Swimming with the Sharks

The ABC hit “Shark Tank” is one of TV’s best reality shows that deals in the dreams and hopes of aspiring entrepreneurs

"All right everybody,” the amplified voice says. “Here we go. It’s TV time now.” 

Multiple cameras are rolling as one billionaire and four multimillionaires sit side by side in their bright-red leather chairs. Two tall, brown wooden doors stand open before them. They are five of the Sharks of “Shark Tank,” which over its half decade on the air has become one of American television’s most successful shows, the star of Friday nights on ABC. 

A man in jeans, T-shirt and blazer, looking in his mid-30s, has walked down the program’s long pathway, at first invisible to the Sharks, and has entered the set to place his feet on the red and blue Oriental rug where many before him have awaited the chance to achieve their goal: to convince at least one Shark to invest in his business and help make his financial dreams come true. Welcome to Sound Stage 25 at Sony Pictures Studios in Culver City, California. 

Seventy-five years ago, Dorothy found Oz here (it was MGM Studios then), encountering a wicked green witch on the way; now, a parade of wannabe tycoons have found a different kind of green—$40 million invested in the last five years by the Sharks in an effort both to enrich the contestants and add to their own overflowing coffers. 

The night before, “Shark Tank” was voted best reality competition series at the annual Critics’ Choice Awards, and this morning there have been congratulations all around. “Shark Tank” is a hit not only with the critics—last season, its fifth, it was watched by as many as 8 million viewers weekly in its Friday-night spot. It consistently won Friday in the treasured Adults 18 to 49 ranking measure, finishing as the night’s No. 1 TV series for 26 of 28 original telecasts in 2013–2014. Reruns are shown on CNBC and have significantly helped improve that business cable network’s ratings. Unlike many shows, the program’s popularity has increased, rather than diminished, over the years. 

Why? “Everybody wants to know that the American dream is alive and well,” says Mark Cuban, 56, the show’s multibillionaire (net worth $2.6 billion, according to an Internet estimate), the owner of AXS TV, HD Net movies and the Dallas Mavericks basketball team. 

 

“Even more so, parents want their kids to know that the American dream is alive and well,” he says, sitting in his chair between pitches. “Even if a parent may not feel it so much for themselves, they want to know that their kid has every opportunity. That’s why the show is the No. 1 show watched by families together, and Friday night is the perfect night for it, because kids 8 to 12, 13, 14 years old are staying home, and their parents are probably staying home so they can watch it together. It used to be people told me about their son or their daughter playing basketball and how good they might be. Now, they tell me about the companies their kids are starting, and they beam a whole lot brighter when they talk about the companies than they did about sports.”

The contender on the carpet in this city in western Los Angeles County has been standing and waiting while the crew makes technical adjustments. It’s a time of great tension—contestants have been known to tremble, to perspire freely, to be unable to lift their heads up and face the judges. The Sharks have been looking at him carefully, sizing up their prey. True to the program’s rules, they have never seen him—or any other mogul-in-waiting—before. This is the initial, and only, encounter before deciding whether to invest. What are their first reactions? Their gut instincts? Is this a worthy magnate-to-be? Is this someone they can trust with their money, someone with the drive to achieve what he wants to achieve?

Beside the man is his product—luggage of different sizes and colors—that he will say is different from and better than all other luggage of its type. Displayed in large letters is the name of his company: Biaggi.

Finally, the director calls out that all is ready, that the man should begin. During the wait, he has looked calm and confident. He is Stephen Hersh, he says, from Brooklyn, New York. He adds that he is seeking $500,000 for 30 percent of his company. 

“Wouldn’t it be great,” the 35-year-old Hersh continues, “if luggage didn’t have to serve as a coffee-table solution?” All the luggage onstage, he says, “folds flat,” so it’s “out of sight and out of mind” until your next trip.

The Sharks listen carefully, looking at him, some taking notes. He points to a dark wood cabinet next to his display. In this standard piece of bedroom furniture, he says, you can fit “11 pieces of luggage. Think of how much space they would take up in your home.”

He pauses. “Which one of you will take us to the next level?” he says. “Who can we welcome to the fold?” 

