Millions of Americans are familiar with the popular television show Shark Tank, where entrepreneurs pitch their business ideas to a panel of celebrity angel investors. However, the investment terms on the show are often harsh compared to traditional venture capital deals. Shark Tank investments typically involve small amounts of funding and high equity stakes, while venture capital investments can be much larger and involve lower equity stakes. The types of companies that appear on Shark Tank are usually consumer-focused and aim to quickly become profitable, while venture capital-backed companies are typically high-growth technology start-ups that may take years to become profitable.
Despite the differences between Shark Tank and venture capital, some entrepreneurs who have raised significant funding from angel or venture capital investors still choose to appear on the show. One such entrepreneur is Dawn Myers, a lawyer turned entrepreneur who created a hair styling device called The Mint. Prior to her appearance on Shark Tank, Myers had raised $1.15 million in pre-seed funding from various venture capital funds. This funding allowed her to refine her product, launch it in the market, and negotiate partnerships with major companies.
The landscape for venture capital funding has changed significantly in recent years, with a decline in overall funding and fewer opportunities for start-ups to raise capital. This shift has made it challenging for many companies, especially those led by Black entrepreneurs, to secure funding. The decline in venture capital funding for Black-founded companies is part of a broader trend in the industry, with fewer investment dollars available for diverse founders at all stages of funding.
Despite the challenges in the venture capital market, Myers was able to secure funding and support from two Sharks on Shark Tank, Mark Cuban and Emma Grede. She entered the show seeking $150,000 for 10% of her company and walked away with a $150,000 investment for 20% of her company. While the investment terms on the show may have been lower than what Myers could have received from traditional venture capital investors, she believes that the support of Cuban and Grede will be instrumental in helping her grow her business.
As Myers navigates the challenges of raising additional funding at a higher valuation following her appearance on Shark Tank, she is not alone in exploring alternative funding sources. Many start-ups are turning to public funds, government grants, and revenue-based financing platforms to fill the gap left by reduced investor activity. These alternative funding sources may help companies navigate the current funding environment and stay afloat until more traditional venture capital opportunities become available.
