Explainer: How Shark Tank Australia works

Shark Tank Australia is back on television screens, combining the exciting and high-tension world of venture capitalism with reality television.

As the new season gets underway, here’s what viewers can expect from the tried and true television format.

The application

Before putting their pitch to the sharks, applicants must first convince the Shark Tank production team their idea is worth investing in (or, at the very least, worth putting on television).

In effect, the application process serves as a miniature pitch, giving producers a clear idea of what’s on offer, and allowing entrepreneurs to fine-tune their presentation before putting it to the Sharks.

For the latest season, applicants were asked to complete a video submission, introducing themselves, their product or service, and what problem it aims to solve.

The application phase also asks entrepreneurs to discuss the success their product or idea has received to date, and any relevant feedback, be it from customers or family and friends.

The process also asks applicants to consider how much investment they are seeking, how much equity they’re willing to offer up, and the best-case scenario for their business.

“Describe how big you want your business to become – dream big!” the application form stated.

The pitch

Successful applicants are then offered the opportunity to pitch their product or idea directly to the Sharks.

Typically, these presentations involve hands-on demonstrations and even miniature merchandising displays, in an attempt to woo the would-be investors.

Entrepreneurs also share how much they are hoping to raise, and how much equity in the business they are willing to give in exchange.

It is typical for founders to offer minority stakes in their business at first, with initial offers generally between 10% and 45% equity.

Valuations fluctuate depending on the potential size and success of the venture.

Afterwards, the Sharks are free to ask questions about the pitch.

With only a few minutes of screen time a piece, the broadcast tends to show the Sharks picking apart past revenue figures, future business plans, and potential weaknesses.

Although the pitch and question-taking process is heavily streamlined for TV, it still represents the nuts and bolts of the pitching process.

The offer

Entrepreneurs who fail to convince the Sharks are generally met with a polite “I’m out”, and usually hear some final words of advice from the panel.

But the Sharks are free to accept the terms put forward by the entrepreneur or suggest their own alterations.

When multiple Sharks offer to invest, they can effectively engage in bidding wars among themselves, each offering more attractive deals to the entrepreneur until they agree to one investor’s offer.

It is not uncommon for entrepreneurs to face near-identical terms from multiple Sharks, but choose one due to personal preference, be it for their character or specific business acumen.

Alternatively, multiple Sharks can band together on deals — a useful approach when a strong pitch comes with an equally high price tag, that no individual Shark is willing to meet.

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Founders are also free to walk away from a deal if it doesn’t match their expectations, as occurred in the first episode of the 2023 season.

Once a deal is struck, the Shark(s) and the successful entrepreneur shake hands, making a preliminary commitment to carry out the investment strategy.

That handshake kickstarts a process in which the Sharks offer up their own investment funding, making genuine contributions to the startups on display.

The due diligence

The process doesn’t stop there.

Before actually handing over their capital, the investors engage in due diligence, to make sure the entrepreneurs and their business cases actually stack up.

Each investor might have a different due diligence strategy, but all are focused on ensuring their on-screen enthusiasm correlates with a real opportunity to grow a business and eventually recoup their investment.

This can result in a deal changing significantly off-screen, as the Sharks question aspects of the business not reflected in the pitch.

Sometimes, a business’ success between the filming date and the episode’s premiere might even shift the deal in the founder’s favour.

Of course, investment is no sure guarantee of a business’ ultimate success.

Mark Cuban, the billionaire investor who has featured on 13 seasons of the show’s US version to date, last year said his Shark Tank investments have not turned a profit overall.

The TV debut — and what comes next

For founders who successfully secure a Shark Tank deal, the TV debut is generally cause for celebration: thousands of potential new customers become aware of the business, and founders can unleash marketing campaigns predicated on their Shark Tank success.

Companies to find success on prior iterations of Shark Tank Australia include Car Next Door and Modi Bodi, the latter of which succeeded despite its segment never actually making it to air.

Even for those who failed to secure on-screen backing, appearing on the show can serve as a tangible lesson on how to successfully construct a pitch.