Shark Tank: A Reflection of The Pros and Cons of American Capitalism

Hello, everyone! I know I’m about 15 years late to the game, but I finally started watching Shark Tank, and I’m addicted. There’s something satisfying about watching eager entrepreneurs pitch their products to self-made billionaires and actually get a deal, even if about half of these deals fall through after the cameras stop rolling. As I’ve been binging this show, I’ve been thinking about what its reality TV antics reveal about the real world of business. Underneath the name calling, and stop-clocking, and manipulation, Shark Tank is a microcosmic view of American capitalism in action, and what it reveals isn’t exactly pretty.

Im Out Shark Tank GIF by ABC Network

One of the most enduring tenets of the American Dream is the idea that the United States is the ideal place to start a business. With a great product and a little bit of grit, elbow grease, and perseverance, anyone can come to the United States and build a successful business from the ground up. The Shark Tank sharks embody this idea. All self-made millionaires (or billionaires in some cases), the sharks preach about working themselves to the bone in order to achieve success, and reminisce fondly about the times where they lived paycheck-to-paycheck before reaping their eventual rewards. While the image of a struggling entrepreneur sacrificing everything to achieve their dreams features prominently in the American mythos, it’s less rosy in reality. The sharks will often tell struggling entrepreneurs to quit their jobs in order to focus wholly on their company, while dangling predatory deals in their faces.

According to a deep dive from angel-investor Halle Tecco and Zachary Crockett, the deals keep getting bigger each season, but that doesn’t mean they’re getting better for the entrepreneurs. The average deal is $286k, with the average equity given up being 27%, which means that the entrepreneurs who land a deal are often giving up a third of their company, which they’ve paid for with blood, sweat, and tears, for around $300k from a shark who usually has to do little but cough up the money. While this skews close to reality, it does make for painful TV. Episodes often feature sharks pressuring entrepreneurs into giving up as much equity as possible, and complaining of feeling disrespected, or threatening to pull out of the deal, when the entrepreneur tries to negotiate. Sharks will yell at the entrepreneurs, talk over them, and force them to make deals within ten seconds or less, which feels less like good-faith investing and more like intimidation and manipulation. The power imbalance in “The Tank,” as it’s called, is huge, and it’s never more apparent than when a billionaire shark like Mark Cuban pulls back their offer because an entrepreneur took more than 6 seconds to think it over.

Another imbalance inherent in the show is the idea of “due diligence.” Before coming onto the show, it’s assumed that entrepreneurs will do some research into each of the sharks so that they know a little bit about what they’re getting into. But since Shark Tank is a TV show, it’s difficult to separate the TV identities of the sharks from their real histories. Kevin O’Leary, known as one of the bluntest, but also most beloved sharks, has a murky business history. His startup Softkey, which was later re-branded as The Learning Company, was acquired by Mattel for $4.2 billion in 1999, and resulted in a $105 million loss for the company. The deal made O’Leary’s fortune, but was considered to be a disaster for Mattel. Similarly, fan-favorite Mark Cuban sold his startup Broadcast.com to Yahoo for $5.7 billion in stock, another deal that ended up being incredibly profitable for the shark, and incredibly unprofitable for the company on the acquisition end of the deal. The histories of all of the sharks’ good and bad business deals can be found with just a quick search on Wikipedia, but they’re never mentioned on the show itself. When introducing the sharks, the show glamorizes their fortunes and business deals, but skirts around mentioning exactly how these moguls acquired their wealth. From a viewer’s perspective, it seems like most of the entrepreneurs are dazzled by the sharks’ personas, and are certainly given the shorter end of the stick when it comes to preparation.

