Mike Hartwick and Sarah Ponn were getting worried. Their company, Surfset—which makes training surfboards that mimic the movement of the ocean—was starting to take off, and they had more orders than they could handle. They tried to get a bank loan, but that didn't work out. So Hartwick and Ponn decided to audition for ABC's Shark Tank, where entrepreneurs pitch their businesses to a panel of mega-successful "sharks," hoping one or more will invest their (real) money in exchange for a stake in contestants' companies. They came in offering 10% of Surfset for $150,000.
Hartwick and Ponn joined thousands of other entrepreneurs hoping to jumpstart their companies through prime time's first-ever venture-capital reality show. For its first season, Shark Tank received 2,000 online applicants. Its fifth, which premiered on September 20, attracted 30,000 hopefuls. Of the 262 contestants who had gone in front of the sharks by the time season 5 kicked off, 116 walked away with deals—a total investment of about $28 million of the sharks' own cash. The show has launched successful products like the Drop Stop, a device that prevents objects from falling between a car's seat and center console ($3.5 million in sales since it debuted on the show, on March 29), and Scrub Daddy, a sponge that changes texture based on water temperature (more than $13 million since its Shark Tank appearance).
And it isn't just aspiring moguls who love the program. After Shark Tank premiered in August of 2009, it was first a cult favorite, then a popular one. Audiences came for the inventions, the "how did I not think of that?" head slap. They stayed for the deal-point negotiations and tense talk of valuation and equity. By last season, an average 7 million viewers were tuning in during its humble time slot of Fridays at 9 p.m., making the show—essentially an on-screen business meeting—an unlikely hit.
The people behind Shark Tank are convinced that they're helping reinvigorate innovation and entrepreneurship by bringing startup culture to mainstream America in an unprecedented way. "It used to be you learned about how business works through a lemonade stand," says shark Mark Cuban, the billionaire owner of the NBA's Dallas Mavericks. "Now you watch Shark Tank." As the show has grown into a phenomenon among audiences and entrepreneurs alike, it has begun to waken long-dormant dreams as it whispers into the ear of its audience: Why not you?
"This is some ugly stuff," says shark Daymond John, founder of clothing label Fubu. It's a Sunday afternoon on Shark Tank's Culver City, California, set, and John is talking to a pair of nervous-looking young men in bow ties who are pitching a clothing line, called Fraternity Collection. The sharks are not impressed by the shirts. "I saw one of these on a scarecrow," says shark Kevin O'Leary, a venture capitalist.
Sweating noticeably, the guys start to defend the duds, but John reassures them that ugly is fine with him. It's not beauty or genius that sharks are looking for in an investment, but rather a proven sales history and the potential for huge profits. Over the course of about an hour of taping, an interesting thing happens.
The guys impress the pants off John, O'Leary, Cuban, and the rest of the panel—inventor and QVC host Lori Greiner and software magnate Robert Herjavec. (Real estate mogul Barbara Corcoran also often serves as a shark.) They have an answer for every question, have valued the company accurately, and had $1.8 million in sales for the prior year. The sharks are shocked. "You're one of the best presentations we've ever seen," says Herjavec.
Which is not to say they necessarily walked away with an investment (to find out, you'll have to watch the episode). But that's what makes Shark Tank compelling TV: You never know who is going to kill it. "Everybody's got an idea and certainly this nation is a country of small businesses," says British-born executive producer Mark Burnett (Survivor), who adapted the show from the Japanese program Dragon's Den. "I just knew it would spark America."
Shark Tank lets its audience eavesdrop on a process one normally doesn't get to see. And it doesn't hurt that it features a panel of wealthy investors who seem unexpectedly relatable. Why not you? indeed. "With our show, you get five friends"—the sharks—"who come to your living room, who are successful, who really aren't that special, don't have a special education, don't come from wealth," Herjavec says later in his dressing room. "And if we can do it, absolutely anybody in this country can. Trust me. Look at us."
Yet the show may, at its core, obscure how hard it really is to succeed. None of the sharks have seen a life-altering payback from their deals—some even pity-laugh at me when I ask if any of the returns constituted a significant contribution to their wealth. While appearing on the program has made a huge difference for quite a few of the contestants, it could be that exposure is the crucial payoff. "Shark Tank is a platform," says O'Leary. "You can launch a product or service where tens of millions of people see it, and sales quadruple in a matter of hours." Could the show's success catapulting businesses owe more to its role as a massive advertising platform than to anything offered by the sharks? Maybe the millions of attentive eyeballs are the real prize.
Consider an investment O'Leary made in Wicked Good Cupcakes, which sells treats in a jar. "They [had been] doing $16,000 a week," he says. "Within seven days of appearing on Shark Tank, their sales grew to $280,000. There's no venture-capital firm that can do that for you. We are the American Idol of venture capital."
Before pitching themselves in the Tank, Surfset's Hartwick and Ponn (along with cofounder Bill Ninteau) wooed some potential investors in case the show didn't pan out. They knew that no matter what happened, hawking their product on TV would create big interest. They needn't have worried. All five sharks made bids—a rare occurrence—and Cuban won, buying 30% for $300,000. Corcoran, who had tried to partner with Cuban on the deal, told Hartwick and Ponn, "You just made yourselves millionaires."
She might just be right. Hartwick, the company's CEO, says they had 250,000 visits to their website the night their episode aired on September 20, 2012, along with thousands of emails. Orders have been coming in steadily ever since. Hartwick says they're on track to do $5 million in sales this year. A few months after the Surfset episode aired, Shark Tank did a segment on the company's progress. In it, Hartwick and Ponn talk about what a windfall Shark Tank was. Ponn sits next to her business partner, her voice softening. "It sounds corny," she says, smiling. "But it is the American dream, and we honestly feel like we're living it."
if you're going on the show, Be passionate. Or maybe don't be passionate? Hmm.
"We had a guy come out yesterday and he was very even-keeled. Everyone was making fun of him: 'Oh, you're not excited.' I said, 'What did you do before this?' He said, 'I was a corporate lawyer. I left a $175,000-a-year job to start this business.' For me, he's all-in. I'd rather have commitment than passion."
"Charisma is big. I don't invest anymore in entrepreneurs who don't have charisma."
"How you impress somebody is confidence. That's what the sharks are looking for."
-Clay Newbill, Executive Producer
"I'm passionate about basketball, but that doesn't make me a good basketball player. That's typically the biggest mistake, because they get so excited about what they're doing that they think they're just going to overwhelm us with their passion and energy. That doesn't work. Lots of people are passionate, but it doesn't mean they put the determination and effort into it."
Talbott flavored teas
Oprah's hair colorist Shane Talbott and his business partner, Steven Nakisher
Jamba Juice acquired Talbott Teas for an undisclosed amount not long after the episode aired
Lip balm KissTixx. Smooching creates a new taste
Dallas Robinson and Mike Buonomo, who hoped to improve their game with the ladies
Former fashion designer Fleetwood Hicks
Villy Customs, a bicycle business that allows customers to design their own beach cruisers
More than 5,000 sold when the episode ran. You can buy them in stores across the country
After appearing on the show, Villy started selling more than 100 bikes a week
A version of this article appeared in the November 2013 issue of Fast Company magazine.