Last weekend, my fiancée and I were catching up on old Shark Tank episodes.
We love to watch entrepreneurs pitch their start-up ideas to “Sharks” like Mark Cuban and Barbara Corcoran.
But after the Sharks said “I’m out!” to some start-ups I was bullish on—and I said “Definite pass!” to some ideas they liked—my fiancée asked me a great question:
“Do these guys have any idea what they’re talking about?”
“There’s Nothing to Invest In Here”
To judge their smarts, we decided to look back at a sampling of Shark Tank deals from the past and see how the start-ups ultimately turned out.
So we logged into SharkTankBlog, which keeps a list of companies that have presented on the show, and my fiancée selected three of them.
The first start-up she picked was called SnagaStool.
SnagaStool lets you reserve a bar stool or table at your favorite pub—whether for big nights like the Super Bowl, or for drinks with friends after work.
At first blush, it seems like a fun idea—but one of the Sharks, Kevin O’Leary, had quickly punched a hole in it:
"There's nothing to invest in here," he sneered.
You see, the entrepreneurs behind SnagaStool hadn’t built the “app" yet. They hadn’t even built a website yet.
We’ve got to give credit to O’Leary. In fact, his reaction reminds us of one of Crowdability’s “10 Commandments” (this was a special report we sent you when you first joined Crowdability; we’ll link to it at the end of the article):
“Thou Shalt Look for Quick Progress.”
You see, nowadays, it’s inexpensive and simple to create a website or app. If a tech start-up hasn’t made any progress building either, it probably doesn’t have what it takes to succeed.
In the end, how did things turn out for SnagaStool?
It went belly up.
Score one for the Sharks.
"It's a Hobby, Not a Business"
The second start-up my fiancée picked was called Hotshot, founded by an entrepreneur named Danny Grossfeld.
Hotshot is hot coffee that comes in a can. It comes with a “hot fridge”—a small storage unit that looks like a lunch box. The fridge heats the coffee can to 140 degrees, and then keeps it at that temperature.
Unlike SnagaStool, Grossfeld had a product ready to sell—but despite $2 million in prior funding and six years of work, he still hadn’t sold a single can!
The Sharks had torn into Grossfeld for not making sales his #1 goal:
“It's a hobby, not a business,” they barked at him.
Once again, one of our “10 Commandments” comes to mind:
“Thou Shalt Look for Goal-oriented Entrepreneurs.”
Some entrepreneurs try to raise capital from you just so they can keep the lights on and survive. But great entrepreneurs have specific goals in mind when they raise money—and in general, those goals should include attracting paying customers.
So what happened with this start-up?
Well, Grossfeld pitched the Sharks on October 20, 2015…
And as of today, December 9, he still hasn’t sold and delivered a single can.
When Inc Magazine asked him about his business prospects, Grossfeld was strikingly honest:
"I'm not overly optimistic," he said.
For their wisdom on this one, we’ll give the Sharks another point.
The last start-up we looked at featured an entrepreneur named Aaron McDaniel.
McDaniel had set up a website called Tycoon to offer individuals like you access to high-quality real estate investments. The minimums would be low enough for small investors to take part—but pooled together, these minimums could fund promising projects.
It took billionaire Mark Cuban less than 60 seconds to decide he didn’t like McDaniel’s idea—he said it sounded like a “rip off.”
“I’m out,” he declared.
The other Sharks circled McDaniel with skepticism—and before long, they’d turned him into chum.
Evidently, the Sharks hadn’t digested one of our most important “Commandments”:
“Thou Shalt ask ‘Why Now?’”
The Sharks didn’t grasp why now was the right time for the new industry that McDaniel was contemplating—an industry that’s become known as Real Estate Crowdfunding.
You see, new companies and business sectors often emerge due to new laws and regulations. Crowdfunding, for example, only became possible when the history-making JOBS Act started taking effect in 2013.
Since then, real estate crowdfunding has turned into a massive industry:
Research firm Massolution reports that in 2014, crowdfund investors injected $1 billion into U.S.-based online real estate investments. And by the end of 2015, that number is expected to climb to $2.5 billion.
And what happened to Tycoon?
The Shark Tank episode created so much interest in McDaniel’s business that the company was eventually acquired by a consortium of real estate companies.
For this one, Mark Cuban and his friends get a big fat zero.
How to Make Your Own Decisions
Shark Tank is great entertainment—but when it comes to following their lead on start-up investments, you might be wise to make your own decisions.
To learn more about how to identify high-quality early-stage investments, check out our free report, “Crowdability’s 10 Commandments” »
The Commandments are some easy-to-understand dos-and-don’ts for early-stage investing…
And unlike what you might pick up from watching the celebrity Sharks, these dos-and-don’ts were derived from extensive interviews we conducted with professional venture capitalists and angel investors.
You could also join one of our free online training courses, like the one we hosted last month—if you missed it, don’t worry, we’ll be hosting another one soon.
Or if you’re serious about becoming a Shark yourself—and getting paid like one—consider enrolling in our in-depth online course, The Early-Stage Playbook »
Thousands of readers have enrolled so far, and they’re already well on their way to building a portfolio of high-quality, early-stage investments—and beating the Sharks at their own game.