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The hidden moments of one of the most popular American television programs: Shark Tank

 

Disappointment

A feeling of fear began to creep into Vladislav Smolyansky after he dropped out of the program. It was 2016 during the filming of the eighth season of Shark Tank, and the 21-year-old had just agreed to a deal under which he would give up a majority stake in his company, Pinblock, in favor of the famous investor Kevin O'Leary.

 

Smolyansky had just shared the story of the" American dream " that he had when he emigrated from Kyiv in Ukraine to New York and started his business in the gaming sector by creating a company competing with Lego Lego, so that the company makes identical pieces of cubes, allowing its users to create complex three-dimensional shapes.

 

O'Leary offered an attractive deal in which he would give Smolyansky 100 thousand dollars, in exchange for half of the company, provided that the two would form a partnership with a large toy manufacturer.

 

Smolyansky's stake in Pinblock was 85%, after the co-founder abandoned most of his stake, he no longer owned only 15% of the company, and if the deal had been completed, Smolyansky would have been left with a minority stake.

 

None of the other judges made any offers, while O'Leary had a strong argument that he formulated during the episode, saying: "I can highlight the company in the gaming sector because everyone answers my calls, and I will be able to bring you deals," referring to his close relationship with the large gaming company Mattel. O'Leary also added: "You're not going to be able to do this on your own.

 

Smolinski was visibly upset while recording the exit interview after the show ended, he felt that he had given up a lot, while one of the Shark Tank producers tried to reassure him away from the camera, suggesting to him that the deal with O'leary was worth it.

 

"I thought hard to convince myself that it was a good deal," said Smolyansky, and after that, he quickly became excited about working with the investor.

 

Four months later, Smolinski says he received a lengthy email from O'leary's team, notifying him that the investor had canceled the deal. The email stated that there is a lot of competition in the gaming segment, which reduces the willingness of manufacturers to risk working with Pinblock.

 

There was no opportunity to negotiate, which left Smolyansky devastated. Smolyansky not only wanted to work with O'leary, but at that stage, he was counting on the promised amount of 100 thousand dollars to meet the expected demand after the episode was broadcast, which coincided with the holiday season.

 

Smolyansky expressed his shock, noting that Pinblock, which had sold 80% of its inventory when the show aired, was experiencing low turnout, and added: "I entered the show with great confidence until I forgot that in the end, it was only a TV show.

 

The Shark Tank TV show

The Shark Tank program premiered in 2009 and is still running today, with organizers preparing for the fourteenth season.

From season to season, the popularity of the program has grown to the point where it is comparable to other programs, such as the popular musical talent show American Idol.

The SharkTank program allows tens of thousands of small company owners to compete by exhibiting their goods in front of millions of viewers to land a contract with one of the program's main investors.

Traditionally, two-thirds of the almost 100 entrepreneurs who appear live every season get initial deals, and big expansion plans are proposed by the investor. But it seems to be different behind the cameras.

 

Analyzing 112 of the works that aired the shows of Seasons 8 to 13 that they got deals, it was revealed that almost half of these deals did not take place, and 15% of them ended on different terms as soon as the cameras were turned off. (Forbes reached out to almost 300 companies that got deals, but only 112 of them responded)

 

A similar survey conducted by Forbes in 2016 showed that 73% of deals in the first seven seasons either changed or failed.

 

Many of the entrepreneurs interviewed by Forbes requested anonymity due to the strict nondisclosure agreements they signed to appear on the show, which holds them personally liable if they discuss the details of their deals or even what they met on the set, however, Forbes was able to probe the depths of the program and take an unprecedented look at what is really happening when they finish recording.

 

The presentations were filmed months and sometimes more than a year before the episodes were broadcast. Many entrepreneurs admitted that they were asked to accept deals or risk not appearing on television, a fact that billionaire investor Mark Cuban confirmed to Forbes.

 

A few also admitted that they went to the show for advertising purposes only, and they never had the desire to get an investor, and at least 10 others added that the decision to terminate the deals without completion was a "mutual decision".

 

However, most of the decisions to cancel deals came from the investor, without explanation, or the decision of entrepreneurs after changing the conditions so much that they become irrational, or in some cases endanger the work, as many recognized.

 

The results varied according to the investor, as the real estate tycoon, Barbara Corcoran, was the most complete of her initial deals (60% of the entrepreneurs we spoke to indicated that the deals they concluded with her were completed after filming), followed by Diamond John (56%), who made his millions through the clothing company FUBU. However, John was the most changeable of the conditions, as four of the five businessmen who made deals with John said that the conditions changed after filming.

 

Billionaire Mark Cuban, who closed 54% of the 37 deals we tracked, has invested in more than twice as many companies as others. Kuban noted that the number of deals would have been less than Forbes calculated, blaming entrepreneurs who "came just for advertising," which, according to him, has become popular in recent seasons.

 

The following businessmen make the list as the least likely to complete deals: O'leary (45%), cybersecurity entrepreneur Robert Herjavec (30%), and Lori Greiner (29%), according to Forbes research.

 

The data compiled by Forbes does not include the dozens of companies whose episodes are not broadcast every season, which also receive deals, as it is not clear how many deals are concluded at the end.

 

What investors said

Kuban, John, and O'Leary were the only investors who answered the questions posed by this article, as both John and Kuban said that many deals failed due to new information that became clear during the due diligence period after the end of filming.

 

John said in an e-mail response: "When we make deals on Shark Tank, they are based on verbal initial offers of people who have the talent to appear well on television. But they do not provide written documents about their work and condition," he said.

