Why One Entrepreneur Isn’t Taking the Bait When It Comes to ABC’s Shark Tank

Comments   |   General

Sam Hogg, a venture capital investor with Open Prairie Ventures, takes issue with the popular venture-backing TV show.

From the February 2015 issue of Entrepreneur:

******************************

Why One Entrepreneur Isn’t Taking the Bait When It Comes to ABC’s Shark Tank

I teach a business class at a university here in Michigan, and it pains me to discuss ABC’s Shark Tank with my students. They love the show, in which entrepreneurs pitch their businesses to billionaire Mark Cuban and other venture capitalists in a bizarro setting where deals involving hundreds of thousands of dollars are mixed with a VC version of speed dating. My students believe that getting on Shark Tank and making a deal is a punched ticket to entrepreneurial stardom.

I can’t decide whether Shark Tank is a wonderful motivator or the worst thing that ever happened to my industry. Here’s why: The focus is on money, not on value. My biggest pet peeve with the show is seeing entrepreneurs more fascinated with pitching and raising venture capital than with building value—as if the default way to start a company nowadays is by having someone pay you to do it.

Entrepreneurship is about creating valuable things by summoning every possible resource you can, only some of which is other people’s money. Starting this long journey by selling off a third of your equity or more on a TV show should not be the model.

I also have issues with how little time is spent on the actual mechanics of the deals. With so much focus on getting a deal done, founders on the show have very little time to get a good one. I have even seen the sharks send the founder out of the room so they can syndicate and collude. This is the opposite of what an entrepreneur should strive for: a transparent auction process to get the best deal.

Perhaps I’m just feeling the way lawyers feel when they watch an episode of Law & Order, but Shark Tank minimizes the difficulty of building a valuable company and the complexity of executing an actual equity deal. But that’s what TV has to do: shrink a transaction that can take weeks to hammer out down to 10 minutes.

I will give the show some props, though. Despite its flaws, it teases out the very best of entrepreneurial drama and makes an industry populated mostly by nerds (like me) seem sexy and fun. And in a reality-TV world dominated by celebrity wives and pawn shops, it is great to see innovators get some well-deserved airtime.

http://www.entrepreneur.com/article/241507

Leave a Reply