Entrepreneur, Explorer, Angel.

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20TH June 2019

Entrepreneur - Leftovers - MoneyHunt - Social - Uncategorized

Is Shark Tank “Real” Enough


Best Logo. Ever.

It’s been 20 years since I was in the studio for MoneyHunt; not a week passes without the same question… “is that like Shark Tank (previously, Dragon’s Den). I explain the similarities, and the differences, and conclude… all that is worth, like, one Chai Latte at Starbucks, give or take.

On MoneyHunt, we were nuts enough to write the check on the air. No broken deals, no weaseling out of agreements on arcane terms. We considered it a cost of business, and didn’t expect much from the outcomes (our expectations were met!). But we did a whale of a job marketing our little VC fund, a seminal outperformer in the dot.com rush.

So what people ask me about SharkTank is this: Do they really do what they say they do? 

Yes, they invest. The Hustle (really, Halle Tecco) recently did an analysis of 222 episodes, 895 pitches, and 499 deals. Here’s a small selection of findings:

  • 56% of contestants successfully “make a deal” on camera
  • Women are underrepresented on the show and secure smaller deals
  • Food (20%) and fashion (19%) are the most popular pitch industries
  • Mark Cuban is the most prolific deal-maker (151 deals in 10 seasons)

The average contestant asks for $301k, and seeks a $3.6m valuation. But like most things in life, expectations often fall a bit short of reality. On Camera, the average deal amount is $286k; the average equity given up is 27%. For early stage pitches, this is excellent. The companies are consumer facing, fun to watch, and brimming with new ideas and angles. I think this is the best value of the show: it teaches the viewer a small bit of entrepreneurship.

But the the bigger lesson of Start-Up Deals is this:  Deals melt. People flake. Shit happens. Make the best of it.

Forbes spoke to 74% of the on-camera guests from Seasons 1-7. About 43% of the people they spoke with said their deals didn’t come to fruition after the show. They attributed this to sharks pulling out of the agreement or changing the terms to ones that didn’t work for them. Others canceled deals after getting term sheets that included unappealing clauses. Another 30% of the offers changed (some were accepted, some not). So, roughly 73% of the “deals” we see on camera implode… knocking the 56% deal number down to 40%.

What you saw on camera has a 60% churn factor by the time the wire instructions come out. For some entrepreneurs, that might hurt, but the exposure for a start up makes up for some of that.

For the viewer, it’s all good. Really Good I think.

Aside from being duped more than half the time (I can’t imagine The Bachelor has any worse churn rates!). Families often watch this show together, and discuss entrepreneurship in the process. Entrepreneurs watch and learn how to pitch and take tough questions on the fly. Some get to polish the fine art of negotiating when reality (an offer) is upon them. I don’t think any angel investor ever learned anything from the cast, aside from what not to wear on camera.

 

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