Is Reality TV real? In some cases we don’t think so, but in this case, more than most viewers and even writers know.
Rafe Needleman posted a column on CNET titled “Stiffed by ‘Shark Tank’ VC, startup CEO Persveres” on Valentine’s Day. According to Rafe, he’s spoken directly with Megan Cummins, founder and CEO of You Smell Soap.
She informed Rafe that the deal never happened; in fact, Robert Herjavec never returned her phone calls for months. Finally, she received a contract for a different deal than the one originally agreed upon, to which she declined.
Rafe commented in his post, “nobody really expects what they see on a reality show to be the unvarnished truth, do they?”
The reality is Investors react as Robert Herjavec did frequently leaving Entrepreneurs thinking they are funded and waiting for the investment. Many businesses die because the Investor made a promise and then either renegotiates or backs out on the deal all the while leading the Entrepreneur on, keeping them thinking that they are still going to get the money.
Sure, Megan should have had a clue when he didn’t return her calls or respond to correspondence but she’s working on her first deal and lacked the experience to realize what was happening. He made an offer on National TV to a passionate Entrepreneur that believed in him. She got a dose of reality!
What Megan Cummins learned is a deal is never a deal until the Subscription Agreement is signed and the check has been cashed. It’s that simple and hopefully, going forward, she won’t quit seeking her investment needs until she has cashed the investors’ checks.
The lesson is a deal is never a deal until you have the money and the subscription agreement signed, period! Don’t wait for investors to have boards approve the investment, they say it will take 30 days and most end up taking a year or more.
I know what it’s like to have the experience that Megan Cummins is having and I learned my lesson very fast. If I’m raising money for my business I don’t quit until the Subscription Agreement is signed and the check is cashed.
Reasons like the ones portrayed in this story is why Lawyers are a necessary evil… make no mistake though, if you run out of money you run out of muscle.
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David,
Lawyers don’t help when they don’t have a signed subscription agreement. In the case of investments, verbal commitments and hand shakes are only as good as the person who extends it.
Is the deal closed even when only one party is happy and the other is left feeling ripped off? I don’t think so, delivering on promises made during the course of the negotiation counts equally with the “Subscription Agreement is signed and the check is cashed.” Just my thoughts.
Tom, when it comes to negotiations for investment, the deal is only done with the “subscription agreement is signed and the check is cashed.” Investors are notorious for jumping in full force and saying it’s a deal and then backing out when they think about it some more. That’s why Entrepreneurs need to keep seeking investors even thought somebody says “it’s a deal”. It’s not right, not fair but it is reality.
Another great post Kirk. Thanks!
Thank you
There could be many reasons why the deal never materialized after the show. Perhaps she neglected to disclose information that would have made Robert opt out of the deal. You are right that until you have something legal and binding, you should count your unhatched chickens.
Oh man this steams me. Now I know a deal isn’t a deal until it’s in ink, but hearing stories like this ….arrrrgh
It is sad that the day when ‘your word is your bond’ is not only long gone, but considered naive . I do unfortunately agree .
How long will the show continue to be credible if situations like this continue to happen- it isn’t the first time….
The show has the highest ratings it has ever had. Also, the parent show, Dragons Den has version in countries all over the world that have been running up to nine years.
I no longer watch the show. It appears to be all planned out ahead of time to make the program look good, but forget the show ever helping someone. Just my opinion.
This is business reality. On the second thought, I think Shark Tank should include a section to show the success rate of each investor which are actually signed. I may ask too much by this. Yet, for many new entrepreneurs this is one stats he/she could take as a basis reference when making a decision. It will also improve the credibility of the show.
Agreed…. I’m going to do research and see if I can put that information together and then present it on this site.
As with any business transaction, until the money is safely in your bank, there is no transaction in my eyes….
Deals fall through after the handshake. Anyone who doesn’t think there is further due dilligence after the cameras stop rolling is naive to the way the business world is. Obviously Robert has followed through with a lot of other deals on the show, so something had to be different here. I’m not blaming anyone, but obviously he wasn’t happy with something in the deal. For them to pass up any of these small deals is insane to me considering the press from the show is going to net enough profits for their measly investment to be covered. But, I guess they just didn’t see eye to eye on something. It isn’t the first deal to not come to fruition because someone on either side backed out. Hell, the OneSole lady backed out of her deal not too long ago before everything was signed so it can come from either side.
Ok so 2 things. Apparently he offered her 50K for 50% of the business AFTER the fact, so that could mean he backed out of the deal with no good reason. I mean, if she withheld something so big, then why offer anything? The original deal was 20% for $125K, that’s a big difference. I was surprised to see how much the sharks wanted a piece when she had no sales. Normally no sales always means no deal, so that was a big wow good jon for me.
Next, my understanding is that a signed contract is necessary because it’s proof, versus a verbal agreement you have no proof, and a witness may or may not be lying. So if this is the only reason why ink is necessary, to show proof (though sig’s can be copied), then why doesn’t millions of people seeing the show count as proof? I really don’t like how on various occasions they simply back out. It should be illegal for them to do so UNLESS, there is valid reason to do so.
P.S. Wonder how the deal may have worked out with Barbara or Cuban….but I heard Barbara back out of another deal so I am losing respect for this show now.