Shark Tank Failures: The Hard Truth Behind Million-Dollar Rejections

Shark Tank businesses rarely fail when compared to typical startups. Regular startups have a staggering 90% failure rate, while Shark Tank ventures see only 6% collapse. The stories behind these numbers reveal failed products and missed chances that shaped entrepreneurial history. Some rejected ideas could have turned into billion-dollar successes.

The most common types of Shark Tank failures

Entrepreneurs leave the Tank empty-handed, and there are predictable reasons why. The show might highlight drama and personality clashes, but Shark Tank failures usually come from basic business problems. These issues surface during due diligence or when companies try to scale after the show.

Product flaws and technical issues

Bad product execution stands as one of the main reasons Shark Tank deals fall apart. Take Breathometer - a product that got all five Sharks to invest. This portable breathalyzer claimed to help people track their alcohol levels through a smartphone app. Tests later showed dangerous inaccuracies. 

The device showed blood alcohol levels that were way below actual values, which could lead people to drive while impaired. The Federal Trade Commission stepped in and ordered full refunds. They pulled the product from stores, and Mark Cuban later called it "the worst execution in the history of Shark Tank".

Technical problems often kill promising ideas. The Better Business Bureau got over 30 complaints about Biem, a butter sprayer that won investments but shipped broken products. 

Customers waited months to get their $130 devices only to find they didn't work as promised. Apps face the same fate. CATEapp got rejected because of bugs and security issues, even though it reached 10,000 downloads after the show.

A product's reliability makes or breaks its future success. Even the best ideas fail when entrepreneurs rush to market without proper testing or quality checks. Million-dollar ideas turn into warning stories.

Poor business models or pricing

Shark Tank entrepreneurs often stumble on unrealistic valuations. Many walk into the Tank asking for millions based on future revenue rather than actual sales, while offering tiny equity stakes. The Sharks always want "skin in the game," usually 15-20% equity. Yet entrepreneurs often offer just 3-5%, which makes deals almost impossible.

Bad pricing kills promising businesses too. ToyGaroo, which people called the "Netflix for toys," failed because its costs were too high. The company couldn't buy toys cheaply enough, and free shipping became a huge money drain with different-sized products. Many entrepreneurs also miss the mark on retail math. They don't account for smaller margins when moving from direct sales to retail stores.

Partner fights can destroy a business model. Sweet Ballz got a deal but quickly fell apart when co-founders James McDonald and Cole Egger started suing each other. Egger allegedly started a competing product called Cake Ballz. Their fight exploded right after their episode aired, wasting a huge PR chance.

Lack of market demand

Many failures happen because entrepreneurs don't test their market first. They defend weak sales by pointing to big market sizes, which leads to Kevin O'Leary's famous line: "You will never sell this device". The Sharks hate this logic. They stress that being in a big market doesn't guarantee success without advantages like patents, being first, or smart marketing.

Small markets create another challenge. Specialty products can work, but entrepreneurs often think too many people want their product. The Kookn' Kap failed after Lori Greiner pointed out it looked just like a shower cap. Products for tiny customer groups struggle to justify investment when sales stay low despite years of effort. One backpack invention made just $10,000 in 16 years.

Market timing plays a huge role too. Mark Cuban often says no to early "garage" businesses that aren't ready for mass production. Entrepreneurs who skip competitor research often learn their "state-of-the-art" products already exist in different forms. This happened with desktop items that worked just like regular office supplies.

Most Shark Tank failures come down to entrepreneurs who don't know who wants their product or if people will pay their price.

When founders become the problem

The biggest threats to Shark Tank businesses often come from within. Entrepreneurs can sabotage their success despite having great products that customers want. They fail because of internal fights, lack of experience, or simply not listening to expert advice.

Co-founder conflicts and lawsuits

Partnership breakdowns can destroy promising Shark Tank ventures quickly. Sweet Ballz shows exactly what happens when founders destroy their own success. James McDonald and Cole Egger got their deal but soon ended up in a bitter lawsuit. McDonald claimed Egger secretly developed a competing product called Cake Ballz.

Their fight got so bad that they needed a restraining order. The business crashed right when they should have been riding the wave of post-show publicity.

Legal battles go beyond just founders fighting each other. Bubba's Q Boneless Ribs shows how relationships between founders and investors can turn into courtroom drama. Al "Bubba" Baker and his family got into a public fight with Daymond John. This led to a permanent restraining order that stopped the Bakers from talking about their "nightmare" experience. 

The judge pointed out that their actions made John lose a TV deal and speaking events. This shows how founder's behavior can break partnerships beyond repair.

Inexperience and poor leadership

Many entrepreneurs step into Shark Tank without basic business skills. One entrepreneur admitted on the show, "We came into this very inexperienced as entrepreneurs". This reflects a common issue. Their inexperience shows up in poor record-keeping. Investors see Excel spreadsheets as "a major red flag" that signals unprofessionalism.

