Are the Sharks actually good investors?

you already get them out of here i find you enormously abrasive i feel as though you don't have the capacity to listen could you imagine what kind of a partner you would make for me are you guys out of your freaking minds i think the chances are i'm going to invest in that do you have anything better to show us today or is this the top of the line if you were in one of my business schools i would spray you down with water and every time you say i don't know i'd hit you with electric cattle all right i'm not really here but every year 40 000 companies 40 000 founders go through months of work and effort to try and land a spot in front of those guys it's a nasty application process it's months of paperwork and interviews on auditions all to get in front of these guys for like 10 minutes to pitch your company but companies still do it because it pays so well 207 million dollars have been raised by shark tank companies so far we got a deal we have a deal i'll offer you a million dollars for 25 percent two million dollars you only ask for one i'm gonna give you two million dollars ah i'll take that offer done but it's easy to find a success story of so many companies that have gone through shark tank i've been wondering if these guys are actually good at investing i've been wondering if the roi is there how many of the companies that they bash all the time go on to prove them wrong and whether their shark instinct is actually correct so we did it we spent weeks looking at the cold hard data of hundreds and hundreds of companies that have gone through 295 episodes of shark tank we analyzed everything from their products to how much money they asked for to their evaluations and of course their outcomes we found some shady stuff like producers trying to get equity just for appearing on the show we found that half of the deals that were broadcast as yes i'm investing in you don't actually close and they never get any money so this is company forensics the real numbers behind shark tank so these 40 000 companies apply to be in shark tank every single season and they'll do this by either filling out this online application form or by waiting standing in line for long hours for a live audition and we're going to lose most of those companies along the way maybe their business isn't consolidated enough maybe they're bad at pitching because they haven't watched any of our videos or maybe their product is useless or maybe they're just boring more often than not making it to the show is not so much about the product it's about the personality i mean it is about the ratings a little bit after all but after this massive purge we're gonna land on a group in a small group of a few hundred companies and those that make it here they'll need to fill this thing this is a 17-page application kit and they're going to spend months on audition tapes and answering emails from production and having endless video calls and we're gonna end up with just 158 158 this batch will get to pitch the sharks and all you have is 10 minutes 10 carefully timed minutes to pitch your company i asked for um i think was ten thousand wow i was sleeping through the beginning of this presentation because i thought i was saying i'm awake now crush this i feel like the 160 price point is a problem but it's not over here it's not over yet you won't see all of them if you pitch them and your discussion is boring you're not gonna make it to television and out of those only about 50 to 52 companies are going to get a yes but not all of them are going to get the money we'll get to this later first i want to thank chart mogul for making today's video possible we have been using their platform at slide being long long before this youtube channel even existed i've been recommending it to people and now i'm getting paid to do so turn mobile is a tool for sas companies to track their revenue i genuinely think it's the best tool out there you can plug data from virtually anywhere and it will analyze it for you it'll give you reports on your mrr and your turn rate it'll calculate your lifetime value it lets you filter your users by country or by the campaign that brought them in and look at the metrics for each one of these groups separately the most crucial company decisions that we've made at slight bean have been supported with the data that we get from chart mobile every day and best of all it's free for early stage startups any company that's under 10 000 in monthly recurring revenue you can sign up for free forever if you have more than ten thousand dollars in mrr you can still use the code in the description to get a 600 credit of your first year interval so thanks again to the turmoil team for sponsoring today's video on so many of our videos now back to the story obviously what you see on television is not what actually happens each session takes about 45 minutes some up to two hours but obviously you don't get to see all of that because who watches two hours of anything these days three million dollars for the entire company let's do it but why would anybody want to go through this it sucks it sucks so much that founders that pitch the sharks actually have to go on a one-on-one session with a licensed psychologist just to deal with the experience hashtag avoid lawsuit just being on tv is part of the reason why these companies do it i think it's a terrible name it's hard to spell hard to remember if you gave me a spelling test it would take me 10 times to really get it i'm out if i want to send flowers to your grave i have to wait six days i think you died here today in this case the sharks were wrong this company knocked it out of the park millions in sales enough to make the sharks regret it and that's not the only case of course take lena and steve for example steve sashen and lena phoenix manufactured this modern take on the traditional shoe and they call this the zero shoe and the stakes were really high on this one so does this mean that you don't really need the sharks do they bring any value or is it just the air time after all it's not as if they don't make mistakes 57 shark backed companies have gone out of business some of them quite spectacularly so like the breath of meter you're at 0.04 right now that would be legal does it tell you if she has bad breath too i mean it was a good idea this device that measured the alcohol level in seconds so that you don't drink and drive they agreed on a one million dollar check for about 30 equity but then this happened the ftc forced the company to refund all their customers because of these accuracy problems and the sharks were obviously embarrassed so i want to go back to this question what is the real value of the sharks themselves and for that i want to go back to lena and steve's story this episode aired february 1st 2013. it was i think the 14th episode of the fourth season the show was already established six plus million people were watching it and they loved every minute of it o'leary's heartbreak the product the founders everything the script said mr wonderful for o'leary but i'm not really gonna call them that that's a mr wonderful look in the weeks after the episode air the company boomed zero shoes sold 20 of the previous year's volume in just seven days the website crashed with the airtime alone they had made more than they had asked from the sharks zero shoes only kept growing the company grew 88 during the pandemic and even landed a deal with another investor by 2021 the product was sponsoring olympic athletes