Shark Tank is currently the #1 television show among families in the U.S. Perhaps that’s why co-host Kevin O’Leary felt emboldened to share something interesting about the show’s investments thus far. “At 33 Percent return, we’re the most successful venture firm on Earth,” O’Leary cheerfully announced on stage at the INCMty tech conference in Monterrey, Mexico this weekend. Mr. Wonderful, as he’s known on the show, was there to drop some startup knowledge to the nearly 7,000 founders, VC’s and computer science students in attendance.
That sounds like a good sound bite but exactly what does that number mean? “Is he saying he’s losing two out of 3 deals?” asked Greylock partner Josh Elman, “That’s a pretty bad number.” We don’t have real numbers from all the investments the show has ever made so it’s tough to figure out what O’Leary was referring to here. “Most firms don’t report their funds publicly so it’s hard to say,” agreed Cowboy Ventures partner Noah Lichtenstein. “It’s also a function of time. How long are the returns spread over? Funds are often 7-10 year returns so [it’s] not really fair to judge them until they have matured,” he added.
Shark Tank went on the air five years ago in the U.S. That 33 percent return number puts the show into the top quartile for the length its been around, but not necessarily as “the most successful” of all venture firms in the world. It simply hasn’t been around long enough to make that claim, according to Elman.
A venture firm typically realizes a return when the company goes public. That could take 7-10 years. Elman would rather give a company a good 10 years, much longer than Shark Tank has been on the air. Also, most investments don’t go the IPO route. While some of the companies that got funding through the Shark Tank crew have been acquired by other companies (Jamba Juice bought up Talbott Teas, for example) none of them have gone public.
“Averages are not what anyone should be paying attention to. Nobody knows the averages. It’s about the one or two really good investments that go big. That’s where you see success. That’s what matters,” said Elman.