Do pitch competitions help diversify entrepreneurship?

Guest post by Angelino Viceisza Ph.D., Spelman College

In January and August of 2016, the Kauffman Foundation organized two workshops profiling research on minority entrepreneurship.  Out of these, came a special issue in Small Business Economics with an introduction by Timothy Bates (Wayne State University), William Bradford (University of Washington), and Robert Seamans (New York University) that is accessible at this link,

This blog post features the main findings from one of the papers presented at this set of workshops; in particular, my work with Baylee Smith who was a student at Spelman College and now is in the United States Navy (see for the full paper).  In this research, we treat the ABC show Shark Tank ( as a case study of a high-stakes business pitch competition and thus, as an avenue for access to funding.

While this blog post only discusses our findings, due to space, I encourage those interested to read the remaining articles in the special issue since they study a range of factors impacting minority entrepreneurship, including other forms of capital (such as private equity) and access to product markets through preferential procurement programs.


Pitch competitions as a form of access to angel-to-VC funding

Pitch competitions are among a variety of approaches to providing finance to entrepreneurs at a relatively early stage; others (potentially overlapping) include venture capital (VC), angel investment, incubators, and accelerators.  To date, evidence from pitch competitions suggests that they help entrepreneurs learn and enable firms to buy more capital and hire more workers, but with little impacts on business practices, networking, or mentoring.  Despite such evidence, it remains unclear whether pitch competitions are valuable because they lower financial barriers for winners or provide a signal of quality.  Moreover, their impacts on minority owned businesses have not been widely studied.

In “Bite Me! ABC’s Shark Tank as a path to entrepreneurship”, Smith and I attempt to fill these gaps by studying a unique and novel context—the reality TV show Shark Tank which airs Fridays at 9 PM on ABC.  Shark Tank is a pitch competition couched in a show that first aired on August 9, 2009.  Its premise is one where entrepreneurs pitch to a panel of five judges (also known as “sharks”) who potentially make competing offers.  It is a useful context to study the abovementioned issues because it is a prime example of a high-stakes pitch competition.  In addition, while the show is edited, it airs nationwide, thus making quite some details of the entrepreneurs, the pitch, and the bargaining process (specifically those that are crucial to the funding decision) widely observable to the general public, including potential outside investors.

We construct a novel dataset comprising all entrepreneurs that have aired on the show from Season 1 to Season 7 for a total of 603 firms.  We collect a relatively wide range of variables by combining publicly available data from sources such as (1) show episodes, (2) the Shark Tank Wikipedia page and blog, (3) social media such as Facebook and LinkedIn, (4) YouTube, (5) firm websites and related traffic (analytics) statistics, (6) Amazon, (7) apps such as Mattermark and Pretty-o-meter, (8) the Securities and Exchange Commission (SEC) company filings database (EDGAR), (9) the United States Patent and Trade Office (USPTO), and (10) state company registries.

Using this dataset, we ask what the impact of getting funding on the show is on three outcomes: existence one year after airing on Shark Tank, existence between Fall 2015 and Fall 2016, and patent applications.  Two of our main findings are:

  1. The amount associated with the Shark Tank deal is significantly correlated with existence of the firm in both the short and longer run. Further exploration of this effect shows that different sources of financing—in particular, prior self-investment by the entrepreneur and the funding obtained on Shark Tank—are complementary. This is consistent with prior literature showing that firm survival and growth are constrained by initial financial capital (see our article for some citations).
  2. We find no differential impacts of Shark Tank funding on minority entrepreneurs. In other words, Black- and Latino-owned firms are neither more nor less likely to exist as a result of Shark Tank funding in comparison to White-owned firms.  We find the same for post-Shark Tank patent applications.  This could of course be due to several reasons.  First, minority firms only constitute 14 percent of the sample, which is why we may not be able to discern any effects that are specific to this subset of entrepreneurs.  Second, the “sharks” may take an active role in day-to-day operations of firms once they reach a deal with the entrepreneur, regardless of race.  To the extent that is the case, this “lack of effect” might actually be a good thing, if minority-owned firms are less likely to survive in other contexts; in particular, in absence of the “sharks” or mentors more generally.


Summary and policy implications

Our findings have three main policy implications. First, Shark Tank as a pitch competition mainly functions as an avenue for complementary funding.  Based on the data we have available to us, it does not seem that this high-stakes competition acts as a quality signal to other potential investors. While other work has found that pitch competitions allow entrepreneurs to “learn”, we are unable to test such hypotheses.

Second, while this pitch competition has fairly clear implications for longer-run existence of firms, it has no significant impacts on innovation as measured by post-Shark Tank patent applications.  This could very well be due to the fact that a substantial proportion of firms have already filed (provisional) patent applications by the time they are on the show; in fact, Shark Tank may encourage this in certain circumstances.

Finally, if minority-owned firms are less likely to survive in other contexts (as has been documented by some prior literature), Shark Tank might actually be improving their chances of long-run survival.  The question remains to what extent such mechanisms could also be at play in other, day-to-day pitch competitions such as those housed at universities, incubators, accelerators, and co-working spaces.