“I’m out” is the catch cry from the judges on the television show Shark Tank – the ‘sharks’ as they are known -when they don’t want to invest in a business.
However, even when the television sharks do “invest” in a business, in the majority of cases they are often out straight after the show with the investment never going through.
The reality of the television show is a long way from what happens after the cameras are turned off.
Analysis by Fairfax Media shows of the 50 businesses which appeared on Shark Tank last year, 27 received investment from the sharks on television, however only four of these investments actually went ahead.
‘A bit of a shock’
Rick Coles is one of the business owners who secured an “investment” on Shark Tank only to have the deal fall apart once the cameras were turned off.
Rick and his wife Tracy scored a $200,000 investment from Janine Allis and Steve Baxter for a 25 per cent stake in their business Fresh Meals 2 U on the last episode of Shark Tank for 2017.
“Overall how the show was structured and how the reality was, was not what we had in our minds so that was a bit of a shock,” Coles says. “We did not know that there was a show deal and then a real deal we thought it was just one deal.”
The CEO of iCapsulate managed to get $2.5m on the show, while a Masterchef contestant from 2016 also made an appearance.
Coles says even though they didn’t ever get the $250,000 the business still received benefits from appearing on the show.
“There is an element of disappointment,” he says. “But we were more looking for mentorship and being able to tap into their experience and we did get to do that in some respects. If you are going on there thinking they are just going to hand you money that is not what they are there for.”
Shark Tank reality
Shark Tank’s fourth season on Australian television started this week with sharks Steve Baxter, Naomi Simson, Andrew Banks, Janine Allis and Glen Richards receiving pitches from small businesses which they then choose whether or not to invest in.
Channel Ten claims that across all four series of the show the sharks have invested more than $21 million which would equate to around $5 million each year.
However Fairfax Media’s investigation of last year’s series shows the investment from the sharks only proceeded for four businesses with the sharks investing $625,000 in total for the year.
Two sharks, Naomi Simson and Steve Baxter, did not pay out for a single investment for the series despite “investing” in numerous businesses on the show.
The four businesses from 2017 which got the investment after the show was over were Cancer Aid, which secured a $250,000 investment, Monday Food Co ($100,000), Be Fit Food ($200,000) and Jimalie ($85,000).
The most high profile investment that didn’t go ahead was Andrew Banks investment of $2.5 million in coffee capsule company iCapsulate in what was touted at the time as “the biggest deal in Shark Tank history”.
iCapsulate founder Kane Bodiam says just before the episode of Shark Tank aired he was contacted and told Banks was pulling his investment because iCapsulate did not have biodegradable capsules.
Bodiam claims he did not proceed with biodegradable capsules because Banks did not get back to him.
“The investment was important but we could see straight away that nothing was going to eventuate we could see straight away the goal posts were constantly changing,” Bodiam says.
Bodiam admits Shark Tank was good for promoting iCapsulate.
“As long as you aren’t shredded in front of the public and made to look like a fool it is ok,” he says. “There were definite benefits of it, but put in the situation again I would love to have done it and said no to the sharks.”
Barry Tennant was employed by Shark Tank’s production company Endemol Shine for the first three series to research the applications to Shark Tank which were more than 1000 a year.
Tennant was not involved in the current series.
“I don’t think the applicants were aware of the reality of what being on the show was,” he says. “The schedule for the production company to put a show together you just don’t have the time to put a full due diligence together.”
Tennant says any due diligence is limited on businesses before they appear on the show.
“It is really done by application you don’t have a chance to meet their accountants or financial controllers,” he says.
“I am sure a few of the businesses have benefited but mainly from the exposure not financially. It is very, very easy for the investor to make an offer but very easy to bail out of that commitment once the show is aired.”
A spokesperson for Shark Tank’s production company, Endemol Shine, told Fairfax Media that it is important to remember that the Sharks are investing their own money.
“As in any proposed business investment, even one where the pitch and deal is filmed, comprehensive due diligence is required before the investment proceeds,” the spokesperson says. “There can be many reasons for a deal to not proceed. That said, even where deals do not go ahead, the Sharks often provide their assistance, mentoring or invaluable introductions for entrepreneurs.”
Shark Naomi Simson says iCapsulate is “the most extreme example” of an investment not going through.
“The production company invested with a due diligence team this year to do more work prior to the pitches,” she says. “It’s much better that Endemol Shine does it on the way in as otherwise we are doing it on the way out.”
Simson says while she didn’t invest any money after last year’s series in addition to the pitches she accepts on the show she also makes “a whole bunch of offers” to support contestants.
“Money is sometimes not the right thing and they need to crawl before they walk and then run,” she says. “Often a contact is far more valuable. I am pleased with some of the outcomes we have got even though it hasn’t been financial yet.”
Janine Allis says she has invested $1.2 million over the series personally and in the real world business deals often fall apart. “Even when you look at Shark Tank worldwide the statistics on what goes through and doesn’t go through are pretty similar and they are pretty similar because that’s how business works,” she says.
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