Shark Tank Take Two- Pop Culture Myths that Need Undoing
By Garreth Bloor
ABC’s Shark Tank is popular culture’s take on entrepreneurship and raising the capital fueling the earliest stage of a business. Obviously, the idea of a shark is a negative one. Yet in this crucial formative stage of raising funds, ‘angel’ is the term often ascribed to investors in the real-world. Those who take the risks others are simply unwilling to. So why does television portray them as sharks? Are they the good guys or the bad guys in the world of business start-ups?
The distinction reflects the actuality of business as compared to the entertainment value that generally informs popular culture.
Entrepreneur Kevin O’Leary, who boasts plenty of experience with venture capitalists, makes it clear in a conversation at the Aspen Ideas Festival, that Shark Tank is made for entertainment, not for the real world of entrepreneurship.
Discussions and deals made in minutes in the edited TV version may have required hours of discussion, which the audience seldom wants to see. Patience and prudence are in far greater supply in reality when it comes to investing. So is the value of angel investors themselves as mentors and advisers, often offering what amounts to numerous hours of advice tied to the interests of the business. When quick decisions are made in the real world, they are generally informed by years of developing skills.
Theses distinctions matter: entrepreneurship drives the process of economic growth as economist Israel Kirzner has argued in multiple works. Reagan’s famous supply side economist, George Gilder, also argues that the role of entrepreneurship has been underplayed by even free market macro-economics.
Integral to entrepreneurship are those who finance them; at the earliest stage are the angels, or are they the sharks? And why are we ignoring them?
Perhaps the terminology of the latter points to a crass defense of capitalism, where even the notion of virtue is counter-intuitive, it not counter-cultural. Materialism as a basis of capitalism, together with the immediacy value of our entertainment culture, are a world away from the patience and prudence required in the real world.
Are angel investors in reality more like sharks than heavenly beings? Entrepreneurs with overbearing angel investors certainly exist, and bad experiences exist. Many may be inclined to view good angel investors as products of their own virtue, existing despite markets – not because of them.
Deirdre McCloskey argues markets are conducive to moral behavior. Investors who tie up their capital in the riskiest of ventures are rare. The time and effort to create the wealth they hold, and the diligence and commitment required in allocating it to others reflects a reality far less than glamorous than TV versions of business may portray.
When angels invest, they do so with a view to the future, an optimism and level of commitment to an enterprise that fosters virtue. All inherently good traits, while driving one of the largest factors in economic progress. “Angel investment is the primary source of outside equity financing and support for start-ups in a number of countries, yet it is frequently overlooked as angel investors are often not visible”, according to the OECD’s report on Financing High Growth Firms. Angels finance the gaps left by banks and large venture capital firms.
The distinction between ‘made for TV’ entrepreneurship and that which is created in real life was enough for Forbes’ Marian Hudson to argue for a sharp distinction between angel investors and sharks. Perhaps, the biggest difference lies in what popular culture portrays versus what really drives the process of economic development: namely those among us who take levels or risk and commitment which play a vital role in wealth creation from the bottom-up.
Garreth Bloor is a vice president of the IRR, the oldest classical liberal think tank in South Africa. He served as a former executive politician in the country and is the founder of a venture capital firm. Bloor currently resides in Toronto.