Shark Tank captures the dreams and nightmares of entrepreneurship and has become a staple of Friday night television. Fans would be surprised to find out the journey from pitch to paycheck isn’t always smooth sailing. With adrenaline pumping and cameras rolling, deals are struck, and dreams are seemingly realized. But how many of these handshakes actually translate to closed deals? In reality, it’s roughly half. According to Shark Robert Herjavec, “In general, probably about 50% of the deals close”.
So why do half of these deals fall through? The reasons vary and have evolved over the years. In the show’s early days, a lack of preparation was often the downfall. Entrepreneurs were unfamiliar with the expectations of the sharks and the intricacies of business negotiations. The lack of understanding about their own financials was one of the main reasons deals didn’t reach the finish line.
One notable example is the case of ChordBuddy, where the founder literally sent a box of receipts when asked for a financial statement. Despite the entrepreneur’s passion and the product’s potential, the lack of a solid business structure scuppered the deal.
As the show progressed, entrepreneurs started coming in better prepared, with a clearer understanding of what the Sharks expected. Shark Tank began implementing a more rigorous vetting process, requiring a certain level of financial due diligence before entrepreneurs could step onto the famous red carpet.
Yet, even with a more prepared batch of entrepreneurs and a tough vetting process, the closing rate on deals has remained steady at around 50%. One of the main reasons for this, as Herjavec explains, is that entrepreneurs often change their mind after the negotiations. They get caught up in the excitement of the show, agree to a deal, and then wake up the next day second-guessing their decision.
This change of heart is allowed, as the deals on Shark Tank are not binding. The show is essentially a platform for a verbal negotiation. Entrepreneurs can back out when the cameras stop rolling, and many do.
Let’s look at a few memorable deals that fell through after the show. Plated, a meal service company that went on to become very successful, initially secured a deal with Mark Cuban for $500,000 in exchange for 5.5% of the business. However, the deal broke down during the negotiation process and was eventually canceled.
Another example is REMYXX, a company that produced sneakers from entirely recycled materials. Despite agreeing to give away 80% of the company for $50,000 to Daymond John, the deal fell through after the show.
Deals also fall apart due to negotiations not aligning with initial expectations. Beard King, a grooming kit company, accepted an offer of $100,000 for 40% from Lori Greiner. Once again, the deal didn’t survive the negotiation process.
In some unfortunate cases, the businesses didn’t survive after failed deals. Boot Illusions, a company that pitched a product to transform shoes into boots, failed to move forward with a deal with Barbara Corcoran. Boot Illusions has since gone out of business.
In the glitz and glamor of Shark Tank, it’s easy to get carried away by the excitement of on-screen deal-making. But a closer look reveals that the path to success isn’t always a straight line from a pitch to a paycheck. As fascinating as Shark Tank is, the real stories often start after the cameras stop rolling, in the challenging world of growing a business. The sharks’ bites might be fierce, but the reality of entrepreneurship is even fiercer.
