Halfway Done: Why 50% of Shark Tank Deals Don’t Close

Shark Tank captures the dreams and nightmares of entrepreneurs and has become a fixture on Friday night television. Fans will be surprised to learn that the journey from pitch to paycheck isn’t always smooth. With adrenaline pumping and cameras rolling, deals are struck and dreams seem to come true. But how many of those handshakes actually turn into deals? In reality, only about half. According to Shark Tank’s Robert Herjavec, “generally speaking, about 50% of deals get closed.”

So why do half of these deals fail? The reasons vary and have evolved over the years. Early in the show, lack of preparation is often the reason for failure. Entrepreneurs are unfamiliar with the expectations of the Sharks and the complexities of business negotiations. Lack of understanding of one’s own financial situation is one of the main reasons why deals don’t get done.

ChordBuddy is a classic example of this, where when asked for financial statements, the founder sent a box of receipts. Despite the entrepreneur’s passion and the potential of the product, the lack of a solid business structure ultimately led to the deal falling through.

As the show progressed, entrepreneurs began to be more prepared and had a clearer understanding of the sharks’ expectations. Shark Tank began to implement a more rigorous vetting process, requiring entrepreneurs to perform a certain level of financial due diligence before stepping onto the famous red carpet.

Yet, even with better preparation and a more rigorous vetting process, deal closing rates have remained steady at around 50%. As Herjavec explains, one of the main reasons for this is that entrepreneurs often change their minds after a negotiation. They get caught up in the excitement of a negotiation and agree to a deal, but wake up the next day and doubt their decision.

The change is allowed because deals on “Shark Tank” are nonbinding. The show is essentially a platform for verbal negotiations. When the cameras stop rolling, entrepreneurs can exit, and many do.

Let’s take a look at a few memorable deals that came out after the show. Plated, a catering service that went on to become a huge success, originally struck a deal with Mark Cuban for $500,000 in exchange for 5.5% of the business. However, the deal fell apart during the negotiation process and was ultimately canceled.

Another example is REMYXX, a company that makes sneakers entirely from recycled materials. Although the company agreed to transfer 80% of the company to Daymond John for $50,000, the deal fell through after the show.

The deal also fell through because the negotiations did not meet initial expectations. Beauty product company Beard King accepted Lori Greiner’s offer of $100,000 for a 40% stake. The deal again failed to pass the negotiation.

In some unfortunate cases, businesses don’t survive after deals fall through. Boot Illusions, a company that marketed a product that turned shoes into boots, failed to strike a deal with Barbara Corcoran. Boot Illusions is now out of business.

Amid the glitz and glamour of Shark Tank, it’s easy to get carried away by the excitement of the deals being made on screen. But a closer look reveals that the path to success isn’t always a straight line from pitch to paycheck. As riveting as Shark Tank is, the real story often begins after the cameras stop rolling, in the challenging world of business development. The shark’s bite may be fierce, but the reality of entrepreneurship is even fiercer.

Categories: Shark Tank
Source: svlsf.edu.vn