What You Can Learn from 'Shark Tank' Contestants' Successes (and Failures)
The hit show Shark Tank may be 10 years old, but entrepreneurs still have new opportunities to learn from how its contestants have succeeded or why they've failed.
Over the course of the show’s first nine seasons (the 10th season began Oct. 7), a total 441 teams earned a deal -- and 362 did not. What was the key ingredient to those successes? Actually, a multitude of variables impacted the outcome for these millionaire wannabees.
Some businesses succeeded beyond their founders' wildest dreams. Others failed even to respond to the surge of orders that typically follows a company's appearance on the show.
Then there was Jamie Siminoff, the entrepreneur pitching a wifi doorbell on Shark Tank in 2013, who initially failed to get a deal, then five years later -- in 2018 -- made a billion dollars from the sale of his company to Amazon. He was invited to be the newest Guest Shark, as a result.
Along the way, the show has offered advantages not just to entrepreneurs but to viewers, in terms of the lessons Shark Tank conveys about entrepreneurship's fundamentals. These include: creating a relevant and viable business, clearly communicating its value proposition through backup data and knowing how to secure funding. All those fledgling entrepreneurs out there need advice, and Shark Tank offers it.
That's the reason my company jumped in to give outreach support for a study of Shark Tank pitches by our clients at SimpleTexting. That text-marketing company spent two months analyzing all 803 pitches on the show and reading its producers' official notes. En route, the researchers examined each contestant’s business and his or her (or their) ultimate pitch performance on the show.
What follows is the study's results, presented in the form of four takeaways about how entrepreneurs can win big investments for their own companies -- whether they've secured a coveted spot on Shark Tank or not:
1. Don't work alone if you don't have to.
Shark Tank contestants should work in pairs. Those working with partners had a 21 percent higher chance of landing a deal (61.44 percent deal rate for a team, 50.62 percent for an individual); and their businesses tended to have a 22 percent higher valuation on average than did companies pitched by individual contestants ($2,923,778.77, vs. $2,397,072.79).
What this means: As the old saying goes, “If you want to go fast, go alone. If you want to go far, go together.” There is truth to this when it comes to being an entrepreneur. It may seem simpler to execute the idea that you, alone, came up with, but ultimately you’re more likely to find success if you invite the input of others that you trust.
2. Don't jeopardize a potential investment by asking an investor for too much.
Shark Tank contestants who asked for more were less likely to get a deal. Those who asked for investments of less than $200,000 had a 57 percent deal rate, while that rate dropped to 49 percent for deals in the $400,000-to-$599,000 range, and down even further, to 44 percent for requests of $600,000 or more.
What this means: At the end of the day, investors are people, and people are all different. Investors come from different backgrounds, have unique interests and work in varying industries, so you need to find an investor who makes sense for your specific business pitch. Similarly, the judges (a.k.a. “Sharks”) on Shark Tank have a unique point of view and invest their money in different ways than do their co-stars.
There are six core Sharks associated with the show -- Mark Cuban, Daymond John, Barbara Corcoran, Lori Greiner, Robert Herjavec and Kevin O'Leary -- and five appear on any given episode, sometimes with one swapped out for a Guest Shark (e.g. Richard Branson). It’s extremely rare that all of the Sharks present invest in a pitch. In fact, the first time such unanimity happened was in 2013, meaning four full seasons of the show passed before this even occurred.
Instead, winning pitches will usually get a deal from one or a few of the investors; hence the variation in the total amount each Shark has invested throughout the show’s history.
3. There is no perfect formula to success.
This holds true on Shark Tank. Over the first nine seasons, contestants who asked the Sharks for more investment were less likely to get any deal at all. Those who asked for less than $200,000 had a 57 percent deal rate, while the deal rate dropped to 49 percent for those who asked for $400,000 to $599,000. The rate dipped even lower when contestants asked for $600,000 or more -- down to 44 percent.
What this means: Make sure your business actually serves a need, and that you can communicate its value proposition well. On Shark Tank, certain categories have largely succeeded (e.g., the holiday decor/products segment has had a 79 percent deal rate) while others have failed (e.g., the entertainment segment, which has had only a 30 percent deal rate).
4. If you get rejected, don’t give up; see it as a learning opportunity.
What’s even more devastating than the rejection of a mediocre idea is the rejection of a great idea because you didn’t communicate it effectively. Sometimes, though, failure happens. The first step, then, after a rejection, is to honestly and thoroughly evaluate what went wrong.
If the core premise of the business is flawed, figure out how to fix it or whether you need to focus your efforts on a different idea. If you failed to communicate well or answer investor questions effectively, work on your pitch before trying it again. If everything about your performance and business went right but you still didn’t get the investor’s interest, then find one who is a better fit.
Of the many pitches on Shark Tank that failed, some went on to become highly successful businesses after all. Siminoff, the newest Guest Shark? His pitch on the 2013 season of the show may have failed. But he ultimately succeeded big. So, rejection may be difficult to accept, but perseverance often is the secret to success.