The Sharks, however, get all of the due diligence they want. The reason that so many of the deals fall through is because the Sharks and their legal teams can take as much time as they want after the show to take a deeper look at a company’s numbers and renegotiate the deal to better suit their interests. The sharks have a lot more money and lawyers than the average startup entrepreneur, which automatically gives them the upper hand in negotiations. The on-show deals demonstrate the ability the sharks have to bully the entrepreneurs into taking their deals, and the after-show “due diligence” process shows the power the sharks have when it comes to making the TV deals into reality. The only guaranteed benefit that the entrepreneurs gain from the show is the boost in sales that comes from appearing on Shark Tank. But besides that, they’re truly at the mercy of the sharks, with no negotiating power besides like-ability and charm. It’s realistic, but damn if it isn’t depressing.

shark tank GIF by ABC Network

Another depressing way that Shark Tank reflects the reality of the business world is the type of contestants who make it on the show, and the type of contestants who get deals. According to Tecco and Crockett’s data, 60% of solo entrepreneurs who appear on the show are men, with woman making up 24% of solo entrepreneurs, and mixed-teams making up the remaining 16%. Even though women were under-represented as solo entrepreneurs, they had a slightly better chance of making deals, with women earning deals 60% of the time, and men earning deals 53% of the time. In comparison to the real world, where women only receive a paltry 2.3% of venture capital funds worldwide, Shark Tank provides a much more even playing field. But even though women are slightly more likely than men to earn deals, the deals they get are significantly worse. On average, women receive $214k for 30% equity, while men receive $324k for 26% equity. Essentially, women are far less likely to appear on the show, and when they do they receive on average $100k less than male entrepreneurs, and give up 4% more equity.

Knowing this, it’s less of a surprise to find out that when the Sharks do invest, most of them make the majority of their deals with male entrepreneurs. Robert Herjavec’s made 72% of his deals with male-only companies, and only 17% with women-only companies. The other main male Sharks hardly fared better, with Kevin O’Leary’s percentage of deals with male-only companies being 64%, Mark Cuban’s being 62%, and Daymond John following with 56%. The only two women Sharks, Lori Grenier and Barbara Corcoran, are a tad more egalitarian, with Lori making 34% of her deals with women, and Barbara making 41% of her deals with women. Even so, it shows that the Sharks highly favor male entrepreneurs, subconsciously or not.

When looking at racial diversity in the show, we can again see how Shark Tank mirrors the real world. Data collected from designer Jishai Evers from the first six seasons of the show found that of 432 pitches, around 86% of entrepreneurs were white. Although Evers’ data found that Black entrepreneurs had an equal chance of getting a deal as white entrepreneurs, the fact that there are so few Black, Asian, or Latino entrepreneurs on an show that is supposed to represent the American Dream in action is disheartening. And since only one of the 6 Sharks isn’t white, these contestants have less of a chance of appealing to the sharks who are mostly interested in investing in companies run by people they relate to, a factor that almost always unconsciously boils down to gender and race. Anecdotally, I’ve noticed this bias playing out on episodes where sharks pass up on products that they don’t understand or don’t have a connection to. The male sharks commonly pass up beauty products designed solely for women, leaving the the entrepreneurs relying on the presence of a female shark to “get” their product. The female sharks, on the other hand, rarely dismiss products appealing solely to men. They also don’t look fondly on contestants who speak English as a second language, and often are impatient with language errors. The bottom line on Shark Tank is being relatable. White, male, native English speakers make the majority of the deals, while the rest are left to compete for the scraps.

Clearly, Shark Tank has issues with giving women and minority entrepreneurs the same opportunities as white men, and that’s a problem, but the show is also an excellent tool at showing what’s wrong with our entrepreneurial system, and how we can change it. If Shark Tank is a microcosm of American capitalism, and women and minorities are being left behind even on a smaller scale, then we can learn valuable lessons from these failings and apply them to our greater economic system as a whole. I love watching Shark Tank, but I’d love it more if I knew that people weren’t being given greater opportunities based on their sex or race. It might seem unimportant, since it’s just a reality TV show, but even in a place as harsh and unforgiving as the Tank, there’s room for some meaningful change.

shark tank GIF by ABC Network

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