Ever since the August 2009 debut of ABC‘s “Shark Tank,” the reality show that allows entrepreneurs to pitch their businesses to wealthy investors, contestants were always liable to give up part of their companies even if they weren’t successful in convincing the “Sharks” to invest in them. That’s because to get on the show, founders had to agree to give up either a 5% stake in their company or 2% of their companies’ profits.
The tradeoff, from ABC’s stand point was straightforward. You get your 15 minutes of fame and we get to own some of your company (besides the 5 millions + viewers every Friday night).
While the deal sounds unfair, there are entrepreneurs out there who were ready to defend it as anything but, especially those who consider a spot on national TV as their big break, a chance to spark interest and, ultimately, dollars into their businesses.
Forbes’ J.J. Colao wrote in June about the idea that the exposure and business advice from top entrepreneurs were worth giving up equity. The New York Times’ Mark Cohen wrote about founders who appeared on the show, said “yes” to make for a better story, but were only really in it for limelight.
Even, Robert Herjavec, a multimillionaire and shark himself, acknowledged the notion that entrepreneurs were abusing the opportunity.
“I look for the entrepreneur to capture my attention. If you don’t come out with a great presentation, you’re dead. That’s a big red flag,” Herjavec told the Daily Beast in a recent interview. “The other red flag we’re seeing this year, because of the success of the show is, because of the success of the show, people will come out just for the publicity.”
But there are cases of business owners turning down the opportunity to appear on the show, namely Kristy Hadeka and Sean Tice of Brooklyn Slate, a New York-based cheese company who didn’t feel giving up part of their company or the profits was worth appearing on TV with their product.
With Brooklyn Slate’s story in mind the question then becomes: how many other legitimate companies, with great ideas, decided to turn down the show for the same reasons?
That question might have been relevant a week ago. ABC’s ultimatum, however, exists no more after Mark Cuban gave the show one of his own: get rid of the equity clause or I’m not coming back.
“FYI, there is no additional equity or percentage of anything taken any longer. That was removed retroactively,” Cuban apparently told former contestants. “I told them I wouldn’t come back this season if it wasn’t.”
Cuban said that the clause was “retroactively retracted,” which not only means that future contestants will not have to give up any equity, but also indicates that those who appeared in the past will soon owe ABC nothing as well.
Cuban also said that he was worried about the quality of entrepreneurs on the show declining because of the clause, but with that clause now gone, thanks to the billionaire putting pressure on ABC, that fear will not be realized.
Now, on the contrary, with the no more decision making having to be done over whether or not equity or royalties equates to the amount of exposure, Shark Tank may see a higher quality of bait enter its waters in the next few years.