No Business is Tanked After Being on Shark Tank
The popular ABC reality show Shark Tank has propelled hundreds of businesses to major success by linking entrepreneurs with hungry, well-connected investors. Businesses who manage to score a deal with one of the sharks have instant access to expanding their production facilities, partnering with retail or service giants, and most importantly, a heightened recognition of their brand name. But with last season’s view count of 7.9 million, even the losers who don’t earn an investment can be winners. That kind of publicity brings substantial profits for businesses just by being on the show and spreading the word of their goods and services; this phenomenon is familiarly known as “the Shark Tank effect.”
Take the business CoatChex, for example. The very young founder, Derek Pacque, came on the show during season four. Mark Cuban loved Pacque’s idea of a ticket-free coat check system. Cuban offered Pacque $200,000 but for triple the equity he was willing to part with. He walked away without securing any deals. Since the company’s appearance on the show, CoatChex has managed to achieve unbelievable success without any awarded investment. CoatChex was asked to service major events, such as the 2013 New York Fashion Week, Mercedes Benz Fashion Week, and the Super Bowl. After these events, the company was projected to bring in more than $500,000 in six months through more events, contracts, and new leads. The publicity from airing on the show brought him connections to go on to amazing things, even though he was unsuccessful on air.
Founder of CoatChex, Derek Pacque, making his pitch on season 4 episode 1 of Shark Tank.
The company Chef Big Shake managed to garner unprecedented success after their featured episode’s air date and without an offer from the sharks as well. Shawn Davis came on the show during season two. He pitched his specialty burger business, proclaiming his restaurant the “home of the original shrimp burger.” He asked for $200,000 in return for a 25% stake in his company and received no offers. However, after Davis’s episode aired, he received capital from angel investors and was able to expand his revenue from $30,000 to $5 million in just one year. Mark Cuban has even stated that Chef Big Shake is the one company he strongly regrets not investing in and that it was one of his biggest missed opportunities. Davis was able to be connected with investors because of his appearance on Shark Tank. His success is directly attributed to the attention his episode brought him.
Shawn Davis pitching his original shrimp burger and company for the sharks.
The strength of the phenomenon has prompted experts to research just how profitable airtime can be. Based on their findings, some believe that the airtime on Shark Tank is more valuable than the actual deals from sharks because that means losing precious equity. There is a general consensus among experts that airtime is worth somewhere between $4 and $5 million in market exposure.
Businesses now understand this huge opportunity for exposure, and they want to take advantage of it. For example, Garrett Gee came on the show in 2013 and pitched Scan, a mobile app that can be used as a QR-code and bar code scanner for consumers and code creator for businesses. Gee did not need the investment, as he had already raised $8.7 million and valued his company at $25 million. Daymond John, upon learning this information, then asked “What exactly are you doing here? Is it just for exposure?” Gee had answered “no” at the time, but later stated that he was open to a deal, although exposure was in fact his top priority. The venture paid off, literally, as the app soared in popularity. Before the show, Scan’s $1.99 app was #150 among all paid apps in the Apple App Store. After the show, it shot up to #1 in the utilities category and #25 in all paid apps, and #1 in all paid apps in the Window’s app store.
Scan’s founder, Garrett Gee, delivering his presentation of the already successful app.
It is evident that appearing on the show can bring a business immense profits. Leaving with a deal can support a business and take it to new levels using the capital and connections of the sharks. Leaving without a deal, which for some means the end of the road, is still a major marketing tool for businesses that makes their time on the show fully worthwhile. This publicity has given rise to several successful entrepreneurs who persevered without an offer, and several entrepreneurs who received funding from outside investors. The “Shark Tank effect” is real, and it’s big. As more and more businesses come to recognize the sheer benefits of being on an episode, a feeding frenzy will begin in competition for airtime. Only time will tell just how far-reaching and long lasting the impact truly is.