On ABC’s “Shark Tank,” entrepreneurs from across the nation step forward to present their brainchildren to a panel of industry experts with deep pockets. They go in looking for an investment that could propel their startups to unimaginable heights. Yet, not all that glitters is gold. Just because an entrepreneur gets the handshake of a shark, doesn’t mean the story always has a happy ending. While some Shark Tank deals go on to become extremely successful, other deals, no matter how promising, just don’t work out.
Some deals failed because the sharks decided that it was not the right opportunity for them. Others may have failed because the sharks and entrepreneurs did not see eye-to-eye after the show. And some deals fall apart because there are things fundamentally wrong with the product or business.
No matter the reasons, it is clear that when a deal is made on Shark Tank, there is still a long road to success. Today, we’ll look at stories of promising enterprises that faced unfortunate reversals of fortune. These tales are not just narratives of failure, but rather cautionary tales.
ToyGaroo (Season 2)
Deal: $200,000 for a 35% stake (Mark Cuban & Kevin O’Leary)
In their appearance on Shark Tank, the founder of ToyGaroo, Nikki Pope impressed the sharks with her business concept, which was often referred to as “the Netflix for toys.” She secured a deal with Mark Cuban and Kevin O’Leary, who invested $200,000 for a 35% stake in the company. However, things quickly turned sour after the show. Despite a surge in customers, they found themselves struggling to meet the demands. The exposure from appearing on the show caused logistic nightmares and customer service issues.
Unfortunately, they had scaled too quickly without establishing a robust operational base. According to the software developer and shareholder of ToyGaroo, there was also a disagreement between sharks and Pope about charging customers for shipping. Pope wanted to begin to pass along shipping costs to customers when it was previously agreed that shipping would be free. Mark Cuban strongly disagreed with the idea. Eventually, financial strains piled up, and they filed for bankruptcy within a year of their Shark Tank appearance. Cuban did offer to purchase the company but Pope declined.
The failure of ToyGaroo serves as a cautionary tale about the pitfalls of rapid expansion without having a strong logistical and operational foundation.
ShowNo Towels (Season 3)
$50,000 for a 25% stake (Lori Greiner)
During Season 3 of the show, entrepreneur and mom Shelly Ehler pitched her product ShowNo Towels to the Sharks. The product was a towel and poncho combination that allowed individuals to have privacy to change clothes when at a water park. Ehler was an enthusiastic entrepreneur who gained the admiration of the sharks.
The founder managed to secure a $75,000 investment from Lori Greiner for a 25% equity stake. Lori believed in Shelly so much that she wrote her a check on the spot without doing any due diligence. Initially, it seemed like a promising venture, as the towels were picked up by Disney water parks. However, the towels didn’t receive a spike in sales after Ehler presented her pitch on the show which is rare for a product that appears on Shark Tank. After the deal, the business encountered several obstacles along the way.
Shelly and Lori had disagreements, leading to Lori exiting the deal. Furthermore, a significant business deal fell through which resulted in a considerable financial hit. Despite putting up a courageous fight and even mortgaging her home to keep the business afloat, Ehler eventually had to close down the business.
One of the reasons why this deal made our list is due to the potential the product had. It seems as though Ehler has bounced back and is still an entrepreneur as she has a new venture that she has been running for many years.
Sweet Ballz (Season 5)
$250,000 for a 25% stake (Mark Cuban & Barbara Corcoran)
Image credit: SweetBallz.com
The cake ball company, founded by James McDonald and Cole Egger, was a sensation when it first appeared on Shark Tank. Mark Cuban decided to invest $250,000 for a 25% stake in the company. Initially, it seemed like a sweet deal; the product was featured in 7-Eleven stores nationwide and saw a surge in sales.
However, internal strife soon emerged within days after appearing on the show. After the show aired, the Sweet Ballz website was flooded with so many orders that they had to temporarily shut down. At the time the site was back up, it was reported that Egger began redirecting Sweet Ballz traffic to another site seemingly in an attempt to siphoning sales.
A bitter legal battle ensued between the founders, with accusations of fraud and misconduct. Cuban and Corcoran found themselves caught up in the disputes. Both investors then decided not to move forward with the deal. The infighting hampered the growth of the business severely, tarnishing its reputation and affecting sales. The story of Sweet Ballz serves as a warning of how internal disputes can quickly sour a promising business venture.
Body Jac (Season 1)
$50,000 for a 50% stake (Barbara Corcoran & Kevin Harrington)
Cactus Jack, the founder of Body Jac, a fitness device designed to help people do push-ups, appeared on Shark Tank seeking investment. He managed to strike a deal with Barbara Corcoran and Kevin Harrington, who was an original cast member of Shark Tank, for $50,000 for a 50% stake in the company. However, there was a condition attached – Jack had to lose 30 pounds to prove the effectiveness of his product. At the time, Jack weighed 275 lbs.
