Shark Tank may be a popular show — the ABC television hit averages 7.2 million viewers per episode and consistently wins the 18-49 demographic on Friday nights — but according to one real-life venture capitalist, it is all entertainment. Writing Wednesday in the Wall Street Journal, John Greathouse of the Santa Barbara venture-capital firm Rincon Venture Partners said many would-be entrepreneurs receive the wrong lessons from the show.
“A number of my entrepreneurial students at the University of California, Santa Barbara, have modeled their pitches and overall fundraising approach on the show’s format. In these discussions, it has become clear to me that the students aren’t aware where reality stops and entertainment begins.”
Specifically, Greathouse objects to such “destructive startup myths” as the portrayal of investors as “sharks,” presumably taking advantage of entrepreneurs. In reality, most investors want to be their partners. The investments offered and the equity received in return are out of sync with Greathouse’s experience — in his words entrepreneurs normally give up no more than 25 percent and investors pony up significant funds.
Another difference is the pitch. In the Shark Tank world, the pitch is the key element to securing a deal with the sharks — at least on television. Greathouse says the pitch tends over-emphasize ideas and not the ability of the entrepreneurs to execute them. In his piece, however, Greathouse does admit he has only seen a few episodes of Shark Tank.
Last year in Entrepreneur, Stephen Key also made the point that Shark Tank is more entertainment than venture capital. He seemed to praise the show, however, for the emphasis Shark Tank places on the pitch.
“Learning how to pitch your ideas is extremely important because as long as you have ideas, you’ll be making pitches. It’s very important to understand manufacturing costs, market potential, and how you can protect your business. But the reality is that Shark Tank is entertainment.”
Greathouse also criticizes the Shark Tank timeline, which appears to give entrepreneurs an immediate investment decision when, in the real world, that relationship would develop over weeks and months. Indeed, The Inquisitr previously reported that two-thirds of Shark Tank deals fail to close off-air. The writer also criticized the tendency of Shark Tank pitchers to be proposing their companies to investors outside of their areas of interest, while in reality most venture capitalists have experience with the industries they invest in.
Despite these criticisms, Shark Tank looks poised to start another successful season next week. The New York Times reported yesterday that the show went to small towns to recruit potential pitchers instead of sticking to major cities such as New York, Chicago and Los Angeles. Going to Milwaukee, Des Moines and Greenville in July was a result of Shark Tank‘s partnership with U.S. Cellular.
[Image: Shark Tank/ABC]