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Mark Cuban makes Shark Tank remove equity clause in contract

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Re: Mark Cuban makes Shark Tank remove equity clause in contract

#31

Post by corresation »

pzxc wrote: post #11
marcamillion wrote: post #9

I love this. Never knew this was a clause...glad he pushed for this. Mark really does seem like a stand up guy. Shark Tank sounds kinda 'fluffy' and I never paid it much attention for the first few seasons - but then I heard about a company that pitched and I was intrigued so I was searching through the episodes of one of the earlier seasons and I realized how awesome the show is. It is amazing to watch and see how q…

I've read interviews before where it was indicated they know nothing (and want to know nothing) until they walk through the doors to make their pitch. The extensive due diligence is done after the show, which is why deals struck on the show often fall through later on. For example, some of the companies that pitch indicate that they have patents, but of course the validity and defensibility of such patents is somethi…

The extensive due diligence is done after the show, which is why deals struck on the show often fall through later on.

Another reason is that many of those doing pitches don't actually want a deal, but instead simply want the exposure provided by the platform (which, I presume, is how the show managed to get that ridiculous equity clause in). Getting a "deal" is useful in that it makes it more likely that you'll make the cut and actually appear in an episode.

Dragons Den did a follow-up show where they talked about the majority of deals falling through afterwards for various reasons, among them that the pitchers had a change of heart.

Re: Mark Cuban makes Shark Tank remove equity clause in contract

#32

Post by aarondf »

e40 wrote: post #26
marcamillion wrote: post #19

This is also interesting that he waited to push for this until now. It just goes to show that no matter how rich you are, you have to understand your value. If he had pushed for this change in Season 1 - which I suspect he may have - he probably didn't get anywhere because the show could always replace him. Now that he has become synonymous with Shark Tank, he has much more leverage, along with the fact that maybe th…

Cuban wasn't on the show in season 1. He joined later.

Probably why he didn't push for it season 1 then!

Re: Mark Cuban makes Shark Tank remove equity clause in contract

#33

Post by kohanz »

yogo wrote: post #30
marcamillion wrote: post #15

Earlier quoted context omitted.

Have always seen Dragon's Den but didn't pay it much attention for the same reason. I may just revisit it now, based on your recommendation. Thanks :) The patent move always had me scratching my head - how they could just take their word for it and move on so quickly. Never understood it, but now it makes sense.

I'm sure there is always due diligence since the people pitching can always lie about purchase orders and the like. Sometimes a shark will even explicitly mention that the deal is contingent on something else coming through. I've watched both and for some reason I find Shark Tank much better. I'm not sure if it's production or just that spark for reality TV that seems to be perfected in America. The personalities of…

I've seen all three shows extensively and actually prefer the BBC show the most. IMHO, the BBC one is the most serious version and even though you have to get your head around some of the UK-specific stuff at first, you'll learn a lot from the show. Canada's Dragons Den and, even worse, Shark Tank, are more heavy on the drama and personalities, so there's more flash, but less substance.

Also, Peter Jones on BBC Dragon's Den strikes me as an incredibly intelligent investor.

Re: Mark Cuban makes Shark Tank remove equity clause in contract

#34

Post by icedchai »

morgante wrote: post #14

I still don't think many "savvy entrepreneurs" would/should turn to reality television for VC, but glad this ridiculous term got removed. Any other VC who demanded equity just for a meeting would've been laughed out of town years ago.

It's not just a meeting - it's advertising on national TV.

A small % could make sense for a start up selling consumer products, but probably not much else.

Re: Mark Cuban makes Shark Tank remove equity clause in contract

#35

Post by kronholm »

avalaunch wrote: post #21
morgante wrote: post #14

I still don't think many "savvy entrepreneurs" would/should turn to reality television for VC, but glad this ridiculous term got removed. Any other VC who demanded equity just for a meeting would've been laughed out of town years ago.

True but this isn't exactly a normal meeting. It's 10-15 minutes of television coverage in front of ~6 million potential customers. Estimates have put the value of that advertising at about 600k. 5% of one's company is actually a pretty good deal for a lot of small B2C businesses when you look at it that way. If you already have a product being sold and it would do well on a show like QVC then the deal was pretty goo…

Just to add to your post, I don't remember ever seeing anyone getting a deal at 5%. It's usually more around the 20-30% range, and sometimes with equity stakes on top of that.

