05/30/2012 01:28 pm ET Updated Dec 06, 2017

How Exactly Are the Investments on Shark Tank Executed? Do the Producers Get a Cut?

This question originally appeared on Quora.

By Nate Berkopec, Contestant on Season 1 of Shark Tank

It depends completely on the Shark who made the deal.

The contract for the show stipulates that 'making an offer' on the show is definitely not a guarantee of investment. An offer on Shark Tank is, if I recall correctly, an agreement to 'negotiate in good faith' using the terms from the show as a starting point.

This sounds unfair, but this is how it is done in the real world as well. Shark Tank is a reality show, but it is not a 'game show.' This is business. No one gets $100,000 from a 15 minute meeting.

When I worked for Barbara Corcoran after my appearance on the first season, several deals were killed in the due diligence stage. From show taping to actual investment varied greatly with each entrepreneur, but I'd say it took about 6 to 9 months.

Sometimes Barbara would also work extensively with the entrepreneur before the actual wire transfer - I remember this being the case with Tiffany Krummins (Ava the Elephant). Barbara did a lot of legwork for Tiffany to help her get her product into big-box retailers.

Each entrepreneur chooses the option on their show contract if they'd like to give 5% of their total equity to ABC or a 2% lifetime net income royalty. If the equity option is chosen, that is worked out completely separately from an investment with a Shark.

A lot of times, especially for entrepreneurs that frequently invest together (Daymond and Barbara, for example), one Shark is acting as "dumb money" and one as "smart money" (one with particular domain expertise, like Daymond with clothing businesses or Kevin Harrington with TV products). In that case, the 'smart money' Shark will lead the due diligence process and (generally) make the decision for the syndicate on whether or not to invest.

Honestly though (and I don't work for her anymore), Barbara is a person of extreme integrity, and all of her after-show negotiations really were honestly carried out.

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