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The Impact of Media Portrayals on Private Equity and Venture Capital

Americans love their reality television. So, it is no surprise that ABC would choose to broadcast a reality competition every Friday at 9 PM. What might be more surprising is the show’s subject matter. The judges on ABC’s “Shark Tank,” are not entertainment industry insiders. Instead of looking for America’s next big star, they are looking for America’s next big investment. The judges on “Shark Tank” are five venture capitalists, and during each episode, they listen to various pitches from startup entrepreneurs.1 After each pitch, the judges decide individually whether or not they will invest their own money into the idea.2 “Shark Tank” is one of the media’s most prominent portrayals of the venture capital market; and, it is a positive portrayal. The deal-making process of venture capitalists is presented to the audience as an exciting competition, full of fast-paced drama-filled pitches.3

While venture capital gets its glitzy prime-time showing, the media portrayal of private equity has generally been more negative.4 The most prominent representation of private equity in recent years was the media’s portrayal of Mitt Romney as a former leader of the private equity firm “Bain Capital.”5 Mitt’s private equity past was brought to public attention by Barack Obama’s 2012 presidential campaign.6 The campaign produced advertisements that blamed Bain for laying off a group of steel workers in Kansas City.7 The pervasive nature of these advertisements gave enough Americans a negative view of the private equity industry that certain factions within the industry felt the need to mount a campaign of their own.8 The Private Equity Growth Capital Council produced videos stressing that, in contrast to Obama’s portrayals, “private equity has pumped hundreds of billions of dollars into the U.S. economy.”9 However, those counter-campaigns haven’t kept the private equity industry free from scrutiny that one executive compared to the “Salem witch trials.”10 In fact, the public sentiment that private equity firms were “job destroyers” and “tax dodgers” got so bad that venture capitalists attempted to protect their image by distancing themselves from Romney.11 The spokeswoman for the National Venture Capital Association clarified that “opponents of Mitt Romney are quick to call him a venture capitalist . . . [b]ut the investments they point to were actually private equity deals.”12

Even the nomenclature surrounding private equity and venture capital favors the reputations of venture capitalists. While private equity firms are at worst “job destroyers” and at best “financial engineers,” a common term for venture capitalists is “angel.”13 Angels are individual investors who inject their own capital into an opportunity.14 Of course, the term “angel” connotes a sense of benevolence that infers that these investors are giving out of the kindness of their hearts, in contrast to private equity investors who are seemingly more concerned with private profit than with giving (if you take the terminology at face value). Furthermore, angel investors are often involved in early-stage “seed” investments for startups.15 The term “seed” furthers the idea that venture capitalists are involved in “growth” of jobs and opportunities.

These slanted portrayals are interesting, but do they actually have any effect on private equity and venture capital markets?  More and more the answer seems to be yes.16 Venture capital investing reached a ten year high in 2011, “[b]uoyed by a growing belief that venture-backed startups drive job growth.”17 Meanwhile, private equity fundraising had dropped nearly 80 percent since its peak in 2007.18

Is any of this increase in venture capital investment a result of the “Shark Tank” television show?  That might be difficult to tell, especially because the procedures of “Shark Tank” do not mirror most usual venture capital investments.19. Most “real” venture capital investments do not result from five minute pitches that end with several investors attempting to out-bid each other for the right to invest in the company—as is the case on “Shark Tank”.20 Additionally, the investees on “Shark Tank” on average give up a 39% equity stake to the investors, whereas outside of the show this average is somewhere between 15 and 30% for similar seed investments.21. Yet, since the show began, more angel investors are mimicking the show’s quick, contest style pitch format.22 Investor panels have met in California and Boston to offer startups the chance to gain quick access to the eyes and ears of investors.23 This idea of giving startups quicker access to more investors and more publicity is mirrored by the increase in internet crowdfunding opportunities in recent times. “Shark Tank” itself offers great publicity to the startups that appear on the show. A “smartphone breathalyzer” startup raised over two million dollars from a combination of several venture capital firms, after its founder made an appearance on “Shark Tank.”24 As the investor pool becomes larger and more transparent over time, the attitudes of the public will matter even more when it comes to investment opportunities. The venture capital industry has taken advantage of these facts, while private equity has suffered.

  1. George Deeb, Comparing ‘Shark Tank’ to Venture Capital Reality, Forbes (Oct. 9, 2013, 9:48 AM),

  2. Id. 

  3. See Carol Tice, How Shark Tank Is Changing Angel Investing, Entrepreneur (Oct. 5, 2012),

  4. See Nate Hindman, Mitt Romney’s Private Equity Past Haunts Some Investors’ Future, Huffington Post (Feb. 2, 2012, 2:54 PM),

  5. Id. 

  6. Joshua Green, Private Equity’s David vs. Goliath Problem, Bloomberg Bussinessweek (May 14, 2012),

  7. Id. 

  8. Id. 

  9. Id. 

  10. Hindman, supra note 4. 

  11. Id. 

  12. Id. 

  13. Id

  14. Manu Kumar, VC Nomenclature and the Investor Spiral, CNN Money (May 16, 2011, 10:16 AM),

  15. Id. 

  16. See Hindman, supra note 4. 

  17. Id. 

  18. Id. 

  19. Deeb, supra note 1 

  20. Steven Rosenbaum, Why ABC’s Shark Tank is Entertaining, and 100% Wrong on Dealmaking, Fast Company (July 11, 2011, 12:30 AM),

  21. Deeb, supra note 1 

  22. Carol Tice, How Shark Tank Is Changing Angel Investing, Entrepreneur (Oct. 5, 2012),

  23. Id. 

  24. Timothy Hay, Fresh From Swimming in ‘Shark Tank,’ Breathometer Raises $2M for Smartphone Breathalyzer, Wall St. J. (Oct. 18, 2013, 5:50 PM),

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Gregory Berman

Vol. 3 Associate Editor