Barbara Corcoran Says These Due Diligence Issues Cause 'Shark Tank' Deals To Fall Apart

Barbara Corcoran has been part of the panel on Shark Tank for several seasons now, and over the years, she's gotten smarter about her investments. As she recently told Business Insider, she's developed an eye for red flags that she should stay out of a deal. Those red flags include "fancy talk" and "guys making up stuff."

In a particularly revealing section of the Business Insider interview, she also described the kinds of circumstances that lead to deals falling apart during due diligence.

"What you find is that the ex-husband actually owns the patent. That the sales numbers they swore they had were projections, not actual sales. That they were only in business a month even though they said they incorporated four years ago.

"[The entrepreneurs are] not really badly intending, but [the result is] well-intended misrepresentations."

Corcoran said one-third of her deals do not close after the process of due diligence. Last year, a blogger estimated that overall, a very high percentage of Shark Tank deals, perhaps two-thirds, do not survive after the tough work of due diligence.

Robert Herjavec recently told Inc. magazine that now it is more likely that the entrepreneur pulls out during due diligence than the investor, a shift from when Shark Tank was a new phenomenon. Herjavec said after getting the publicity from the program, entrepreneurs decide they don't need or want an investment after all.

Corcoran reveals that, in her estimation, it takes several years for her companies to make money. She only began to make money on her Shark Tank deals in her third season on the show. Overall, she's invested in approximately two dozen businesses through the program.

You can watch her give those comments to Business Insider in the video below.

Part of the mystery of what happens after entrepreneurs leave Shark Tank should be revealed when Beyond the Tank debuts next week. The short-term spinoff gives updates on past pitchers as they try to work with their investor sharks to make their businesses succeed. In his interview with Inc. in early April, Herjavec described it is as a "much more realistic" look at entrepreneurship than the short updates featured on Shark Tank.

"It's a much more realistic view of what happens in terms of running the businesses. It just looks at what happens over that longer period of time. The updates on 'Shark Tank' are typically quick, and they're always positive. Sometimes life is positive and the businesses are great, but sometimes it's not. Where 'Shark Tank' ends, 'Beyond the Tank' begins."

Herjavec, Corcoran, and their colleagues will feature on Beyond the Tank following a new episode of Shark Tank starting May 1 on ABC.

[Main image: Getty]