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Source link: http://archive.mises.org/17820/shark-tank-the-best-most-capitalist-show-on-tv/

Shark Tank: The Best, Most Capitalist, Show on TV

July 22, 2011 by

At the annual meeting of the Property and Freedom Society in Bodrum, Turkey, earlier this year, investor, homeschooler and founder of Radio Free Market Michael McKay raved to me about the ABC show Shark Tank, which he said he watches with his family on a regular basis. My wife, 7 year old, and I have come to love the show. It’s family-safe and pure capitalism in action. It’s a reality show with a panel of 5 independently wealthy billionaire or multimillionaire investors who evaluate pitches by small entrepreneurs. The investors are ruthless in their evaluation; the entrepreneurs are forced to explain the valuation of their company, their business model, revenue plan, target market, and use of funds. The entrepreneur usually asks for a certain amount of money (say, $100k) in exchange for a certain percent investment in the company (say, 20%). The sharks instantly do the math to figure out the implicit valuation of the company (in this example, $500k), and to figure out the current revenues and the multiple to the valuation. Then they argue about whether it’s worth it, and sometimes make competing offers to the entrepreneur. The show highlights the perfect intersection of innovation, entrepreneurship, and capital.

{ 4 comments }

Dobush July 22, 2011 at 8:42 pm

The investors in this show sometimes place a great emphasis on the proprietary nature of the product that is being pitched. Specifically, can the entrepreneur patent the product if they have not done so already. Would some of the products that are displayed on the show be brought to market if they were not patentable? How would the show change absent of IP?

Stephan Kinsella July 22, 2011 at 9:25 pm

they ask about patents etc. b/c that’s today’s political landscape. But I notice, as a patent lawyer, that their questions are usually very rough–”do you have ‘that’ ‘coverered’” and the answer is often the nonsense “yeah we have ‘it’ covered in a patent ‘application’”. So it’s just like checking off a box. In a patent free world the question would never arise, obviously.

Louis B. July 22, 2011 at 10:11 pm

The Canadian version (Dragon’s Den) is way better.

Also Kevin is a total IP whore.

Daniel Coleman July 23, 2011 at 8:43 am

I don’t know if the American show features an obsession with IP, but I have seen about a dozen episodes of this same show in the UK (Dragon’s Den), and just about every business deal revolves around whether the person in question has patented their idea. IP is everywhere.

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