There are six Sharks—but only five each week, as the two women Sharks usually alternate. In addition to Cuban (who is worth more than all the other Sharks combined), they are Kevin O’Leary, 60 (Internet estimate of net worth $300 million), a controversial Canadian businessman and investor who is also a TV personality in his home country; Robert Herjavec, 50 (Internet estimate of net worth $125 million), a Croatian-born immigrant to Canada and CEO of a major tech security company; Daymond John, 45 (Internet estimate of net worth $250 million), the founder, president and CEO of the FUBU clothing line; Lori Greiner, 44 (Internet estimate of net worth $50 million), an inventor and entrepreneur known as the “queen” of the QVC home shopping network; and Barbara Corcoran, 65 (Internet estimate of net worth $40 million),  a New York City real estate mogul, who is off this day. And, sometimes there have been Guest Sharks, among them comedian Jeff Foxworthy, billionaire businessman John Paul Jones DeJoria and Steve Tisch, chairman and executive vice president of the New York Giants football team.

Starting last season, Greiner and Corcoran began appearing together at times on the show. Corcoran told USA Today back in August 2013 that she had been asking to have both women on the panel at the same time more often. She said that audience pressure, which she had helped build up in her speeches to women’s groups that had asked why there were always four men and one woman, had been responsible for the switch.

Except for Cuban, the full-time Sharks were not especially well known in the United States before “Shark Tank.” That has all changed—speaking engagements, books and all the other assorted paraphernalia of celebrity now accompany them everywhere.

“We are the Mick Jaggers of the business world!” Herjavec recently and proudly declared on an ABC behind-the-scenes “Shark Tank” special.

“It’s ‘Shark Tank,’ ‘Shark Tank,’ every living moment of my life,” Corcoran said on the special. “But I feel very popular.”

Back on the set, with the cameras still rolling, the questions begin. Yes, the luggage is sturdy, Hersh says, with 360-degree spinnable wheels, like much modern luggage. Greiner, who has sold, by her own estimate, “hundreds of thousands” of pieces of luggage, stands and approaches. “Can I touch it?” she asks.

 The grilling continues and continues, including the typical questions the Sharks almost always ask—is there a patent, how much does it cost to make, what do you sell it for, how much money has your company taken in, how do you want to use our investment? There have been previous financial and sales mistakes, Hersh acknowledges, and he is asked to explain them and discuss his planned solutions. He says that he, his family and their 50-50 partner in the Far East “understand now we’re not the geniuses” they thought they were, and he suggests ways to improve sales. Pitches on the set can go on for a half hour or longer, sometimes an hour or more, and are cut down for broadcast on the hour-long program. 

Finally, Cuban drops out. It’s “not a business I want to be in,” he says. And besides, the entrepreneur sounds like a certain NBA referee, and “any time I’d talk on the phone to you I’d think I’m talking to him.” 

Herjavec and O’Leary soon depart. “I think it’s a good product,” O’Leary says, adding that he loves Hersh’s personality. “I know a good guy when I see it.” He adds that the luggage “may lend itself to a certain QVC” queen.

Greiner and John (who sells luggage on HSN, the Home Shopping Network) are left, and soon John speaks up. He has an offer. He will invest $500,000 for a one-third interest. He wants, he says, to be an equal partner with the other owners of the business.  

“It’s a terrific offer,” Hersh says. 

Only Greiner has remained quiet. 

“Shark Tank,” produced by Sony Pictures Television, is based on a Japanese program that was called “Tigers of Money.” Versions of the show, often called “Dragons’ Den” or variations of that title, have appeared on television around the world, including Britain and Canada (both O’Leary and Herjavec have appeared on the Canadian version). “Shark Tank” started slowly in the United States. Executive producer Mark Burnett, whose other hit shows include “Survivor,” “The Apprentice” and “The Voice,” told the Hollywood Reporter earlier this year that he thought all along in creating the program that it would steadily gain in popularity because that was what had happened in other countries. Ratings grew after the popular Cuban became a regular in season three. Burnett said he switched from Dragons to Sharks because he knew “Dragons’ Den” wouldn’t work with American viewers. 

