Shark Tank , ABC’s hit series about entrepreneurs pitching wealthy investors, is casting for its new season. Coincidentally, Bloomberg Businessweek is reporting that two-thirds of Shark Tank deals never get inked once the cameras go dark.
Bloomberg tapped T.J. Hale, who hosts a Shark Tank podcast, to learn more about what actually happens after the handshakes at the end of a successful pitch. Hale estimates the majority of deals fall apart, based on his conversations with 70 Shark Tank entrepreneurs. Said Hale:
“One entrepreneur said basically the shark just never called them.”
Investors receive no information about pitchers before they come before the panel hoping, or purporting to hope, for an influx of cash. As previously reported by The Inquisitr , show producers insist this protects the integrity of negotiations. It also means that what happens after the show is a due diligence process where both the sharks and the entrepreneurs can look thoroughly for red flags and back out anytime they want before the deal is final.
Those red flags may be legal issues, financial irregularities or tax concerns; or either party can simply have a change of heart. Sometimes entrepreneurs re-think the equity stake they have given up; some were always in it for the Shark Tank exposure and never really wanted a deal to begin with.
The television show, however, is quick to feature the deals that end well and the companies that go on to have great success. As Hale puts it:
“Not every deal closes, and not every deal ends well, but you probably won’t hear about that because Shark Tank is the hand that feeds, and nobody wants to bite it.”
But some insight as to how messy a closing can be was documented in 2006 on Dragon’s Den , the CBC television predecessor to Shark Tank . All five “dragons,” including current “sharks” Robert Herjavec and Kevin O’Leary, agreed on-air to a total $200,000 investment in an online job board, JobLoft. With the Dragon’s Den cameras rolling to capture what was to be a happy deal closing, an unexpected advisor to the entrepreneurs — their university professor — insulted the dragons in attendance. Robert Herjavec dramatically ripped up the certified check for $200,000. Upon further discussion, it seemed the investors, when given the choice, would rather follow their professor’s advice and not the man holding the large check.
You can watch that dramatic piece of Canadian television here:
According to the CBC, the JobLoft entrepreneurs sold their company within the next year. Shark Tank returns for a sixth season this fall.
