Certain “Shark Tank” pitches have an impact due to their intensity. Cancellations and successful deals, on the other hand, are much more noticeable
LOS ANGELES, CALIFORNIA: Shark Tank is a television show where entrepreneurs pitch their business ideas to a panel of savvy investors, and if they manage to impress them, they may land an investment in their business. Everyone understands that playing Shark Tank is a risky game, but failing at Shark Tank isn’t necessarily a bad thing.
The show’s track record is intimidating, to say the least, and it’s easy to get discouraged when you see the countless products that have failed. The show focuses on compelling mass-market direct-to-consumer items that have the potential to appeal to a wide audience. After all, the purpose of the show is to maximize television viewership rather than the Sharks’ financial portfolio performance. Free exposure to over millions of viewers on national television is a fantastic advertising opportunity, regardless of whether your business needs cash. While this doesn’t happen to every company, it’s not uncommon. Here’s our list of the biggest and most notable Shark Tank fails ahead of the show’s first live season premiere.
Toy Garoo (Season 2, Episode 2)
The Ask: $100,000 in exchange for 10% equity
The offer: $200,000 for 35% equity
Toygaroo, a start-up that billed itself as the “Netflix of toys” because it allowed users to rent toys each month, was so appealing that Kevin O’Leary and Mark Cuban invested $200,000 in 2011 to Gain 35% control of the company. Toygaroo filed for Chapter 7 in April 2012, less than a year after receiving the investment. The company finally closed in 2016. According to founder Phil Smy, the company collapsed for two main reasons. First, it was difficult to find toys at reasonable prices. They expected their financiers to help them get in touch with Mattel, but nothing came of it. Second, the shipping cost would skyrocket because the toys were different sizes. This was a problem as they used a “free shipping” concept. They wanted to go to take care of the situation, but their newfound investors were reluctant.
When the episode aired, the company’s share price went up, as is the case with most Shark Tank performances. Which they didn’t need, because a sudden rush into a stock-based company is not a good thing! According to Phil, the company would have been much better off moving slowly and organically, giving them more time to address some of the sourcing and shipping issues discussed earlier. This, coupled with the lack of agreement on the shipping issue, led Phil to believe that being on Shark Tank was bad for the company.
The Ask: $50,000 in exchange for a 25% stake
The offer: $75,000 for 25% equity
Shelly Ehler went on the show in 2012 with her product for young children who need to change in public places like a swimming pool. Her towel/poncho crossover was called “Show No Towels”. Shelly won numerous sharks but decided to work with Lori Greiner, who presented her with $50,000 on the spot, the first time in the show’s history that a contestant received cash on demand.
They worked together for a year until the company went bankrupt. The relationship between Greiner and Shelly Ehler suffered from the start. Lori warned Shelly not to cash the check the next day and then tried to change the terms of the deal (demanded for 70% of the company instead of 25%, and when Shelly Ehler refused, Greiner changed the contract to a loan that only could not be used for other costs but for sales). In addition, the company had a lot to do with a huge deal with Disney. After several months of trying to move forward with the deal, he failed because the product’s online sales weren’t spectacular enough and the profit margin wasn’t enough to meet Disney’s expectations. A royalty agreement with Franco Manufacturing was another agreement that fell through. The company was abandoned as a result of the failure of both deals and the conflict between the founder and the investor.
Sweet Ballz (Season 5, Episode 1)
The Ask: $250,000 for 10% equity
The offer: $250,000 for 25% equity
Everyone, even investors, like cake. Cole Egger and James McDonald, the founders of Sweet Ballz, a cake ball company, must have done something good as they received $250,000 from Barbara Corcoran and Mark Cuban in return for 25% of their candy business. According to ‘Shark Tank’ Success, the cake company made $700,000 in cake ball sales alone from 7-11 franchises at a time.
However, this delicious success did not last. The narrative of Sweet Ballz is a typical tale of two founder feuds. Shortly after the Shark Tank deal closed, Cole Egger and James McDonald got into a legal battle. James sued his business partner because he felt he was developing a competing product behind James’ back – Cole began running the competing Cake Ballz brand. Things were so tense between the two partners that a restraining order was sought. The problem was that the dispute between the founders took place shortly after the airing of the “Shark Tank” episode, which highlighted the product, resulting in a significant missed opportunity for the company. The site was down and the Sweet Ballz domain was briefly switched to the Cake Ballz website. The company continues, but the partnership between the founders does not.
The Ask: $180,000 in exchange for a 20 percent equity interest
The offer: $180,000 for 50% equity
It may seem difficult for new exercise equipment to attract large contributors, but in season one, infomercial sensation and entrepreneur Jack Barringer convinced investors Kevin Harrington and Barbara Corcoran to invest $180,000 in his company. His device, called The Body Jac, was designed to make push-ups easier while strengthening other muscles.
The Ask: $250,000 for a 10% stake
The offer: $1 million for 30% equity
After the deal, the company faced several problems. They had difficulty fulfilling all the orders they received and it soon became apparent that the device was not working as advertised. The readings from the device were inaccurate and occasionally recorded a blood alcohol level that was significantly lower than the actual value. This is a big problem as it can encourage people to drive when they are physically unable to do so. The Federal Trade Commission intervened, ordering Breathometer to pay back all of its customers in full (and to withdraw the product). Mark Cuban called it the “worst execution in Shark Tank history” and criticized the founder for mismanaging the funds.