 

O'Leary, who recently caused controversy due to his role as a spokesman for the bankrupt cryptocurrency company FTX, and the subsequent defense of its founder Sam Bankman fried, admitted in a phone call that entrepreneurs give up a lot to appear in Shark Tank, but he considers it worth it.

 

O'Leary said: "I don't want to sound arrogant, but I'm not like traditional investors. No one can do what I can do for you, and you have to pay for it. If you don't want to pay, don't apply, go and get your investment in the normal ways".

 

ABC declined to comment for this article, however, Shark Tank producer clay Newbell noted that ABC does not control what happens after filming, when she spoke with Forbes regarding billionaire Kuban in September 2022.

 

"It becomes limited to entrepreneurs and investors after the show is over, we are just the link, so to speak so that we try to find the best entrepreneurs in the country, and hopefully they will come to an agreement," said Newbell.

 

Whether the deal was completed or not, all the businessmen interviewed by Forbes admitted that going to Shark Tank was worth it for the visibility and fame it provides. An average of 4.2 million people watched the episodes of Season 14 of Shark Tank when it began airing in September 2022, according to Nielsen data.

 

Many companies have indicated that they have achieved sales equivalent to months in just a few days after the show aired, and many also attribute their current business success to the opportunities they have gained from appearing on the show.

 

"The Shark Tank program is designed to help companies that started working in marginalized places, small towns, started by inexperienced founders so that it gives them opportunities that they would not dream of," said Kuban.

 

And while the producers of the program spend months checking the business before filming, investors do not have any information before the show, the time of which is adjusted not to exceed 10 minutes on television but lasts from 30 minutes to more than two hours in reality. Then the investor starts his due diligence period only after the initial deal is pledged.

 

It is not surprising, then, that investing is not obligatory for those who say that they intend to do it. In his email, John explained that companies go to Shark Tank "without having to provide guarantees or meet the requirements that traditional banks require".

 

Eyewitnesses

However, the contestants describe the due diligence period as a long and opaque process that leaves them skeptical about investors ' real desire to invest in the first place. One of the entrepreneurs, who requested anonymity, said that the investor Diamond John did not respond to his questions about the deal during the months that stretched between filming and the time the episode aired.

 

After the episode was broadcast, John completely changed the deal without negotiation, which made it less attractive for the entrepreneur. The parties eventually agreed to abandon the agreement. "It was like talking to loan sharks (providers of loans with high-interest rates)," the businessman said about the negotiations.

 

The non-completion of the deal was not surprising, but it hurt the business, says the person, who was unable to look for another financing due to an exclusive contract he signed with the investor.

 

It is not clear why the investors did not complete the initial deals completely, one of them said that they tried repeatedly with Greiner for more than a year, but all their attempts to complete the deal failed before Greiner finally left the deal.

 

In the same way, John Shanahan, the founding partner of Stryx, made a deal with Herjavec, the amount of which was 600 thousand dollars for 10% of the equity in the 13th season of the show. "They told us they didn't want to pursue the deal without giving reasons, despite asking us several times, "he said afterward.

 

On the other hand, many entrepreneurs pointed to clauses in their contracts that give investors great control over the company, which caused them to stay away. This included taking control of, for example, hiring, laying off, raising funds, and selling the company.

 

For example, Jay Vaknin made a deal worth 1.5 million dollars on the air with Greiner, and the show's guest Matt Higgins in the tenth season for his vegan restaurant Beyond Sushi, but decided to abandon it, and Vaknin explained: "the amount of control they were trying to impose was great, and I felt that it would not be beneficial for the company in the long run".

 

At least two people said that the agreed stock deals were replaced by loans, one of them mentioned that he received an offer of a loan with recourse worth 500 thousand dollars from Kuban, which means that his assets taken as collateral will be at risk if they cannot repay it within 12 months.

 

However, Kuban made it clear that he would not have radically changed the deal, offering, for example, a loan with the right of recourse, only to mitigate the risks.

 

He also described the control clauses in some deals as a way to make sure that their investments go "into building a business, and not increasing the salaries of the founders."

 

The other face

Many expressed their great pleasure at completing their deals, as they get the services of a team of experts dedicated to helping their companies at Shark Tank, such as lawyers, marketers, and in-house accountants, even if the investor does not start providing guidance himself due to his preoccupation. Moreover, the investor's name is used in marketing materials and conversations with clients.

 

Eric Burt, the co-founder of pizza oven maker Bertello, said that his investor O'Leary helped him earn millions by helping him appear on the QVC and Good Morning America programs, and also by repeatedly mentioning Bertello on social media.

 

Bert said that it was worth the trouble to part with a quarter of his company for 120 thousand dollars. Bertello now has sales of over 10 million dollars.

 

 

Similarly, Krisa Peterson, the founder of Shower Toga, received an investment of 40 thousand dollars from Mark Cuban in exchange for a share of 25%. she said that Cuban (with whom she still communicates weekly) and his team helped organize a donation campaign during the covid - 19 pandemic when she wanted to donate her product to hospitals (a robe that helps to take a shower in private).

 

 

Even those who did not complete their deals benefited from appearing on Shark Tank, in fact, some successful companies pulled out without deals, such as Kodiak Cakes, which rejected a deal in the fifth season but benefited greatly from publicity and ended last year with retail sales of 500 million dollars, according to co-founder Cameron Smith.

                                                                                                         Sources

                                                                                                      Forbes middle east

                                                                                                      ABC.com