It’s no secret that the deals that happen on Shark Tank are nothing more than handshakes until both parties — shark and entrepreneur — go through a period of due diligence and sign a contract. In 2014, Bloomberg reported on blogger T.J. Hale’s analysis that two-thirds of Shark Tank deals fall apart completely after the show, based on his discussions with 70 people who pitched the tank. Now, a new analysis by Forbes estimates that 73 percent of Shark Tank deals either don’t go through or are changed after the program.
In October, 2016, Forbes published an analysis based on interviews with participants in 237 of the 319 deals made in the show’s first seven seasons. Surprisingly, despite the fact that three-quarters of those deals changed or fell apart, one shark has a much better batting average: Mark Cuban. He made 32 deals on his own, without other sharks, and of those 24 remained the same. Four changed and the last four did not complete after taping.
Compare that to Robert Herjavec, who started on Shark Tank during Season 1, one season before Cuban began appearing as a guest shark and two years before he was a series regular. Out of the 24 deals made by Herjavec that were analyzed by Forbes, a full 13 fell apart and nine were changed. Only two remained the same. That means that while Cuban closed 87.5 percent of his deals — even if the terms were later modified — Herjavec closed only 45.8 percent.
The magazine reported that out of the 237 participants interviewed, 43 percent had deals fall apart, 30 percent closed deals with different terms and only 27 percent closed the deal they agreed to during the Shark Tank taping. Of those individuals, 31 percent made deals with Cuban if group deals involving more than one shark are taken into account.
Cuban’s deals closed far more often than his Shark Tank colleagues. Herjavec’s percentage may be startling in comparison, but it’s actually similar to the other panelists, making Cuban the outlier. Lori Greiner closed 48.6 percent of her deals, Barbara Corcoran 50 percent, Kevin O’Leary 57.1 percent, and Daymond John 59.3 percent. Since these are the statistics for solo deals, it does not include shark deals where the investors teamed up to partner with a Shark Tank entrepreneur.
As for why deals change, Forbes reported that either the entrepreneurs or the sharks pulled out of the deal or offered terms they didn’t like. In February 2015, the Associated Press reported that entrepreneurs also back out. Producers of the show said they encourage the attempt to complete a deal, but Clay Newbill said sometimes things don’t come together.
“[W]e understand, just as in the real world, the reality is that not all deals will close.”
At that time, the show was not tracking how many handshake deals turned into concrete investments off-air. In the same article, Barbara Corcoran expressed disappointment at one company, The Smart Baker, that chose not to accept her investment offer after the program, but said she understood.
“When we shake hands on a potential deal on ‘Shark Tank,’ the romance runs high and everyone’s excited about what could be. In the end, the entrepreneur is in charge.”
An Inquisitr article from April 2015, reported that Corcoran said due diligence often brings up unexpected issues that hurt the deal. The entrepreneur might unintentionally misrepresent sales revenues or who has ownership of key assets like patents.
Once a deal goes through, however, often the sharks are of great value to the entrepreneurs. Cuban told Business Insider in October 2015, that his company often takes over back office tasks like accounting and web hosting so entrepreneurs can focus on their key competencies.
According to Forbes, the entrepreneurs, in general, didn’t regret their Shark Tank experience regardless of the outcome. They cited the publicity from the program and some were able to establish a relationship with a shark even though the deal did not close.
Shark Tank airs Friday nights on ABC.
[Featured Image by Chris Weeks/Getty Images]