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Comment by benologist | Hacker News Reader

It doesn't really surprise me that they take equity, at least they only do it if you actually get a deal - it's strange that we haven't seen anyone take that into consideration as they sign away 51 - 80 percent of their business although it's probably just cut out.

What amazes me most about Shark Tank is the difference between "tech companies" and those companies .... they won't hesitate to tell someone their business isn't even worth $100k whilst 'companies' with half a product and no users raise seed rounds at multi-million dollar valuations.

Edit: actually was wrong about them only doing it if you take a deal heh.

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"at least they only do it if you actually get a deal"

This is not true but it is a very good example how a contract can be drafted to be completely misleading to a layperson yet completely clear to a court. It goes to show one should always read one's contracts carefully or hire lawyer.

They never really tell you, but I think most of these deals fall apart after the show airs:

http://www.inc.com/erik-sherman/shark-tank-vc-handshake-deal...

Not saying you're wrong, but that article mentions one specific instance where the deal did not go through.

About 3 minutes into the podcast, Cuban says about 50% of his deals fall through after due-diligence.

http://insidetv.ew.com/2012/03/02/podcast-mark-cuban-shark-t...

It's not really a secret. Certainly not on the Canadian version of the show. That's a good thing though. It means that both the investors and the entrepreneurs have a chance to take a breather and make a more informed decision later.

This is especially interesting for the cases where the sharks ask for 50% of the company (saying that it is an equal partnership between the sharks and the entrepreneur.) They often even distinguish between 50% and 51%.

If ABC takes some of the equity, the entrepreneurs are now in a situation where the sharks + ABC have control.

Could it be that in those cases the royalty is initiated instead?

Seems like a royalty would be against the shark's interests, that's money out of their pocket whereas equity is just another chunk of your company you gave up.

"only do it if you actually get a deal"

It's a little bit more nuanced than that. Read this:

The Option shall vest only upon the occurrence of either of the following:

(i) I enter into a binding agreementregarding my Business with a shark within two (2) years of the date of my presentation to the shark.

(ii) the initial exhibition of an episode of the Series that includes my presentation to the sharks (or a portion thereof sufficient toallow a reasonable person to identify the name and nature of my Business).

It seems to me that the 2nd section here says that the royalty/equity options also vest if you get a deal from someone else after the show airs, if they can say that the new investor only found out about you from your appearance on shark tank.

No, that's only relating to when the option vests. Either from the date of the presentation to the shark (which can be a whole lot earlier than the air date) OR from the time a commercial or segment showing the company on Shark Tank is aired.

Make sense?

And when the option vests it can be exercised. When the option is exercised the producers gets their equity. So the gp poster was correct.

| at least they only do it if you actually get a deal

They have 2 years to exercise their option if you get a deal, or they can exercise it when the episode airs.

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