Shark Tank India Deals with Equity and Royalty

26 February 2024

Few months back, a picture of Aman Gupta meeting with US sharks trended on all social platforms, where Aman candidly said how US sharks taught him to think big.

And a few months later, you all have noticed how Aman has started Royalty deals in Shark Tank India season 3.

Royalty deals became popular in the American version of Shark Tank, especially by one of the Sharks, 𝗞𝗲𝘃𝗶𝗻 𝗢'𝗟𝗲𝗮𝗿𝘆, who is known for his preference for royalty deals over equity deals.. Some of the successful royalty deals that O'Leary made on the show include 𝗪𝗶𝗰𝗸𝗲𝗱 𝗚𝗼𝗼𝗱 𝗖𝘂𝗽𝗰𝗮𝗸𝗲𝘀, 𝗣𝗹𝗮𝘁𝗲𝗱, 𝗮𝗻𝗱 𝗚𝗿𝗼𝗼𝘃𝗲𝗯𝗼𝗼𝗸.

𝗪𝗵𝗮𝘁 𝗮𝗿𝗲 𝗥𝗼𝘆𝗮𝗹𝘁𝘆 𝗗𝗲𝗮𝗹𝘀

It is a type of investment deal where the investor receives a percentage of the business's revenue or profit until a certain amount is recouped.

For Example, A Shark may offer Rs 1 crore for 1% equity plus 1% royalty until Rs 1 crore is recouped. This means that the Shark will get 1% of the company's shares and also 1% of the sales or profit until the initial investment is recovered.

In India Shark Tank season 3, Out of the 51 pitches made so far, 11 have involved royalty agreements, and some of them belong to the consumer goods sector.

𝗦𝗵𝗮𝗿𝗸𝘀' 𝗽𝗲𝗿𝘀𝗽𝗲𝗰𝘁𝗶𝘃𝗲𝘀 𝗼𝗻 𝗼𝗳𝗳𝗲𝗿𝗶𝗻𝗴 𝗿𝗼𝘆𝗮𝗹𝘁𝘆 𝗱𝗲𝗮𝗹𝘀:

When it comes to royalty deals, they believe that royalty deals are a win-win situation for both the Shark and the entrepreneur, as royalty deals provide a faster and more predictable return on investment.

Sharks consider royalty deals as a way of mitigating the risk and uncertainty of investing in businesses that are in highly competitive or crowded markets, or that have low margins or high costs and When they are not confident about the long-term growth or exit potential of the business,

But as a founder, what do you think, does royalty deal make sense for all the budding founders, or only restricted to companies who have achieved a stable revenue growth.