A Quick View into the Shark Tank

A good friend of mine who is a trader on Wall Street sent me an email saying, “Have you seen Shark Tank?  It is exactly how the public sees private investors.”  I figured I should check it out.  The show is almost like an American Idol... for investing... complete with all the drama akin to Mr. Trump’s “You’re Fired”.  A story is told about an (innocent and naïve) entrepreneur raising funding for his or her next “big thing,” who then pitches the idea to a panel of five (aggressive and merciless) investors.  The high level deal terms are negotiated right there on the spot and the venture is either funded or not.

Granted this is reality television I'm writing about, as someone who goes to work everyday as a private investor I have to vent.  The whole concept of the show is completely at odds with what I believe to be the most important aspects of investing.  These investors listen to a five to ten minute pitch about the company raising capital, couple it with the same amount of time for Q&A, and their decision is made.  (I won’t even get into the fact that this show focuses on start-ups, perhaps the riskiest investments of all.)  How can someone make an informed decision about an industry and business they know little to nothing about after a brief conversation? What happened to everything that makes investing difficult? My reality day in and day out consists of extensive industry-specific research, meticulous diligence on financial prospects, investigation of a management team’s track record, and competitive analysis.

So, going back to my friend's email.  If the public views private investors as they are portrayed on Shark Tank, then that’s quite a shame.  What makes me more worried, though, is that based on some of my daily interactions with investors and capital raisers, maybe Shark Tank isn’t too far from reality at all…