Desiree Stolar and Nate Barbera needed to practice the pitch for their startup company, but they couldn’t tell people why. So when they invited a group of investors, consultants, and product design experts to a conference room last May at Harvard’s Innovation Lab, they concocted a ruse.
“We told them that we had a meeting coming up with a Chicago venture capital firm, and we wanted to practice answering the questions they might ask,” Stolar says. In fact, her company, Unshrinkit, had landed a coveted invitation to appear on the ABC reality show “Shark Tank,” and a confidentiality agreement prevented them from telling anyone.
It wasn’t until the episode featuring Unshrinkit aired in November that Stolar could divulge the secret.
“I got text messages and e-mails saying, ‘Hey, was that rehearsal for ‘Shark Tank,’ or was it for a legitimate venture capital firm?’ I told them the truth then,” she says. The company, founded on the campus of Harvard Business School but now based in Arlington, Va., sells a solution that purports to reverse shrinkage of sweaters and other wool products.
Unshrinkit is one of a handful of companies with Boston ties that have appeared on “Shark Tank,” which wraps up its seventh season in May, and “Beyond the Tank,” a spinoff that follows companies after they’ve secured an investment from the panel of investors.
The premise of the show is simple. The “sharks,” as the panelists are known, evaluate a handful of deals on each episode, deciding either to put money in or pass. But there’s much more happening than most viewers realize, both before and after entrepreneurs step onto the show’s famous red Persian rug to pitch the sharks.
The first is just how tough it is to get on the show.
Tracey Noonan says that when she applied in 2012, there were about 35,000 applicants hoping for a spot; a casting director recently told her the number has now surpassed 100,000. “They take 120, and anywhere between 80 and 100 of the pitches air per season,” she says.
Noonan’s Cohasset business, Wicked Good Cupcakes, sells cupcakes packaged in glass jars. What was a small retail bakery with a handful of part-time employees has since ballooned into a company with 25 full-time employees, and Noonan says they will be hiring more soon for a new production facility in Hanover.
Stolar says it was “absolutely” harder to get on the show than it was to get into Harvard Business School — “and there is no guarantee of a positive experience when you get on ‘Shark Tank,’ ” she adds, while the career effect of obtaining an MBA is more predictable.
Once you’re picked, the producers mandate complete secrecy with a “detailed confidentiality package,” Stolar says. And every e-mail they send includes a note at the bottom that cautions that, at any point, they could decide not to film your segment — or decide not to broadcast it after it has been shot.
Though it began airing in 2009, the hourlong show has begun attracting more serious entrepreneurs in recent years. In part, that’s because of a change that took place around 2012, when the sharks persuaded the companies that produce the show, including ABC and Mark Burnett Productions, to nix a condition that required everyone appearing on the show to give them 5 percent of the company’s equity or 2 percent of future profits— regardless of whether they landed a deal.
“All we were getting were people with ideas on a piece of paper,” says Kevin O’Leary, one of the sharks, mentioning an entrepreneur who appeared on an early episode with a battery-powered turkey baster. Once that contractual change was made, the show “exploded from there,” O’Leary says.
Rob Go, a Boston venture capitalist, says that with more than 6 million people watching each episode of the show, according to Nielsen ratings, “Shark Tank” offers companies trying to target consumers a great launch pad. The value of the show to entrepreneurs “has almost nothing to do with the actual financing deals that get discussed on the show, but the reach of their audience,” Go says, noting that several startups have gone on to raise venture capital after appearing on “Shark Tank.”
Stolar confesses that when she was on the set waiting for stagehands to open the two large wooden doors that lead into the sharks’ chamber, “my hands were shaking. You walk down and stop at your place in front of the sharks. There’s this huge camera. It’s the culmination of months of work. Even though we’d done a lot of practicing, you still don’t know what mood they’re going to be in.”
John Wise, cofounder of the greeting card startup Lovepop, adds, “Half of the companies on the show are not portrayed as favorably as you would hope. You could be made a fool of if you don’t do a good job.”
Entrepreneurs have 90 seconds to pitch — but the questions from the investment panel can last an hour or more.
Stolar says she was on the soundstage for a little over two hours; the segment was edited down to 10 minutes. Wise says that much of the discussion at his shoot drilled deep into “boring financials” — things like rent for retail locations and sales trends that didn’t wind up in the final segment. It’s an intense grilling, and one that Wise says is very different from the meetings, coffees, and “get to know you” lunches an entrepreneur would typically have with a venture capitalist or an individual investor evaluating a startup deal.
Wise and his cofounder, Wombi Rose, left the set with a deal in hand: O’Leary offered to put $300,000 into the company in return for a 15 percent ownership stake. That was part of a larger $700,000 funding round the Boston company raised last summer.
Not surprisingly, Lovepop saw a huge boost to its business after its episode aired in December. Rose says the company had done about $1 million in revenue in about 20 months of operations to that point.
O’Leary says the show’s producers have gotten good at sniffing out entrepreneurs who are only looking for publicity and don’t actually want to land a deal.
Ryan Moore, a venture capitalist at the Cambridge firm Accomplice, concurs. “My hunch is the producers have improved [the] vetting and selection process,” Moore says. His firm put money into Lovepop before its “Shark Tank” episode aired.
Of course, some entrepreneurs appear on the show only to walk off without a deal.
John Radosta, an alumnus of Northeastern University who lives in Florida, spent seven months last year preparing for “Shark Tank.” He felt, he says, supremely prepared.
“I had watched every episode and seen what entrepreneurs had done right, what they’d done wrong, and how to negotiate.”
His pitch was for a franchising business built on the game of bubble soccer, which involves playing soccer while each player is protected by a large inflatable plastic sphere. (Bumping one another is a big part of the strategy.)
“I still don’t understand what happened. I had a ton of sales, was profitable, and the business was all bootstrapped,” he says. But no one offered a deal, and the sharks criticized him for not being clear enough about his business model and financials.
Radosta says he booked an additional $16,000 in sales from the publicity he got from appearing on the show, “but it didn’t send us on a rocket ship.”
And even some of the deals that seem to get sealed on the show don’t lead to money in the company’s bank account. A lengthy due-diligence process follows the agreement you see on the show. “It is intensive,” says O’Leary, the shark known for his cutting questions and his competitiveness with the other investors. “We want to know more about the people, know more about the business, what the company owns and what its intellectual property is. Very often, they leave out some critical facts around ownership or debt.”
O’Leary says he has a core team of six people who help him vet the companies he has agreed to invest in; when “Shark Tank” is filming new episodes in June and September, the team expands to a dozen. He estimates that slightly more than half of the handshake deals that happen on the set actually come together.
Mark Cuban, perhaps the best-known investor on the show, says via e-mail that 25 to 30 percent of his deals “don’t pass due diligence for any number of reasons.”
That was the case with Unshrinkit, whose founders left the soundstage having agreed to sell Cuban 15 percent of the company for $150,000.
But after several months of negotiations, Stolar says, “Mark loved us as founders, but had concerns about taking the product forward,” as well as about how a laundry-related product would fit with the rest of his portfolio of companies. Stolar and Barbera felt as if they had enough money to produce enough Unshrinkit to fill all the orders the show’s broadcast spurred. They agreed to walk away from the investment.
Since her segment aired, Stolar says, the company has gotten its product into several retail chains, including Bed, Bath & Beyond, and her plan is to begin meeting with investors again this summer.
This time, with no cameras in the room, she expects it to be substantially less nerve-wracking.