Cuban has brought about one key change. At first, every potential contestant had to agree to let the show’s production company, Finnmax, take a two percent royalty or five percent equity in their business just to get on the show. Cuban insisted that the practice end or he would leave—he said it kept budding entrepreneurs away—and in the fall of 2013 he reported that it was stopped retroactively. 

Getting on the show is not easy. Executive producer Clay Newbill told the Washington Post last January that for the 2013–2014 season, 157 out of 35,000 applicants were chosen for filming—less than one half of one percent—and that 112 or so would actually be shown on air. Of those, Newbill said, less than half get deals. If the Sharks don’t like a deal, think the product won’t sell, is useless or ridiculous, their remarks can sometimes be brutal. Cuban has said that “my BS meter is going through the roof” and called contestants “cockroaches.” O’Leary has shouted out: “The whole thing is crap. Is crap the brand?”

But being on the show can be a cornucopia—last season, Newbill said, at least two businesses garnered $1 million in sales within two days of airtime. The “Shark Tank” investment total for 2013–2014 was $16,845,000.

“It’s like a shot in the arm,” Herjavec told his TV audience last May. It “is like the rocket to the moon.” It “takes your company—boom!” But an agreement on TV does not necessarily mean a deal in real life. After deals are made, the lawyers take over to check out the business, do their due diligence, and if things aren’t exactly right the plans can be scrapped.

Sometimes contestants refuse deals because they don’t think the offers are good enough, often making counteroffers that may or may not be
accepted. And sometimes applicants seek to get on the show without any interest in making a deal—they just want the exposure, which can be enough, even without a deal, to jump-start their company. It’s a fact that riles both producers and Sharks, and the show tries, not always successfully, to screen them out. O’Leary will often tell someone who refuses a deal with him, whether the person isn’t really interested in the Sharks or is just not interested in O’Leary: “You’re dead to me.” 

Animosity is not reserved solely for contestants. Sharks will often turn on one another, bare their teeth and compete for the deal—and although they respect each other’s abilities and accomplishments, they can have harsh words for their colleagues. John has called Herjavec “a very, very vicious Shark” and Cuban a “know it all.” Herjavec has said Greiner can be “irritating,” and Corcoran has said Greiner “talks too long.” Cuban has called Herjavec “syrupy.” Herjavec has called O’Leary “just a rude guy” and Cuban “very pushy” (adding that Cuban “pisses me off” because he’s worth so much). Corcoran has called Cuban “too cocky,” and Greiner has said that John can sometimes “be a little too vicious—he starts to pull some dirty tricks.” 

“We’re like a family,” Herjavec says, sitting in his trailer outside the sound stage. “There are good days and there are bad days. There are days when I really don’t get along with them. I love Lori, been sitting with her for many years, probably get along better with her than most of the other Sharks because we sit next to each other, but two days ago when we were filming she pissed me off so much that I actually got up and walked out because I was going to say something really rude to her on camera and I didn’t want to.”

What did she do? “You’ve got to watch the episode.”

On the set, John is insisting on an answer. It’s not an ultimatum, he says, because there’s a “deadly Sharkette” still to be heard. Finally, Greiner speaks. “I have an offer,” she says. She’s been in the luggage business a long time, she says—she even has a regular luggage special on QVC—and she matches John:  $500,000 for 33 1/3 percent. She has instantly thought of a new name for the product, she says, and there will be free advertising on QVC. 

“It’s a really tough decision,” Hersh says. And he asks to consult by telephone with his business guru and partner—his father.

The Sharks will often battle one another, Shark teeth bared, for the right to spend their bountiful cash. “It’s real money at stake, and big egos at stake,” John noted on the TV special. After investing, they take an active role in the business. And each has pretty much the same criteria in deciding when to hold ’em and when to fold ’em.

“I look for smart, dedicated people, and an idea I think I can help grow,” Cuban explained in an email. His decisions don’t emanate from his intellect. “We don’t get enough time to be thorough. So it’s always gut. And it works most of the time.”

He counts among his many successes Simple Sugars, a skincare product that he says went from having 1,000 orders in a few months to 10,000 in one night—and from $88,000 in sales in one year to $2.1 million in 2013. Such are the ways of “Shark Tank.” 