During a Shark Tank update, viewers were treated with the sight of Jack weighing in at 243 pounds, surpassing the goal by 2 pounds. Harrington and Corcoran went on to partner with Jack and even made an infomercial for the product. However, in a later interview, Corcoran stated that she had lost money on the deal and would probably never invest in another one of Cactus Jack’s products. Currently, the Body Jac is no longer for sale and Jack has moved on to running a marketing company.
Hy-Conn (Season 2)
$1.25 million for a 100% stake (Mark Cuban)
In one of the most memorable pitches on Shark Tank, firefighter Jeff Stroope presented Hy-Conn, a connector for fire hydrants and hoses that significantly reduced the time it took to connect the two. Mark Cuban was impressed and struck a staggering $1.25 million deal for 100% acquisition, with a promise to keep Stroope as the manager.
However, post-show negotiations soured dramatically. Disagreements over the valuation and the future direction of the company became stumbling blocks. Stroope found Cuban’s approach too aggressive and ultimately backed out of the deal.
It’s reported that the relationship between Cuban and Stroope became quite contentious. The fallout of this deal is often cited as an example of how vital clear communication and aligned visions are for a successful partnership, and how deals can disintegrate when the invested parties aren’t on the same page.
Breathometer (Season 5)
$650,000 for a 30% stake (All Sharks)
The Breathometer, pitched by Charles Michael Yim, seemed like a groundbreaking product at the time. It was a portable device that could turn any smartphone into a breathalyzer. Yim had already sold 4,000 units within the first 30 days through its successful Indiegogo campaign. The sharks saw potential right away. In a historic move, all the sharks teamed up to invest $650,000 for a 30% stake.
Initially, the business seemed promising, garnering millions in sales. However, the product soon faced scrutiny for providing inaccurate blood alcohol readings. Clearly, a device that has the potential to lead to deadly consequences if wrong, was a major cause of concern. Eventually, The Federal Trade Commission got involved. The FTC slapped the company with serious sanctions and forced it to refund $5 million to its customers.
This case stands as a stern reminder of the regulatory hurdles and product reliability issues that can trip up even the most promising startups. It also underscores the importance of rigorous product testing before entering the market.
CATEapp (Season 5)
$70,000 for a 35% stake (Kevin O’Leary and Daymond John)
Neal Desai pitched CATEapp, a privacy app designed to help individuals keep their calls and text messages confidential. Desai went into the tank seeking $50,000 for 5% equity of his company. CATE stands for “call and text eraser”. Although it started as an app that prevented significant others from seeing calls and texts from the cheating partners’ phone, the app had valid security applications. However, because of the cheating aspect, Herjavec immediately went out.
Kevin O’Leary saw potential and agreed to do a deal with Daymond John to invest $70,000 for a 35% stake. However, post-show, the deal was never finalized due to disagreements on the contract terms. Furthermore, the app faced fierce competition in the crowded market of privacy apps. As of 2023, the company is no longer in business.
You Smell Soap (Season 3)
$55,000 for a 30% stake (Robert Herjavec)
Megan Cummins, the entrepreneur behind You Smell Soap, successfully secured a $55,000 investment from Robert Herjavec for a 20% stake in her luxury soap company. Herjavec was able to steal the deal away from Mark Cuban by offering Cummins an additional $50,000 annual salary and bringing up the ownership to 30%
However, the post-show period turned into a nightmare as the deal dragged on without materializing. According to Megan, she never claimed that she never received the promised investment from Robert. In fact, she claimed that she didn’t hear from him for quite some time and significantly stunted the growth potential of the business. She also claimed that when she did hear back from him, he requested a change in the terms of the deal to 50% equity. This sometimes is the case after investors do their due diligence.
Eventually, Megan had to sell her business. Unfortunately, You Smell Soap is no longer in business.
Conclusion
Business is not an exact science. This means that every deal made by the sharks or any other investors is not a guarantee of success. There are a lot of things that need to go right for a business to succeed. Not only with the product, market, and team, but in some cases with the interpersonal relationships of the entrepreneur and investors. All entrepreneurs can learn a lesson from failed Shark Tank deals and apply those lessons to their own businesses.
Image credit: CNBC/YouTube
Also Read:
How Valuations Are Calculated on Shark Tank
10 Successful Companies That Were Rejected on Shark Tank
The 20 Best Shark Tank Episodes Ever
Pingback: 8 Greatest Failed Shark Tank Offers - Webbizmarket.com
Pingback: 8 Biggest Failed Shark Tank Deals – Entrepreneur – Start, Run and Grow Your Business
Pingback: 8 Biggest Failed Shark Tank Deals – Joseph Odierno Buffalo