ABC's Shark Tank--a reality show on which entrepreneurs pitch their business ideas to a panel of potential investors headed by Dallas Mavericks owner Mark Cuban--has brought the excitement of venture capital to prime-time television.
But not all entrepreneurs recognize what they have to give up to get on.
To appear on Shark Tank, entrepreneurs must give Finnmax, the show's production company, either a 2% royalty on profits or a 5% equity stake in the company, Amir Kassar, founder and CEO of business loan company MultiFunding, wrote in The New York Times's small-business blog.
Recently, Kristy Hadeka and Sean Tice passed on the opportunity be on Shark Tank because of this little-known stipulation, Kassar reports. Hadeka and Tice co-own Brooklyn Slate, a company that makes homewares such as coasters and place mats out of slate.
The show offers entrepreneurs the opportunity to publicize their venture and strike deals with wealthy business owners-turned-investors, including Daymond John and Barbara Corcoran. Entrepreneurs should consider financing options, such as debt options, before accepting equity investment and entering a business partnership that's likely to last forever, Kassar writes.
Entrepreneurs interested in appearing on Shark Tank should know that deals reached during filming are not final until a formal agreement is reached later. Early in 2012, Megan Cummins successfully pitched Robert Herjavec during taping, only to have the deal fall through afterward.