This summer, ABC announced a ninth season for its Emmy-winning reality TV show, “Shark Tank.”
The show, which features entrepreneurs pitching a panel of celebrity investors, including Mark Cuban, has brought venture capitalism into homes across the nation and established the “Shark Tank” pitch as part of pop culture. On the plus side, the show has engaged and hopefully inspired millions to think about pursuing the entrepreneurial dream.
On the other hand, this is reality TV, so it is built to engage and entertain, not depict the reality of venture funding. Here are a few reality checks:
The 5-minute deal
Though the magic of television, a bold, inspired investor can get a million-dollar deal done in five minutes flat. Make your pitch, get your check. In truth, for the show (and for venture investors), the deal isn’t “done” until long after the pitch.
Forbes tracked hundreds of on-air deals from the first seven seasons of “Shark Tank” and found that more than 40 percent actually fell through off-camera, while another 30 percent went through significant changes.
“Shark Tank” doesn’t try to hide any of this, nor should it. The investor pitch is only the start of the process, not the end. Conducting diligence and working through investment terms takes time and can sometimes derail an investment, particularly when there are meaningful dollars at stake.
The made-for-TV pitch
“Shark Tank” is on the money when it comes to the importance of creating a concise and compelling business pitch. It’s not easy to get an audience with an investor. When the opportunity strikes — whether it’s a formal pitch or an impromptu meeting — it’s important to make a good first impression.
However, for television a good portion of the actual pitch often gets lost in the editing suite. Producers obviously need to maximize entertainment value by selecting only the most compelling sound bites. The back and forth between investor and entrepreneur in a typical pitch will dig much deeper into the details and business fundamentals.
The big reveal
Investor decisions rarely have the same tinge of drama as they do on television. Even when they say “no,” it’s rare for an investor to insult an entrepreneur, slam the door on working together in the future and risk creating a reputation of being unapproachable. Still, candid feedback is something that is essential for investors to give and entrepreneurs to accept, even when uncomfortable.
The celebrity sales bump
Even when an entrepreneur leaves “Shark Tank” without a deal, the on-air exposure can create meaningful impact. Akron-based food startup Peaceful Fruits was featured on the program and immediately saw its orders skyrocket, despite not receiving an offer from the sharks.
Although entrepreneurs have no control over what part of their pitch will air, it’s often worth considering pitching the show for the national exposure. Even pitch competitions that are not broadcast can provide entrepreneurs with exposure that can lead to meaningful connections.
This post originally appeared in Smart Business Magazine on September 1, 2017