Shark Tank turns venture capitalism into a reality show. Through the process of great editing and musical cues, they turn what could be an incredibly boring look into the world of business into an exciting financial showdown between 5 investors and a person/company looking for an investment opportunity. The guest gives an hour-long presentation (edited down to anywhere from a few minutes to about a fourth of the show’s run time), and throughout that time period the Sharks debate, question, and ask about what they’re offering. They then present offers to the hopeful entrepreneur, offers that make perfect sense from the investor’s perspective but often little sense to the entrepreneur (who is often incompetent or emotionally invested). Everybody wins, so to speak, and even the so-called Sharks can bid against each other and join together if the product/service shows any worth to them.
All these deals are actual and real, but from what I can tell many of these products and services never make it past the contractual stages due to incompetence on the part of the non-investor side. First of all, most of the entrepreneurs rate the value of their own companies far too high to justify the equity they’re giving out. That especially goes for a high risk venture, or one that involves a business going into massive debt. Some companies shouldn’t exist at all, given the ownership of distribution channels by larger companies (introducing a new milk product, for example, honestly makes no sense except by selling it to a much larger company who owns the market already). Others turn what should be a profitable patent (such as foladable guitars, a device that won’t let you turn your car on without your seatbelt also buckled) into a venture, somehow thinking they can run all areas of the business themselves. Trust me, that part is not what you want to do!
These different factors make for wonderful television. Your five investors, all worth many millions themselves, look at most of the businesses purely from a financial standpoint. They ascribe value and worth according to how much money said product/idea/service is ultimately worth, or as Kevin O’Leary says “money has no soul”. Money does not care about your feelings, and money does not lie; what works works, and what doesn’t work doesn’t work. Cash measures the success of an idea, and I suppose you could call Shark Tank the zenith of judging ideas by their financial gain and revenue stream.
I think the most enjoyable part of the show comes from the real “reality check” nature of the whole thing. People put themselves into massive debt to finance One Big Idea, or don’t want to give up a certain percentage of their equity. They want to remain in charge of a company without the connections or the skills to actually do any of that, because it’s THEIR idea. I understand that sentiment perfectly, as the pride of work and ownership becomes both a motivator and a source of psychological benefits. Any attempt to take away “their baby”, so to speak, turns them angry, stubborn, and quite irritable. Even incredibly great deals for products with zero selling potential are turned away, and the money (plus, success) disappears with it. And sometimes, these people have the gall to bring counteroffers that sound borderline insane compared to the deal they get.
For whatever reason, they just don’t seem to trust the advice of these people, the kind of risks and benefit calculations they make to stay wealthy in a hundred different business ventures at once. It takes work, and some things require their direct control or co-ownership of a company to bring to fruition. Their upfront capital allows you to persist in your dream (if not just the opportunity to create wealth), so why the hostility? Sometimes, it just blows my mind how they just let such good opportunities slip away for no other reason than their pride and the perception of these Sharks as greedy leeches who just want to screw them over. Is that a true notion? Honestly, I don’t know in the context of the show, but that perception often blinds them. Their pride also comes into account and forces them into an unfavorable position, preferring status to actual power (in this case, money). Lots of people lose on Shark Tank for reasons other than sheer incompetence (although there’s plenty of those too). Much of it comes down to pride taken to its utmost extreme.
I’ll give you one example: the seatbelt car-thing I mentioned earlier is, in effect, a benefit to the world. When Ralph Nader (much as I disagree with him political) made seat belts a standard feature in cars, he set a precedent for that standard and saved many lives in the process. This same thing could happen to the mechanic who invented the ability to prevent car driving unless you wear a seat belt. He patents the product, and presents himself before the Sharks with an equity offer. But he is not the type to run this business; he does not have the connections to compete with car company distribution channels, and this is not a product most people would care to install. HOWEVER, if you could sell the patent away to someone who knew what they were doing, that could potentially save many lives – you get a million dollars, but you lose the patent. What do you do?
Does the credit matter so much? Must you, yourself, continue down a road to financial ruin when you could get your product distributed everywhere, exactly the end you desired? Everyone in history will remember your name, just like Nader; law-wise, you won’t own it, but the credit eventually swings back around to you. So why remain so stubborn to the possibility that your idealistic aim finally reaches fruition? I guess it really depends on what you wanted out of a business other than money (which is, really, the primary goal of any business and let no one tell you otherwise). The real, tantalizing promise of money suddenly shows you a stark reality – why are you invested in the first place, and what part?
That’s what makes Shark Tank fascinating!
