The 2% Reality of Shark Tank Success: How Your Business Pitch Can Land You An Investment

It's not every day that a TV show can offer its audience tried and true tips for succeeding in their real-life endeavors. However, that has been one of greatest selling points of the popular reality series Shark Tank which showcases rising entrepreneurs pitching their business concepts to a panel of renowned investors, referred to throughout the show as "sharks." The entrepreneurs who step into the shark tank not only offer up their best business pitches, but must also come prepared to answer more cuthroat questions on their company's services, practices and revenue. While every contestant aspires to get any one shark to bite, thus enabling them to walk away with financing for their company, it is no surprise that convincing more than one shark to invest is far more challenging.

In effort to uncover more about the success of its participants, Frontier Business analyzed data from the Shark Tank website to find out just how successful entrepreneurs of the show have been. According to the data collected, Shark Tank has received pitches from a total of 894 companies over the course of their 10 seasons on air. Of those companies, 499 have been successful in accepting a deal from one or more sharks while only 2% of the total companies have received or accepted investment offers from three or more sharks.

Despite the show serving as entertainment to millions of its viewers, there is no exaggeration in the sharks' unwillingness to invest in just any old company. The renowned self-made tycoons, Robert Herjavec, Kevin O'Leary, Barbara Corcoran, Daymond John, Mark Cuban, and Lori Greiner have their own unique interests and requirements that can make or break an entrepreneur's chances at striking a deal. However, even when a deal may seem too good to pass up on, the sharks have had to face the unfortunate fate of having to witness a company they once had faith in, fail to meet the demands of its respective market. While some of the most successful products and companies to emerge from Shark Tank includes Scrub Daddy, Wicked Good Cupcakes and Simple Sugars, to name a few, other companies such as Classroom Jams were unable to find success following their debut on the show.

For the companies that have managed the reap the benefits of having a shark invest in their business, the price for this success has always been heavily dependent upon the amount of equity entrepreneurs were willing to hand over. "On average, companies that made a deal with the sharks gave up 26.84% equity in their company. Those with three or more shark deals gave up 34.82% equity," according to Frontier. In order for the sharks to offer more funding, entrepreneurs are expected to hand over a greater percentage of stake in exchange. However, securing more funding from the sharks does not determine the inevitable success or failure of the company overall.

Even when a business looks great on paper, it is simply not enough to ensure that there is room in the market for the business to stay afloat, much less flourish. One of the most crucial selling points for sharks is the valuation of the company being presented. Entrepreneurs can claim their company to be worth over $10 million, but if the true value is estimated to be far less, in the eyes of the investors, then chances are entrepreneurs will not be walking away with their desired amount of funding. Because valuation determines equity, lowering the valuation of a company means equity becomes cheaper, as well. This my advantageous for sharks, but ultimately puts entrepreneurs at a disadvantage by restricting how much money entrepreneurs can request.

So, how have the 2% of successful companies managed to overcome these odds? They have all successfully showcased their company's ability to earn profits while proving to the sharks that there exists a significant demand for their product/service in its respective market. According to Frontier, the two most popular categories of companies who have received three or more offers have been the fashion/beauty and food/beverage categories. While it may seem as though there is only so much room for originality within these categories especially when it feels as though everything that could exist probably already does, these entrepreneurs have managed to successfully demonstrated their originality while proving there are still game changing ideas left to explore.

Earlier this month, O'Leary and shark tank contestant Sarah Paiji Yoo, sat down with Kitco New's Editor-in-Chief to discuss the key factors in a pitch that can help future entrepreneurs win on Shark Tank. The Co-founder and CEO of Blueland, a household cleaning supply company with a mission of reducing plastic pollution, first appeared on the show's Season 11 premiere episode. Their innovative dissolvable cleaning products quickly struck the interest of the sharks. O'Leary jumped at the opportunity to invest by requesting 10% equity in the company, but ultimately ended up accepting Yoo's counteroffer of 3% equity with $.50 royalty on each Clean Essentials Kit. Not only was O'Leary admittedly impressed by the product itself, but stated that Yoo's success on the show stemmed from her ability to demonstrate the products effectiveness alongside its history of financial success.

"I love products that are disruptive because they're going to get a lot of attention. I love products that you can see and within four seconds understand why they should exist. "I love entrepreneurs that have a track record of success, and as you know over the last eleven years, the majority of returns have come from companies run by women," said O'Leary.

Although each shark may be persuaded to invest in a company for a variety of personal or professional reasons pertaining to their own experience with companies maintaining success after the show, it goes without saying that a well demonstrated product backed by a well-rounded business pitch will increase the chances of entrepreneurs getting more than one shark to put an offer down for their startup. Despite Yoo being offered funding from leading investors, her understanding of the market and the valuation of her company and products is what ultimately sold O'Leary on taking a chance on her.

While Shark Tank has not only changed the lives of its participants by giving them an opportunity to scale their businesses, the show offers aspiring entrepreneurs the chance to refine their own business pitches based on the mistakes and successes of others. Receiving an investment from three or more sharks may be staggeringly low, at a mere 2%, but the data compiled from Frontier opens the doors for entrepreneurs to successfully pitch to investors and receive funding or maybe even try their luck at winning Shark Tank themselves.