In October 2013, Cuban made the biggest “Shark Tank” deal in the show’s five seasons, bidding $2 million for a 20 percent equity share of Ten Thirty One Productions, an entertainment company that focuses on live horror shows and whose main attraction is the Los Angeles Haunted Hayride. He beat out John, who had offered the same $2 million, but for 40 percent. The contestant had countered with 20 percent—and Cuban suddenly jumped in, shouting “Done!” to John’s dismay. 

Greiner, who has created 450 to 500 retail products and has 120 patents, holds the record for the most successful investment in the history of “Shark Tank”—Scrub Daddy, which describes itself as a “versatile, all purpose cleaning utensil” with a happy face on its front. (And which O’Leary, perhaps somewhat enviously, has called “the piece of crap sponge.”). In a little more than a year, Greiner says, sitting in her trailer outside the sound stage, “we’ve closed in on $20 million in sales.” The night the product aired, its website had between 30,000 and 40,000 hits.

O’Leary is the controversial Shark, called somewhat sarcastically by his colleagues “Mr. Wonderful” because of a tendency to rudeness. He once told Cuban, during a pitch involving bees, “Why don’t you stick your head in that beehive.”

John, on the TV special, put it this way: “He just wants to burn down bingo halls, trip old ladies and foreclose on orphanages on his day off.” 

O’Leary demurs. “I get accused of being mean,” he says, sitting in the studio makeup room and getting a touch-up between pitches. “That’s not true. I’m the only Shark that tells the truth. Because when you watch what happens, and we’ve been doing it for years now, very often people feel sorry to see someone in front of them who has clearly charted a path that is going to end badly. I would rather tell somebody the truth—that their idea has no merit and that they will certainly go bankrupt. And people call that mean? I call that I’m the best friend they’ve ever had. And there lies where all of this comes from. Personally, I think I should be cloned.”

O’Leary made his fortune in software and is now chairman of a mutual funds company with $1 billion under management; he also cohosts the “Lang and O’Leary Exchange,” a daily business news TV show in Canada. He is as critical of his fellow Sharks as they are of him. 

“There’s lots I disagree with. You can’t encourage people to go and pursue folly, and we are very guilty of that. I find that attribute in Barbara, I find it in Lori, I argue vehemently with Robert about it. This whole Kumbaya worry about their feelings is crap. Because they’re going to get bitten by the fact that they’re failures because they didn’t listen to the truth.”

His best deal? “Cupcakes. Practically an infinite return now. Wicked Good Cupcakes [in jars] proves two things. Number one, you can take a commodity, any commodity, put it on ‘Shark Tank,’ and it becomes a launch platform. So there are thousands of cupcake ovens. Thousands. What’s different between the cupcake that’s inside Wicked’s jar and any other cupcake? The difference is ‘Shark Tank.’ That’s how you can measure.”

The entrepreneurs agreed to give O’Leary 45 cents for every cupcake sold. “This business is going to make $4 million in sales this year,” he says, “spin off almost $800,000 cash. That’s incredible.”

Back on the set, O’Leary is urging Hersh to decide quickly: “You don’t want to be stuck waiting at the baggage carousel” because it “didn’t make the flight.”

John tries to use proximity as a means of persuasion: “I live in New York, like you,” he says. Greiner stresses her strong QVC connection. “I will have it on QVC in four months.” 

Hersh turns and walks through the doors by which he has entered and heads to the production desk to make his call. Others can hear him talking but can’t make out the words. Greiner and then John head through the same doors and get on the phone to try to convince the father that she or he is the best choice. The two Sharks smell green, and are circling. Meanwhile, the minutes are passing.

Herjavec founded and heads the Herjavec Group, one of North America’s major providers of cyber security. In choosing what to invest in on the show, he says, “You want somebody who has a deep passion for the intricacies of their business. There are people that want to play at running a business, there are people that want the end result. But I want somebody who loves the process.”

He can easily criticize his fellow Sharks. “Kevin is a caricature of himself,” he says. “So it’s rare I get truly upset with him, except when he’s rude to people. That really sets me off.”