Re: Mark Cuban makes Shark Tank remove equity clause in contract

#36

Post by larrys »

pzxc wrote: post #11
marcamillion wrote: post #9

I love this. Never knew this was a clause...glad he pushed for this. Mark really does seem like a stand up guy. Shark Tank sounds kinda 'fluffy' and I never paid it much attention for the first few seasons - but then I heard about a company that pitched and I was intrigued so I was searching through the episodes of one of the earlier seasons and I realized how awesome the show is. It is amazing to watch and see how q…

I've read interviews before where it was indicated they know nothing (and want to know nothing) until they walk through the doors to make their pitch. The extensive due diligence is done after the show, which is why deals struck on the show often fall through later on. For example, some of the companies that pitch indicate that they have patents, but of course the validity and defensibility of such patents is somethi…

"and more recently CNBC's show The Profit where Marcus Lemonis"

A great show. I did business with Marcus before he was on the show. Then I saw the show (had literally forgotten who he was) and got an idea and did more business with him.

His negotiating style is to go in at or very close to his final position and then walk. He did that both times. Funny thing was he probably overpaid using that strategy.

Re: Mark Cuban makes Shark Tank remove equity clause in contract

#37

Post by larrys »

Larrikin wrote: post #12
marcamillion wrote: post #9

I love this. Never knew this was a clause...glad he pushed for this. Mark really does seem like a stand up guy. Shark Tank sounds kinda 'fluffy' and I never paid it much attention for the first few seasons - but then I heard about a company that pitched and I was intrigued so I was searching through the episodes of one of the earlier seasons and I realized how awesome the show is. It is amazing to watch and see how q…

Well the meetings are heavily cut, I remember reading that typically each of the pitches is atleast a couple of hours. The sharks have no information on the companies pitching before they walk in to the room, but I'm sure the producers do some home work to only let in entrepreneurs that will make for good TV. The sharks are all smart people so they know what to ask but its no where near a ten minute affair. All the d…

"but I'm sure the producers do some home work to only let in entrepreneurs that will make for good TV. "

Also heavily favors attractive women particularly those with blond hair (I'm serious).

Re: Mark Cuban makes Shark Tank remove equity clause in contract

#38

Post by larrys »

marcamillion wrote: post #9

I love this. Never knew this was a clause...glad he pushed for this. Mark really does seem like a stand up guy. Shark Tank sounds kinda 'fluffy' and I never paid it much attention for the first few seasons - but then I heard about a company that pitched and I was intrigued so I was searching through the episodes of one of the earlier seasons and I realized how awesome the show is. It is amazing to watch and see how q…

"Never knew this was a clause...glad he pushed for this."

You are right in the way you phrased this "glad he pushed for this".

But I think in reading all the other comments here there is an assumption that Mark should get the lions share of the credit for this event.

But Mark didn't say he was the only one who pushed for it.

He said (from the tweet that the story is based on)

"I told them I wouldn't come back this season if it wasn't (removed)".

We have no idea if this was also the bargaining position of any or all of the other sharks as well (nobody has asked them) or if the production company had already decided to do that.

It's great that Mark has done this but I think w/o knowing about the others at this point he may be getting more credit than he deserves (or, maybe not! We just don't know).

Re: Mark Cuban makes Shark Tank remove equity clause in contract

#39

Post by mathattack »

marcamillion wrote: post #9

I love this. Never knew this was a clause...glad he pushed for this. Mark really does seem like a stand up guy. Shark Tank sounds kinda 'fluffy' and I never paid it much attention for the first few seasons - but then I heard about a company that pitched and I was intrigued so I was searching through the episodes of one of the earlier seasons and I realized how awesome the show is. It is amazing to watch and see how q…

I thought the clause was a good way to charge for the free marketing they're giving companies. Maybe it was too high, but most couldn't afford the cash.

Perhaps the reason he was able to convince them to do it retroactively is the companies weren't worth much. Watching a company worth 100K for your 5% stake just isn't worth the time and effort.

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