how does shark tank work?

[compassion101]

It seems like the money goes into the business rather than to the person, is that true and the person gets no cash?

It doesn't seem to make sense to me. For example, a guy comes out and says he values his company at $1 million and is looking for a $200,000 investment for 20%. Let's assume the sharks agree with the valuation. If I owned a company worth $1 million and someone wanted 20% of my shares, they'd better pay the money to me rather than the company.

[marty56]

Some Episodes, Mr. Womderful offred the person cash out for his business.  I also assume that when they take 100% share, this is also a buyout.  The rest of the time the money is spoosed to go into the business.  They may sign a contract for that but I don't know.  IMHO I be they rarely get ripped off.

[stellar]

Your statements indicate a lack of understanding of business and business investing.  

Of course they would not pay you the money, that would be called a personal loan.  

If you are really curious about this topic I would advise you to read some business textbooks.

[compassion101]

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@stellar wrote:

Your statements indicate a lack of understanding of business and business investing.  

Of course they would not pay you the money, that would be called a personal loan.  

If you are really curious about this topic I would advise you to read some business textbooks.

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I don't think you are understanding my question. It wouldn't be a loan. I would be selling shares of my company to another person, just like shares of businesses get sold all over the world. Are they not selling shares of their comapny in shark tank?

[Anonymous]

Shark Tank is a pawn shop/check cashing venture.  They take extreme advantage of desperate people.  It's easier to get richer when you already have money because you get to have cash available to buy stuff people need to quickly get rid of.  I would never work my butt off while some investor sits backs and gets paid without effort.

The people who make out best on the show are the ones who get a chance to sell their products on QVC.  Many times they become instant millionaires.

[compassion101]

After much searching I was able to find my answer. They use post-money valuations on the show. For example, if I value my company at $4 million and I sell you 25% of the company, you would pay $1 million directly to me and I could use the money to do anything I want. But if I ask for a $1 million inventment, it would bring the valuation of the company to $5 million after the investment (post-money), in which case you would receive 20% of the company for investing $1 million. If I were to go on the show and ask for a $1 million investment, I would offer 20% and value my company at $5 million.

Obviously the valuations are cut down by lower offers on the show, but the point is they are post-money valuations not pre-money.