He has negative thoughts about Cuban too. “I have a lot of respect for Mark,” he says, “but he’s a very pushy guy. Mark is the bully in the schoolyard. He’s overtly pushy and I’m overtly sensitive to bullies.” 

He offers another reason for the program’s popularity: “I think in this day and age, the only person you can depend on for long-term employment is yourself. And if you don’t understand the language of money, which is what we’re teaching America, you’re going to get taken advantage of. You don’t have to be like Kevin, you don’t have to be greedy, you don’t have to be after the money, but you have to understand the language of money.”

His best deal so far? “Tipsy Elves.” He invested $150,000 for 20 percent. “Ugly Christmas sweaters. Two great operators. Good product, clever product but fantastic operators. They came on the show, they were doing $600,000 a year in Christmas sweaters. That was last season. We’ll do $4 million this year. And we just signed a license deal with colleges and universities which isn’t even part of that number.” 

Herjavec, by the way, is a racecar driver—and a cigar smoker. He particularly loves Bolivar Royal Coronas. “It’s a darker tobacco, and I find that it has a bit of a stronger taste. I used to smoke when I played golf. I don’t play a lot now. But I race cars. I race Ferraris. I’m a driver. I always have a routine. I qualify and I have a nice cigar before the race. If I win, like I won at the Montreal Grand Prix last weekend, I have another cigar after the race.” Herjavec won the Coppa Shell class at the Canadian Grand Prix on June 8 in Montreal. 

John was born in Brooklyn and grew up in Hollis, Queens. He began by sewing hats in his basement and selling them on the street. He worked as a waiter at Red Lobster while he and friends were developing FUBU (For Us, By Us), now a multibillion-dollar business. 

His best deal? It’s tough to say, he says, but “I have Bubba’s-Q Boneless Ribs,” deboned baby back ribs, “a patented rib product.” Talks are in progress with “several cruise lines that want millions of pounds of it a month.” He thinks that if all goes as planned, “it has the potential to be the biggest deal I’ve ever done in my life.” John put in $300,000; in the first 10 days after the show aired there was more than $200,000 in sales. Four months later, the ribs were in 150 stores. 

Corcoran says her most successful deal financially was with Grace & Lace, “a sexy, lacy boot sock company”; she invested $175,000—with half the money a line of credit—for 10 percent.  The company said it ended 2013 with $2.8 million in sales. Grace & Lace traces its origins to the time Melissa Hinnant,  pregnant with a baby daughter, was put on bed rest and developed an interest in sewing and knitting. She lost the child, but she and her husband, Rick Hinnant, created a business whose success, Rick Hinnant told ABC, has enabled them to open two orphanages in India.

Not every arrangement turns out happily. Cuban’s worst deal—one he shares with O’Leary—occurred in season two. They bought into a toy-rental company called Toygaroo, an investment they split:  $200,000 for 35 percent. But it quickly failed.

Toygaroo “was the worse deal I’ve ever done,” O’Leary recalled on the TV special, citing a management failure. “I don’t like zeros,” he added. “I don’t lose money like that ever. That was shocking.”

A shared success for Sharks en masse is the Breathometer, a device that attaches to a smartphone and registers alcohol content. Five Sharks invested $1 million for 30 percent of the company. Before the episode was seen, not one product had shipped. In a couple of months, there was almost $1 million in revenue. The outlook for 2014? At least $10 to $12 million in sales.

On the set, Greiner and John finally return and take their seats. Time marches on, as Cuban checks his cell phone for messages. At last, Hersh returns. But before he can speak, John has an announcement.

What happens next? What does John say? Which Shark emerges victorious? A nondisclosure agreement forbids revealing the result. But if you tune in to “Shark Tank” Friday nights on ABC when the season begins in September, you, along with eight million or more others, will find out. 

“You can launch incredible businesses on ‘Shark Tank,’ ” O’Leary says. “The ‘Shark Tank’ Sharks are a venture capital firm on steroids. You’ve got capital. You’ve got a massive leverage of millions of people watching the show. And you’ve got ideas. There’s nothing like it in the world.”

Mervyn Rothstein is a frequent contributor to Cigar Aficionado.