and is forced to shut down operations.

Equity: In finance, equity refers to the ownership interest that shareholders have in a company, which represents their proportionate share in the company's assets and earnings. Equity represents the residual value of a company's assets after all liabilities and debts have been paid off.

Break Even: In finance, the term "break even" refers to the point at which a company or business has generated enough revenue to cover all of its costs, so that it is neither making a profit nor incurring a loss. At the break-even point, the company's total revenue is equal to its total costs, and it is said to have "broken even" on its investment.

Once a company has reached its break-even point, every additional unit sold or dollar of revenue generated represents a profit for the company. This can be a key milestone for startups and other businesses, as it provides a sense of stability and a foundation for future growth and profitability.

Pre-money Valuation: Pre-money valuation refers to the estimated value of a company before it receives any additional investment or funding. It is the valuation of the company before any new money is added to the company's balance sheet.

Pre-money valuation is an important concept in startup financing, as it helps investors to determine the potential return on investment (ROI) they can expect from investing in a company. The pre-money valuation is often used to calculate the percentage of ownership that investors will receive in exchange for their investment, as well as to determine the price per share of a company's stock.

SEO - Search Engine Optimization: Search engine optimization (SEO) is the practice of improving the visibility and ranking of a website or web page in search engine results pages (SERPs) through a combination of technical, content, and off-page optimization techniques. The ultimate goal of SEO is to increase organic traffic to a website and improve its overall online visibility.

Revenue Model: A revenue model in a startup is the plan or strategy for how the company will generate revenue and make money from its products or services. It outlines the specific ways in which the company will earn money and generate revenue streams.

There are several different types of revenue models that startups can use, including:

Advertising-based revenue models: In this model, the company generates revenue by selling advertising space on its website or platform.

Subscription-based revenue models: In this model, the company generates revenue by charging users a recurring fee for access to its products or services.

Transaction-based revenue models: In this model, the company generates revenue by charging a commission or fee on transactions that occur on its platform.

Freemium revenue models: In this model, the company offers a basic version of its product or service for free, but charges for premium features or functionality.

Licensing revenue models: In this model, the company generates revenue by licensing its technology or intellectual property to other businesses.

E-commerce revenue models: In this model, the company generates revenue by selling products or services directly to consumers through an online store.

Market Segmentation: Market segmentation is the process of dividing a larger market into smaller groups of consumers or businesses with similar needs or characteristics. Market segmentation can be based on a variety of factors, including demographic characteristics (such as age, gender, income, or education), geographic location, psychographic traits (such as personality or lifestyle), or behavioral factors (such as past purchase behavior or brand loyalty).

Market Penetration: Market penetration is a business strategy used to increase the market share of a product or service in an existing market. It involves increasing the sales of a product or service within a specific market or customer group, without changing the product itself. This can be achieved through various marketing techniques such as advertising, promotions, discounts, and other marketing efforts.

Pivot: In the context of a startup, a pivot refers to a significant change in the company's business strategy or direction. It typically involves a shift in the company's products, services, target market, or business model, in response to changing market conditions, customer feedback, or other factors.

The term "pivot" was popularized by the book "The Lean Startup" by Eric Ries, which emphasizes the importance of continuous experimentation and adaptation in startup businesses. 

Term Sheet: In the context of a startup, a term sheet is a non-binding agreement that outlines the key terms and conditions of an investment deal between a startup and an investor. It serves as a preliminary agreement that sets the stage for negotiations between the two parties.

Kiosk: A kiosk is a small, standalone structure used for displaying or selling products, providing information or performing a specific service. Kiosks are typically small in size and are designed to be easily accessible and user-friendly. They may be located in public areas such as shopping malls, airports, train stations, or other high-traffic locations.

SQA: SQA stands for Software Quality Assurance. In the context of a startup, SQA refers to the process of ensuring that software products meet the required quality standards and perform as expected.

Software Quality Assurance is an essential function for startups that develop software products, such as mobile apps, web applications, or other software tools. 

USP: USP in startup stands for Unique Selling Proposition or Unique Selling Point. It refers to a distinctive aspect or feature of a product, service, or brand that sets it apart from the competition and makes it more appealing to potential customers.

In the context of startups, a USP is often used to differentiate the new company from existing players in the market and to create a competitive advantage. This can be achieved by offering a unique product or service, targeting a specific niche market, or using innovative technology or business models.

GMV: GMV stands for Gross Merchandise Value. It is a metric used to measure the total value of goods or services sold on an e-commerce platform or marketplace during a specific period of time, typically a month or a year.

In other words, GMV represents the total amount of sales generated by the platform, without taking into account any discounts, returns, or other adjustments. It includes the value of all transactions processed by the platform, whether they are completed or not.

ARR: ARR stands for Annual Recurring Revenue. It is a metric used by subscription-based businesses to calculate the total annual revenue they expect to generate from their recurring subscriptions.ARR is an important metric for subscription-based businesses as it provides a measure of their current and future revenue streams. It is often used to track the growth of the business, to forecast revenue and to evaluate the effectiveness of the company's pricing and retention strategies.

RTV: RTV stands for Return to Vendor. It refers to the process of returning goods from a retailer or distributor back to the supplier or manufacturer due to issues such as defects, damages, overstocking, or changes in customer demand. When a retailer or distributor cannot sell the products that they have purchased from a supplier, they may initiate an RTV process to return the products to the supplier for a refund or credit. The supplier may then inspect the returned goods and either issue a refund or replace the products, depending on the nature and extent of the issue.

PAT: PAT stands for Profit After Tax. It is a financial metric that represents the net profit of a company after all taxes have been paid.

In other words, PAT is the amount of profit that remains after deducting all expenses, including taxes, from the total revenue of the company. It is considered a key measure of a company's financial performance and profitability.

PO: PO stands for Purchase Order. It is a document issued by a buyer to a seller or supplier, which contains a detailed description of the goods or services that the buyer intends to purchase, along with the agreed price, payment terms, delivery date, and other relevant terms and conditions.

B2B & B2C: B2B stands for Business-to-Business. It is a term used to describe commercial transactions or relationships that take place between two businesses or organizations, as opposed to transactions between a business and individual consumers, which is referred to as Business-to-Consumer (B2C).

In conclusion, Shark Tank India provides a fascinating look into the world of finance and entrepreneurship, offering valuable insights and lessons for anyone looking to start or grow a business. By understanding the financial concepts used by the investors and entrepreneurs on the show, aspiring business owners can gain a better understanding of what it takes to succeed in the competitive world of startups. Whether you're a fan of the show or a budding entrepreneur, Shark Tank India's financial concepts are sure to inspire and inform.