Leadership problems plague many Shark Tank businesses too. Business experts say, "Many entrepreneurs that I've encountered in my coaching are not good leaders of people". This becomes a real problem when companies need to grow faster after Shark Tank exposure. Entrepreneurs don't deal very well with building teams, keeping positive culture, or inspiring employees during growth.

Bad leadership really shows during crises. Take Breathometer - when they had product issues, they kept selling potentially dangerous devices instead of fixing the problems openly. The Federal Trade Commission stepped in and ordered full refunds. Mark Cuban called it "the worst execution in the history of Shark Tank" and blamed the founder for wasting capital.

Ignoring investor advice

The Sharks offer more than just money, but many entrepreneurs ignore their guidance. Mark Cuban warns about this habit. He says entrepreneurs shouldn't change direction based on every piece of feedback, but they must pay attention when sales numbers point to real problems.

The Sharks have decades of business experience, so ignoring their advice can destroy a business. ShowNo Towels' founder Shelly Ehler's relationship with Lori Greiner fell apart after they disagreed about deal terms. Ehler first cursed Greiner "for kicking me to the curb," but later learned valuable lessons from what happened.

Some entrepreneurs resist making changes after the show too. Barbara Corcoran told Jack Barringer (Body Jac) to lose 30 pounds to prove his fitness machine worked. He did it and got the funding. In spite of that, the business failed, likely because deeper issues stayed unsolved even though he met this specific condition.

Shark Tank deals that fell apart after the show

TV viewers watch entrepreneurs shake hands with Sharks, but these deals often disappear once the cameras stop rolling. Shark Tank deals are merely verbal negotiations, not binding contracts. The reality of what happens after the show explains why many promising partnerships fade before entrepreneurs see their first check.

Why handshake deals often don't close

The real story happens behind the scenes. The Shark Tank process needs extensive validation that can break seemingly solid deals. Forbes research across seven seasons shows that 73% of entrepreneurs didn't receive the exact deal shown on television. The numbers look even worse - 43% of deals completely fell through after taping. This shows the huge gap between TV drama and real-life business.

Deals often break during due diligence. This process takes months as Sharks inspect every part of the business. Kevin O'Leary closes just one-third of the handshakes made on camera. Barbara Corcoran does better at about 70%. Teams start this validation right after entrepreneurs leave the stage, before episodes hit the air.

These reasons often lead to failed deals:

1. Financial discrepancies: Entrepreneurs struggle to validate their claims during due diligence. Robert Herjavec remembers his ChordBuddy investment where "a box of receipts showed up" instead of proper financial statements.

2. Product failures: Products that won't work, food items that taste bad, or non-existent patent claims have killed deals during post-show checks.

3. Entrepreneur reconsideration: Robert Herjavec puts it well: "They go home that night, they wake up the next day, and they're like, 'I just sold 98% of my business to Barbara? What am I doing?'"

4. Growth changes: Business growth between filming and air date can make original deal terms outdated. Nicholas and Alessia Galekovic's Beard King company walked away from their deal with Lori Greiner as sales suddenly exploded.

   
   

Examples of changed terms and broken trust

ShowNo Towels shows how deals can turn sour quickly. Founder Shelly Ehler got $75,000 from Lori Greiner on air, complete with an oversized check on camera. Problems started the next day - the check wouldn't cash, and over months, Greiner reportedly tried to change terms from 25% equity to 70%. After Ehler said no, Greiner allegedly turned the investment into a sales-expense-only loan.

Term sheet talks can reveal shocking differences. One entrepreneur said post-show negotiations felt "more like talking to a loan shark" than sticking to their TV agreement. Megan Cummins from You Smell Soap faced similar issues when Robert Herjavec allegedly disappeared for six months after their deal, then came back asking for 50% equity instead of the original 30%.

Sharks sometimes talk about these challenges openly. Barbara Corcoran sends "Dear John" letters to explain why partnerships failed. Mark Cuban stands out with better consistency - only 25% of his deals changed compared to higher rates from other Sharks.

Failed deals don't always mean failure. About 87% of businesses that didn't close their Shark deals still run today. Some found great success despite the setbacks. Grinds coffee pouches lost their deal during negotiations but grew from $300,000 in pre-show sales to over $4 million yearly afterward.

The biggest missed opportunities by the Sharks

Entrepreneurs often stumble in the Tank, but the Sharks themselves can get pricey misjudgments that turn rejected pitches into missed fortunes.

Ring (DoorBot) and the billion-dollar mistake

Jamie Siminoff's 2013 pitch became the most expensive rejection in Shark Tank history. Siminoff walked into the Tank with his video doorbell company DoorBot, valued at $7 million, and asked for $700,000 for 10% equity. His company already generated $1 million in annual sales, but most Sharks passed on the chance.

