Why Did The Xcraft Deal Fall Through Shark Tank?
Why Did The Xcraft Deal Fall Through Shark Tank? The xCraft shark tank deal fell through primarily due to valuation disagreements and the typical post-show due diligence process, which sometimes reveals discrepancies or leads to renegotiations that result in deals not being finalized. The deal for xCraft on Shark Tank fell through despite the initial agreement with…
Why Did The Xcraft Deal Fall Through Shark Tank?
The xCraft shark tank deal fell through primarily due to valuation disagreements and the typical post-show due diligence process, which sometimes reveals discrepancies or leads to renegotiations that result in deals not being finalized.
The deal for xCraft on Shark Tank fell through despite the initial agreement with all five Sharks. After the pitch, where they secured a deal for $1.5 million in exchange for 25% equity, the agreement was never finalized.
Reasons for the Deal Falling Through;
1. Valuation Discrepancies
During their pitch, xCraft initially valued their company at $2.5 million and sought $500,000 for a 20% stake. The sharks were intrigued but had different opinions on the company’s worth.
Kevin O’Leary raised the valuation to $3 million and offered $750,000 for a 25% stake, while Daymond John proposed $1 million for the same stake. Robert Herjavec and Lori Greiner also made generous offers, indicating a high level of interest.
However, xCraft’s counter-offer to a group deal valued the company at $10 million, which caused some sharks, including Mark Cuban, to reconsider. Cuban’s concern was that the proposed valuation was too high, and this led to a potential breakdown in negotiations.
xCraft’s valuation increased significantly during the pitch, which may have led to complications in finalizing the terms. They initially sought $500,000 for 20% equity, valuing the company at $2.5 million, but ended up negotiating a much higher valuation of $6 million for the deal.
2. Post-Show Negotiations
Even after the show, the deal wasn’t finalized immediately. Shark Tank deals are often subject to further negotiations and due diligence after the episode airs. During this period, both parties review financials, business plans, and other critical details. If either side feels uncomfortable or finds issues during this review, they might back out.
While the Sharks were excited about the investment, deals often collapse during the due diligence phase when legal terms and conditions are being negotiated. This is a common occurrence in Shark Tank deals, where parties may withdraw due to disagreements or complications in the contract.
3. Deal Dynamics
The dynamics of deal-making on Shark Tank can sometimes be more performative than substantive. The show’s high-pressure environment doesn’t always translate into a workable deal once the cameras are off.
According to various estimates, only about 50% of the deals announced on the show actually close. This statistic reflects the reality that while initial interest is genuine, finalizing terms can be complex and may lead to a deal falling through.
4. Company’s Evolution
xCraft’s evolution and pivot in their business model could have also played a role. The company shifted focus from their original airplane-style drones to quadcopters and expanded their market significantly. These changes might have altered the original investment terms and expectations, further complicating the finalization of the deal.
5. Market Dynamics:
After the show, xCraft experienced a surge in website traffic and interest, which may have altered their approach to funding and partnerships. They raised over $1 million through crowdfunding after the episode aired, indicating that they had other avenues for financing that could have influenced their decision to not finalize the deal with the Sharks.
About xCraft & Shark Tank
xCraft, a recreational drone company that appeared on Shark Tank in Season 7, initially made a splash with their innovative products and ended up securing a deal from all five sharks.
However, despite the impressive on-air deal, xCraft did not follow through with the sharks post-show. The high-profile exposure from their appearance, though, significantly boosted their visibility and success.
Following their Shark Tank episode, xCraft’s valuation soared to $17 million, a substantial increase from their pre-show estimate. Their website experienced a surge in traffic, and the company expanded its product offerings and target markets.
While they have shifted focus from their original airplane-style drones to more conventional quadcopter models, xCraft now caters to a variety of industries, including construction, surveying, and even military and law enforcement applications.
As of 2024, xCraft is reportedly valued at around $34 million, showcasing significant growth since their appearance on Shark Tank.