and ranking 13 million dollars in annual revenue all without the help of the sharks and that is really just one of many success stories the other one is this thing justin wang founded this company and well it boomed i'm here today to ask for five hundred thousand dollars for one percent my company lark [Laughter] his valuation made lark the most valuable company in shark tank's history after all years later lark did reach those 50 million dollars but not with the sharks the deal didn't close but appearing on tv was just enough of a catalyst to reach those 50 million dollars in sales and it happened to lark it happened to see your shoes and to many other participants there's even a term for it and the production company knew it very well and tried to monetize it as an entrepreneur appearing on tv means millions of viewers even better than having your own youtube channel this is the shark tank effect on the other side of the screen there could be investors and entrepreneurs or just plain old customers who fall in love with your product so for a while after going through all of this grueling process if your company made it to the season you had to pay regardless of whether or not you raised money production company expected companies to pay five percent equity for just these few minutes on tv for comparison there have been 18 deals in shark tank with that much equity it's no small amount again even if the sharks rejected your idea you had already lost five percent of your company oh but wait there was an alternative if you by any chance didn't want to sacrifice five percent equity no problem alternatively you could just pay them a 2 royalty on your future sales forever but these absurdly high commissions aren't the worst of it you had to pay this regardless of whether or not your pitch made it on tv or not there are a fair share of companies today alive that still have to pay a royalty to shark tank but of course there was a downside here better prepared companies just didn't want to sacrifice the equity so finally in 2013 mark cuban said screw it and demanded the production company stop charging this money and his rant proved correct just take a look at how much the viewership and the deal amount changed for the following two seasons but this is really the first of many charts that we've prepared today so i am going to move to an old but familiar part of our studio [Music] okay but in all of this where do the sharks come in it's really not just about changing the rules or making it on tv after all these guys are millionaires some of them even billionaires so if they get their hands on your product they can make millions of dollars for you with you but what does it take to draw their attention first it might be a category thing now in 13 seasons 1187 companies have been on shark tank and appeared on tv and in that time there have been a total of 207 million dollars in deals from the sharks food and beverage products reigns supreme second goes to healthcare related products and then fashion then it also helps to know how much money you should be asking for here's the average deal handed out in the 13 seasons of shark tank the lowest and the highest and if you ask anything more than that they are literally going to laugh you off the stage and then there's the equity and how much equity you should be giving out this is a lot and when you give out so much you should expect a good payout so you could call this the perfectly balanced shark tank deal that sharks would say yes to but even so this show continues to impress me because a yes doesn't really mean anything let's go back to those 52 companies that supposedly landed a deal that means that at least one of the sharks said yes but it's not over 52 companies got a yes but only about half of these companies actually get any money from the sharks on average only 27 companies close out the deal per season and it's all due to paperwork there's this very little process called the due diligence because after all the handshakes and the drama and complex negotiations the sharks and the founders must analyze the company's paperwork this is called a data room all this paperwork is packed into what we call a data room and next week's video is all about how to build one it's looking at this data room where things sometimes don't work out usually because of the founders ninety percent of the deals fall through because the founders believed that the conditions weren't really good for their business even though they took the deal on tv i thought this was against the rules you know there's no rules okay i'm not sitting waiting i want this deal i'm here i'm with you and then some deals have taken so long to negotiate that the episode has aired already so they already got the benefit of being on tv and they can just kiss the sharks goodbye but anyway this is it 27 companies per season landing a deal should be a life-changing thing right if not then why are there sharks even here we shouldn't forget about one thing these guys aren't ordinary business people this is so not my space that's business bar i would like to bring in another shark with me there have been a total of 32 sharks that have appeared at least once on the show even this guy who was the most boring shark ever so much so that mark cuban actually replaced it in season 2. but the core 6 and the other guest sharks have one thing in common it's the one reason why this show works after all they all really know how to make money and that's the allure here people want their money help people want to be like the sharks so despite the journey the hardship and knowing that the deal might fall apart there's still that sliver of hope that shark tank is a good thing for your business and as much as i really wanted to prove them wrong today i couldn't let's analyze all the companies that have gotten a yes on air and then failed to close the deal there are 349 and here's how many of them still exist those that close the deal are even more interesting so having the sharks on your side is a good thing after all here's how many of each of the sharks investments on shark tank still exists but it's when we compare that to other sectors that this becomes more impressive for example startups we know that around 80 of startups will fail within the first five years so let's leave the startup world and talk about business in general and adding this statistic here you can see that 50 of companies fail within the first five years and this is of course not encouraging but it's just how small business works so how does shark bank compare pretty incredibly but let's go even a bit further even those companies that didn't close the deal do great and i want you to sync on this for a moment this show has a better success rate than most industry standards the drama the brutal admission process and the o'leary guy it's all worth it and this is why shark tank exists and that's why those 40 000 companies are willing to face that emission rate of 0.4 or 0.2 for a chance to make it on air all of that to hear the sharks say i'll do the deal and make their businesses blow up [Music]

Channel: Slidebean

Views: 88,163

Keywords: slidebean, caya slidebean, company forensics, caya, startups, startups 101, shark tank, mark cuban, tv show, shark tank moments, shark tank facts, shark tank pitches, shark tank best pitches, reality tv, shark tank worst pitch, shark tank best deals, shark tank kevin hart, lori greiner, shark tank episodes

Id: ZJRNJ9A-QpE

Length: 13min 31sec (811 seconds)

Published: Fri Aug 12 2022