Kevin O'Leary stood alone with an offer—a $700,000 loan with a 10% commission until repayment, plus a 7% royalty on future sales and 5% equity. Siminoff didn't like these terms and left without a deal.

The rejection turned out to be lucky. The company rebranded as Ring and the TV appearance brought in about $5 million in extra sales. 

The success caught big investors' attention:

• Richard Branson led a $28 million investment round

• Other venture capitalists helped raise the total funding to $209 million

The big payoff came when Amazon bought Ring in 2018 for over $1 billion. This became the show's biggest missed opportunity ever. Siminoff later came back to Shark Tank—not to pitch but to judge.

Other high-growth companies the Sharks passed on

Ring wasn't the only billion-dollar opportunity the Sharks missed:

Coffee Meets Bagel - Three sisters asked for $500,000 for 5% of their dating app in 2015. Mark Cuban offered $30 million to buy the company outright. They said no, raised $23.2 million, and built a business now worth about $15 million.

Kodiak Cakes - The pancake mix company nearly went bankrupt after founders turned down the Sharks who wanted 35% equity. The company bounced back strong, hitting $100 million in sales by 2018 and aimed for $170 million in 2019.

The Bouqs Company - The Sharks passed on this flower delivery service's request for $258,000. The company went on to secure $55 million in funding and reached $43 million in sales. These rejections show a simple truth: the Sharks' business instincts can fail big time, leading to missed investments worth billions.

Lessons from failed Shark Tank products

Failed Shark Tank products are a great way to get lessons for aspiring entrepreneurs. TV exposure and celebrity investors look attractive, but many businesses fail after their brief moment in the spotlight. These failures reveal significant insights that help others seek investment and long-term success.

You must verify your product before scaling

Market validation stands out as the key difference between Shark Tank winners and losers. Lori Greiner suggests creating questionnaires that gather customer feedback before launch. This process helps entrepreneurs shape products based on real customer needs instead of guesses.

Testing purchasing intent matters just as much. Pre-orders and crowdfunding campaigns help you check if customers will pay your proposed price point. Breathometer skipped detailed testing and faced product failures and regulatory problems.

Successful contestants connect with potential customers through multiple channels:

• Face-to-face research with different customer groups

• Online surveys to check broader market demand

• Competitor analysis to find real market gaps

Success needs more than Shark Tank exposure

Many entrepreneurs see Shark Tank as just a marketing platform. The show brings substantial traffic—some companies get 20,000 website visitors on air date. This surge means nothing without solid business basics.

The "Shark Tank Effect" creates a brief spotlight. To name just one example, BoomBoom Naturals saw website traffic equal to 3-4 months of normal operations in one evening. Notwithstanding that, founders who lack inventory management, reliable payment systems, and fulfillment capabilities watch this chance slip away.

The show's format often pushes entrepreneurs toward unfavorable deals. One expert points out, "The sharks often include sizable royalties or loans in their offers". These terms can create cash flow problems during significant growth periods.

Plan your post-show operations

Post-show planning is vital whether you get investment or not. ToyGaroo wasn't ready for the flood of orders after their appearance. Their inventory shortages damaged customer relationships. Experts believe businesses would do better if they "grew slowly and organically" to handle operational challenges before national exposure.

Deals that move to final negotiations change substantially about 73% of the time after filming. Alternative funding sources become important, and continuous business growth during long due diligence processes is a vital part.

Smart entrepreneurs know Shark Tank is just one path to business success. One participant gave wise advice: "Do not stop running the business. Do not stop growing the business while you're waiting for the paperwork".

Conclusion

Shark Tank failures ended up teaching valuable business lessons. Smart entrepreneurs really verify their products first. They build solid business models and prepare to scale before they chase investment. Many deals fall apart during due diligence. Yet some rejected pitches turn into soaring wins later. Getting a Shark's backing helps, but strong business fundamentals pave the way to success.

FAQs

Q1. What percentage of Shark Tank businesses fail? 

Surprisingly, only about 6% of Shark Tank businesses fail, which is much lower than the typical 90% failure rate for startups in general.

Q2. Why do some Shark Tank deals fall apart after the show? 

Many deals fall apart during the due diligence process, where Sharks scrutinize the business more closely. Issues like financial discrepancies, product failures, or changes in the business's growth can lead to deal dissolutions.

Q3. What was the biggest missed opportunity by the Sharks? 

The biggest missed opportunity was Ring (formerly DoorBot), which was rejected on the show but later sold to Amazon for over $1 billion.

Q4. How can entrepreneurs increase their chances of success after appearing on Shark Tank? 

Entrepreneurs should validate their product thoroughly before scaling, have a solid plan for post-show operations, and not rely solely on Shark Tank exposure for success.

Q5. Do all handshake deals on Shark Tank become final? 

No, handshake deals on Shark Tank are not binding contracts. In fact, research shows that about 43% of deals completely fall through after taping, and 73% of entrepreneurs don't receive the exact deal shown on television.