When Shark Tank first hit American cable TV – as a reboot of the Canadian franchise Dragons’ Den – it was viewed as a novelty, but not a place for serious business. Part-time entrepreneurs pitched the celebrity investors on tchotchke products, but rarely did any of the companies demonstrate the potential to become a true multi-million dollar success story.
My how things have changed.
At last week’s Southland conference in Nashville, I spoke on stage with two entrepreneurs and a VC who are walking proof that Shark Tank is no longer messing around. I was joined in our “Swimming with Sharks” segment by Plated co-founder and co-ceo Nick Taranto, UniKey president Phil Dumas, and ff Venture Capital founder and partner John Frankel, who is an investor in each of the above businesses. Together we attempted to parse just what Shark Tank means to the evolving world of entrepreneurship and venture capital.
The biggest takeaway from the session was that Shark Tank offers entrepreneurs a lot more than cash. As usual, any upside comes with its share of risks and warnings (more on that in a moment), but both Plated and UniKey were able to leverage the show’s massive reach – more than 9 million weekly viewers, plus ongoing syndication – to drive awareness to their products.
To that end, on a recent episode, resident Shark, Kevin “Mr. Wonderful” O’Leary, said, “We’re like VC firm on steroids. There’s nobody else like us.” All hyperbole aside, O’Leary is right. No other VC firm can match the demand generation that ABC’s hit show offers.
As Tarnto explains, “It’s an amazing platform. There’s really no other way for a young company to get into 10 million homes across America and have very deep engagement. You would pay millions of dollars in media spend to get equivalent exposure.”
“There’s this notion with a lot of media that things get filtered through early adopters in the Valley and there’s this sort of echo chamber effect,” Frankel says. “They miss the fact that something like Shark Tank allows you to go straight to middle America, straight to mass adoption. Both of these products have gotten enormous traction post early adopter.”
On the flip side, all that attention puts quite a bit of stress on a young business and demands thoughtful planning. Any company whose website, product inventory, fulfillment, customer service, and all around operation isn’t up to the task will, at best, waste their Shark Tank opportunity, or at worst, torpedo their business through delivering poor customer experience.
UniKey aired on Shark Tank in 2012, before ever raising outside capital. It was the first company in the show’s history to receive an offer from all five sharks, but ended up being unable to reach a deal in the post-show due diligence and renegotiation period. (Yup, the deals on the show aren’t final.) But despite not walking away with any cash from the Sharks, Dumas connected with ff Venture Capital after one of Frankel’s LPs (limited partner investors) saw the company on the show.
“I said to [my LP] send me a deck,” Frankel recalls. “He said, ‘I don’t have a Deck.’ I was like, Shark Tank? Are you kidding me? But we looked at the company and we were like, this is actually a great company and the smart lock space is going to be really important.”
At the time, UniKey was still a prototype, meaning that viewers couldn’t even buy the product, but were instead asked to sign up for a mailing list. It wasn’t the ideal scenario, but it was the only way that Dumas – who, living and building the company in Florida, couldn’t have been further from Silicon Valley – knew how to attract the necessary attention and support to grow his vision. Given that UniKey is the first company in its crowded sector to bring a product to market and is now sold in Home Depot and Lowes, it’s unsurprising that Dumas reflects on Shark tank as a positive experience.
“We had this great opportunity to show our company to the world, and it was necessary,” Dumas says. “It was before hardware was acceptable or was coming into being sexy now – 2010, southeast, hardware company. Shark Tank was a huge launch platform for us to get our name and technology out there.”
Plated went on Shark Tank after raising VC funding from ff and others, meaning, unlike UniKey, Taranto was able to convert viewers into customers. The show aired only this April, but has already resulted in an enormous spike in traffic and signups.
“John was very strongly opposed – he thought it was a very bad move,” Taranto says. “The traffic numbers were what eventually won him over.” He adds, “The minute the deal went through with Mark Cuban – you know traffic was already up [during our eight minute segment] 100-times what we’d seen previously, and we’ve seen some national media exposure previously – we saw that triple once the deal closed and Heroku said they’d never seen a traffic spike like that in their history.”
When that brief crash happened, Plated wisely served up an email capture page, rather than it’s equivalent of a “Fail Whale,” Frankel points out. The result: 45,000 emails captured in just 120 seconds.
All three men agreed that Shark Tank can be a powerful tool. The companies that seem to do best on the show are those that can be easily conveyed to a mass-market audience and which have some sort of unique intrigue or appeal (either the product or the founder) that makes for entertaining viewing.
As Frankel pointed out at the outset, the types of companies are changing. No longer is Shark Tank the domain of “cupcake in a jar companies from the midwest,” to use his words. Now real businesses with meaningful growth prospects are leveraging the platform to secure not only cash, but more importantly, national exposure. This can be traced, in part, to a recent shift in the show’s terms that eliminated the requirement that participants grant the show’s producers a 5 percent equity stake in their company simply for participating.
The impacts of Shark Tank go beyond simply helping nascent businesses get off the ground. The show is also delivering entrepreneurial role models into American homes. Coupled with headline news around recent IPOs and acquisitions, as well as fictional movies and TV programming (The Social Network, The Internship, Silicon Valley), the curtain is slowly being pulled back on what was previously a foreign concept to most people.
“[Shark Tank is] educating the millennial generation which is coming into this really strange work market,” Frankel says. “I think it’s doing an incredible public service.” He adds, “I think that’s going to compound. Five years from now, I think this little secret that we know, which is that entrepreneurship is the future of the economy, is going to be known across the country.”
Watch the full interview below: