Credit: Washington Post
Highlights
- Shark Tank has inspired countless people to bring up their business ideas in front of a global audience.
- As a gesture of accepting a deal, the Sharks and entrepreneurs shake hands and hug each other with a promise to work together.
- Read the blog below to learn about what happens once a deal is locked on the show.
Shark Tank presents its audiences with a fascinating world of entrepreneurial nitty gritty. The most exciting part of them all has been the time when the Sharks get up, shake hands, and hug the entrepreneur/s. Yes, the happy visuals seem pleasant; the truth, though, is way more than this.
In one of its studies about Shark Tank deals from season 8 to 13, Forbes found that about 50 percent of the total deals made during this period did not materialize in reality. Apart from this, almost 15 percent of the deals were changed against the terms finalized on the show.
To help you know better, we have listed below different scenarios that emerge after a deal is made on Shark Tank:
1. Entrepreneurs Back Out
The happy faces of both the judges and entrepreneurs force the viewers to believe that everything they see on the show is the entire truth. The investor will pay the promised invested amount and the entrepreneurs will give away the agreed equity share to them.
But what if we tell you many times the pitchers go back on their words? An example of the same is the evREwares deal by Mark Cuban.
The entrepreneurial duo of Ellie Brown and Becca Nelson made their way to the investors seeking $100K for 30% equity. Their company made fabric stickers, especially for kids. While all the other Sharks opted out of the deal, citing different reasons, Mark offered $200K for 100% equity.
The founders accepted the deal on the show and witnessed a sales spike after their Shark Tank appearance. But after the episode aired, they refused to give away 100% of the business. Within a year of this decision, the venture shut down in 2015.
2. Interference Of Investors
There have been numerous pitches in the past where the entrepreneurs begin by seeking a certain valuation but change it as required. Sometimes, the changes happen happily, while in others, the pitchers are forced to accept a changed valuation due to their desperate funding needs.
But the story does not end here. While the entrepreneurs may accept to give away a higher equity percentage on the show, they may reject the deal eventually if they feel the terms are being changed frequently. An example of this is PinBlock.
Vladislav Smolyanskyy approached the panelists with PinBlock, seeking $100K for 20% equity in his construction block toy company. He revealed he owned only 85% of the business, while his friend owned the remaining 15%.
While the other Sharks stepped out of the deal, Kevin O’Leary showed his interest in the condition of licensing the toys. With no other investor left, a pressurized Vladislav accepted his offer of $100K for 50% of the company.
But the real drama unfolded when the entrepreneur claimed that Kevin went to a giant toy firm himself, without communicating with him. This is what led to the deal falling through at the end. After Kevin backed out, the company closed down in 2021.
3. Legal Disputes
Reality shows and controversies go hand in hand; the story is no different for Shark Tank. With huge amounts of money at stake, the nature of the show is such that people can go to extreme lengths. Different Shark Tank deals have exemplified the same in the past.
One such deal, which took up the matter to the court was Bubba Q Boneless Baby Back Ribs.
AI Bubba Baker went to the judges along with his daughter, pitching for his barbequed ribs business. He sought $300K for 15% equity in his patented company.
After intense negotiations, the deal was finalized with Daymond John for $300K at 30% equity. The business then did quite well and made $16 million in sales by 2016. But things took an ugly turn when, in a 2023 interview, Bubba revealed to have been cheated by the show’s makers and Daymond.
He alleged to have been forced to take up his valuation from $300K for 30% equity, as promised on the show, to $100K for 35% after the telecast. Additionally, he claimed to have been left out of crucial business meetings.
Reacting to the allegations, Daymond went to court and filed a restraining order against the entrepreneur. Based on it, Bubba was given a restraining order that forbade him from publicly commenting on Daymond’s family.
4. Partnerships Fall Through
Partnership deals on Shark Tank are not a new thing. Since its initial seasons, based on the business type and valuation, investors have often joined hands and proposed a joint offer. But as they say, ‘too many cooks can spoil the broth.’ The same often happens in partnership deals.
The best example of this is ToyGaroo, which appeared in one of the earliest seasons of Shark Tank.
Brought to the Sharks by Nikki Pope, ToyGaroo was a rental service for toys. She sought $100K for 10% equity in the company. Nikki, along with her husband, owned only 10% of the business; other partners owned the remaining 90%.
Despite initial apprehensions, Mark Cuban and Kevin O’Leary offered a partnership deal at $200K for 40% equity. Nikki accepted the offer. However, the business could not sustain and shut down within a year of its episode telecast.
Over the years, through different interviews, it was revealed that the root cause of the problem was an inconsistent business model due to multiple visions held by the different partners and investors. With no coherent strategy, the company went bankrupt, and the investors did not earn anything out of it.
Bottomline
Shark Tank has been enticing its viewers with thrilling investment deals on the show. But the happy picture we see on air is not the complete truth. The real truth unfolds after the telecast. With entrepreneurs backing out and investors interfering, legal disputes may happen.
Whereas sometimes, partnership deals may not achieve favorable outcomes. Therefore, the handshake and hug should not be considered as a full stop in the deal-making process.
References
1. Deals we struck with ‘Shark Tank’ investor heroes fell apart off-air, New York Post, Michael Kaplan
2. Everything That Happens After A Deal Is Made On ‘Shark Tank,’ According To Mark Cuban, Inc., Richard Feloni
3. Inside The Secretive World Of Shark Tank: Who The Real Winners Are, Forbes
Entrepreneur, auteur, raconteur. Rob Merlino is a blogger and writer who enjoys the Shark Tank TV show and Hot Dogs. A father of five who freelances in a variety of publications, Rob has a stable of websites including Shark Tank Blog, Hot Dog Stories, Rob Merlino.com and more.
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