Inside the Shark Tank

UPDATED: February 2, 2012
PUBLISHED: February 2, 2012

For eight hours last summer, Dallas Robinson and Mike Buonomo stood in line to audition for the hit ABC reality TV show Shark Tank. The producers loved their concise and clever pitch, and a couple months later, the 24-year-old Salt Lake City residents are on the set in Culver City, Calif., getting ready to pitch their catchy startup Kisstixx to five astute and very rich investors, otherwise known as “the sharks.”

As they walk into the proverbial shark tank passing aquariums, they prepare themselves mentally for those first gut-wrenching, pivotal minutes when they try to seal a deal. But before they even open their mouths, they have to stand before the sharks in pin-dropping silence for a good 30 seconds while establishing shots are shot.

“It seems like forever!” says Robinson, chuckling about the experience afterward. “The sharks are just staring at you, peering into your soul and you’re standing there scared to death and trying to remember what you’re going to say. It’s nerve racking!”

During that almost unbearable silence, he tells himself, “Don’t screw up. Just get through the pitch.” He knows his future hinges on that first impression. “It doesn’t look good to multimillion-dollar investors to be nervous,” he says.

And, of course, he’s right. Just ask Barbara Corcoran, the lone female shark, who turned a $1,000 loan into a $5 billion dollar real estate business and is now a contributor on the Today show. Before this season’s show, she had made deals with 11 businesses, two of which were “dead on arrival” and three of which were “definite winners.” She says one business from season 1 was sold for more than $10.5 million.

“I’m watching to see how quickly contestants crumble,” Corcoran says over lunch on the Sony Studios lot. “When they’re no good under pressure, I’m out.” On the other hand, she says, “assertiveness is a beautiful thing to watch. You believe in yourself, you have a right to be there and a right to ask. Those are beautiful qualities in an entrepreneur.”

She and the other investors have already spent hours on the set taping several segments, some of which won’t make it to air for the 2012 season.

During his initial product pitch, Robinson begins by telling the sharks that in high school he was mainly interested in kissing girls and having fun snowboarding and skiing. But he knew with dry, chapped lips, it would be hard to “ramp up his game with the ladies.” Buonomo then jumps in to say they solved the problem by developing pairs of flavored lip balms—such as raspberry and lemonade and fire and ice—that create a chemical reaction when two people kiss. And here’s where the taping gets interesting.

Corcoran and another shark, who shall remain nameless to avoid spoiling the surprise when the episode airs, decide to try out the product. Here’s what’s funny: The two of them often trade snide on-air comments and are notoriously different in their approaches to investing (she’s more intuitive; he never gets emotionally involved in deals, ever!). Now, they’re kissing on the lips and agreeing on something: “It’s actually heating up,” says the male shark. “Ooh, it’s tingly,” says Corcoran.

What makes Shark Tank fun to watch, and a hit among its approximately 5 million viewers, is the quick-paced give-and-take, as well as the bickering and the intense colluding that seems to happen among five very different personalities.

Those dynamics not only occur during filming but can also be witnessed on breaks—that is, when the sharks aren’t all on their smartphones or walking outside to take phone calls. As the cast and crew sit down to a buffet-style lunch, sharks billionaire Mark Cuban, who founded HDNet and MicroSolutions and owns the Dallas Mavericks, and Daymond John, who created the multimillion-dollar clothing line FUBU, engage in sarcastic banter.

When asked who the real shark is, John points to Cuban. “It’s true,” says Cuban. “And these are all the minnows.” At that point, John takes it back. “The real shark, if I had to choose one, of course I would say myself.” But he concedes they’re all extremely competitive. “The meanest and nastiest is Kevin [O’Leary, chairman of O’Leary Funds], the slickest is Barbara, the unpredictable one is Cuban,” he says. And then he jokes that Cuban will pay top price for something he could have gotten a better deal on. “He has a bigger oil well than us. I don’t like him in that sense.”

“My kids…” John starts to say. “…May have to go back to public school,” interrupts Cuban with a wicked grin. “No,” says John, “my kids may have to live homeless if I can’t close some of those deals Cuban’s stealing from me.”

And then Cuban gives a compliment, sort of. “Daymond’s always got some stupid ass saying that throws these other guys off. What the hell does that mean? And then he swoops in and grabs it. DJ knows his stuff. When it comes to fashion licensing or merchandising, he blows us all away. He knows where he has his edge and he plays it.”

In fact, every shark knows his or her edge and plays it. It’s why entrepreneurs looking for strategic investors who already have access to everything from distribution to technological assets wait in line for hours to try out for the show. Finding the right partnership that will help their businesses grow is exactly what entrepreneurs should be doing, on and off Shark Tank, says John. When he started his clothing line, FUBU, he says he worked with a company that already had factories but made only winter coats. “They didn’t make any sales in the summertime—no T-shirts or jeans—so they looked at me as someone to add to their portfolio and I became the lion’s share of business,” he says.

Shark Robert Herjavec, who runs The Herjavec Group, a leading IT security and infrastructure integration firm, agrees. “The harsh reality is instead of just money, what they really need is advice. The key to success in business is execution,” he says. “A bad business with money is still a bad business.”

People should think of Shark Tank as “a venture capital firm on steroids,” says O’Leary. “There’s nothing like this. Every single one of the partners on Shark Tank comes from a different sector. We can tear apart any opportunity in five minutes. Somebody’s going to know something about that sector and the right shark always makes the right investment.”

And this is where Shark Tank becomes more than just an entertaining reality show. Not only are entrepreneurs vying for these precious partnerships, but viewers are gaining insights and tips from this master class of entrepreneurs. For budding entrepreneurs, the information can be invaluable. Producers say they’ve even heard from viewers who say the show gave them the inspiration and courage to start their own businesses.

In the case of Kisstixx lip balm, the sharks are figuratively swimming back for a second look, to make sure Robinson and Buonomo know their market—something all the sharks say is crucial. “When you walk into the room, you’ve got to be the smartest person in the world about your company and your industry,” says Cuban. “A lot of people come in and we know more than they do. You always have to presume someone is out there trying to kick your ass.”

O’Leary, nicknamed Mr. Wonderful for his direct and often tactless comments, says he has reviewed the tape of every deal in which an entrepreneur got funded. “One hundred percent were able to articulate the opportunity in 90 seconds or less showing me why if I were an investor I would make money. That’s crystal clear in every case.”

The pitch is also vital because the sharks don’t receive any background about the business before the taping begins. “I don’t think people realize that we know nothing about the deals before they come in,” says Cuban. “All we know is right before the doors open, they tell us the person’s name.”

The contestants, however, know a lot more about the sharks. Producers encourage them to learn everything they can about the cast members and to be ready for any question related to their business or product. “We offer advice to prepare them for pitching to the sharks,” says Clay Newbill, one of the show’s executive producers along with Mark Burnett and Phil Gurin. “I meet with every one of them the day before their pitch.”

Staff members also work weeks in advance learning about the contestants and the details of their businesses. Robinson says the producers went overboard to make sure he and Buonomo had a positive experience. “They worked with us for about two months before we went on the show,” he says. “We had weekly phone conferences. We wrote our pitch, but they helped us refine it.”

The sharks say they take the time to do the show because the deal flow is phenomenal. “The days go by so fast, because you’re concentrating the whole time,” says Cuban. “It’s split-second; that’s what makes it interesting and so fun. You just have to rack your brain continuously.”

Says O’Leary, “Every single kind of trading dynamic occurs in the shark tank just by natural osmosis. I learn something every day. This is the most fascinating day job I’ve ever had.”

Meanwhile, the exposure for the contestants is priceless because businesses are keeping a close eye on the show. In essence, the platform is the United States, and sometimes the world. “Anyone who airs on Shark Tank receives unsolicited contact from highly successful and well-known companies interested in working with the business or carrying the product pitched in their stores,” says Newbill.

He looks for variety in contestants and their ideas, and says he wants anyone with a great idea or business to apply. “We consider everyone,” he says. “I look first for something that makes me and my team say, ‘Wow!’ I want stay-at-home moms or dads who just have an idea, and I want business men and women who have a company that has already generated millions in sales.”

Each investor has a due diligence team so that once a deal is made, it usually takes 60 to 90 days to close it, but some of the deals never close. “You have to do due diligence because sometimes the entrepreneurs get a little excited and they embellish some,” says Cuban.

“I want to make sure everything they said on tape is true,” says O’Leary. “I don’t take their word for it. I go and dig it out.”

Herjavec says he once invested in a product on Shark Tank that he believed was one-of-a-kind. But he got in a cab later that day and the cab driver told him he had just bought something similar. “He drove me to the mall and there it was,” he says. “It’s a matter of making sure everything in due diligence pans out.”

Sharks differ about how much interest they seek in a business. O’Leary says he likes to retain 51 percent control of the companies he invests in. “That doesn’t mean I’m going to yank them with a chain,” he says. “I’m going to give them plenty of room to do what they say. We agree mutually when we start out, what are the targets, what’s our strategy, where are we going to be in a year, and if we’re not there, I’m going to fire you just like in the real world.”

But Herjavec doesn’t buy into the 51 percent idea and questions the motivation of anyone who would agree to such a deal. “Who would ever start a business, work their ass off and give up control at an early stage?”

The sharks agree that entrepreneurs have to be willing to sacrifice a lot until a new business starts to succeed. “If you’re not dreaming about it, if your relationships aren’t being injured by it, you know, if you’re not tired, you’re not working hard enough,” says Cuban.

O’Leary is more direct: “I love working with young people who are willing to sacrifice everything for success. I’m talking about people who are willing to give up their marriages just to make the business successful. They’re willing to live like hermits and work for 20 hours a day if that’s what it takes.”

As for Robinson and Buonomo, both of whom are married—and neither has sacrificed his spouse for the business—it’s safe to say they’re both pretty happy about lip balm. Whether they got a deal remains to be revealed during the 2012 season.

Tom Ziglar is the proud son of Zig Ziglar and the CEO of Ziglar, Inc. He joined the Zig Ziglar Corporation in 1987 and climbed from working in the warehouse to sales, to management, and then on to leadership. Today, he speaks around the world; hosts The Ziglar Show, one of the top-ranked business podcasts; and carries on the Ziglar philosophy: “You can have everything in life you want if you will just help enough other people get what they want.” He and his wife, Chachis, have one daughter and reside in Plano, Texas.