Shark Tank Deal Terms Glossary

Shark Tank negotiations move fast, and the vocabulary can be confusing if you're new to investing. This glossary defines the terms you'll hear most often on the show, plus related terms that come up when a handshake becomes a real agreement. Each entry includes a short example. Definitions are simplified for education and aren't legal or financial advice; actual agreements can define these terms differently.

Core deal terms

Ask

The amount of money a founder requests and the equity they offer in exchange, stated at the start of the pitch. Example: "$200,000 for 10%."

Equity

Ownership in a company, expressed as a percentage. A Shark who receives 20% equity owns one-fifth of the business and generally shares in its profits and sale value.

Valuation

What the company is considered to be worth. On Shark Tank, the implied valuation is the investment divided by the equity percentage: $200,000 for 10% implies $2,000,000. See how valuation works on Shark Tank or use the valuation calculator.

Pre-money and post-money valuation

Pre-money is the company's value before new cash comes in; post-money includes the investment. With $200,000 for 10%, post-money is $2,000,000 and pre-money is $1,800,000.

Counteroffer

A response that changes the terms, most commonly the same money for more equity, less money, or an added royalty or loan.

Dilution

The reduction in a founder's ownership percentage when new shares are issued to investors. A founder who owns 100% and sells 25% is diluted to 75%.

Alternative deal structures

Royalty

A payment to the investor on each unit sold or as a percentage of revenue. Example: $1 per unit until the investor recoups $100,000. Full breakdown in Shark Tank royalty deals explained.

Recoup

The point at which an investor has received back the amount they invested, often a trigger for a royalty to end or step down.

Perpetual royalty

A royalty with no end date. It continues as long as the product sells, which makes it more expensive for the founder over time.

Loan

Money that must be repaid with interest. Some Shark deals combine a loan with a smaller equity stake, letting founders keep more ownership.

Line of credit

A pool of money a business can draw from as needed, such as for inventory purchases, and repay over time. It differs from a loan in that the business borrows only what it uses. Sharks have offered credit lines for inventory-heavy businesses, sometimes alongside equity.

Convertible note

A loan that can convert into equity later, usually at the next funding round. More common in startup investing than on the show, but founders may already have them on their cap table.

Advisory shares

A small equity stake given in exchange for advice and connections rather than cash. A Shark might propose advisory shares when they want to help but don't see a fit for a full investment. These typically vest over time.

Licensing deal

An arrangement where another company manufactures and sells the product and pays the inventor a royalty. Some Sharks pursue licensing for inventions that suit large existing brands. See licensing vs. building a brand.

Conditions and contingencies

Contingent deal

An offer that depends on something happening first. Examples include a deal contingent on landing a licensing agreement, reaching a sales milestone, securing a patent or getting a particular retailer. If the condition isn't met, the deal may not proceed.

Milestone

A target, such as $1 million in sales or a national retail order, that can trigger additional funding, a change in equity or the end of a royalty.

Earn-back (or equity clawback)

A provision letting the founder regain some equity if the business hits certain targets. For instance, a Shark might take 25% but return 5% if sales double within two years.

Due diligence

The investigation an investor conducts after agreeing to a deal on air, checking sales, financial records, intellectual property, contracts and legal matters. Deals can change or fall through at this stage. Read what happens after Shark Tank.

Multi-Shark terms

Joint or shared deal

Two or more Sharks investing together and splitting the money and equity. In our database, 257 of 942 on-air deals (about 27%) involved more than one Shark.

All-Shark deal

A rare deal in which every Shark on the panel invests together. Our records show only six five-Shark deals, including Classroom Jams (Season 1), Buggy Beds (Season 4), Breathometer (Season 5), Cup Board Pro (Season 10, a deal that included guest Shark Matt Higgins) and Eyewris (Season 14).

Guest Shark

An investor who joins the panel for some episodes alongside the regular cast. Guest Sharks appear in our records on many deals, such as Rohan Oza's deal with Poppi (formerly Mother) in Season 10.

Business and finance terms Sharks use

Revenue (sales)

Total money brought in from selling products or services, before expenses.

Gross margin

Revenue minus the cost of goods sold, as a percentage. If a product sells for $20 and costs $8, gross margin is 60%.

Landed cost

The full cost to get a unit into your warehouse: manufacturing, freight, duties and packaging.

Net profit

What's left after all expenses, including overhead, marketing and salaries.

Customer acquisition cost (CAC)

The average marketing and sales spend to win one new customer.

Lifetime value (LTV)

The total gross profit a customer generates over their relationship with the business. Healthy businesses aim for LTV well above CAC.

Burn rate

How much cash a business loses each month. Combined with cash on hand, it shows how long the company can operate (its runway).

Cap table

A record of who owns what percentage of a company: founders, investors, employees and holders of options or notes.

Exit

The way investors eventually realize a return, such as a sale of the company or a public offering. A handful of companies in our database show an "acquired" status, including Scholly (Season 6 deal with Lori Greiner and Daymond John) and DoorBot, which did not get a deal on the show.

Shark Tank effect

A popular term for the surge in website traffic, orders and attention that many businesses report after their episode airs. It varies widely and isn't guaranteed.

Paperwork and governance terms

Term sheet

A short, usually non-binding document summarizing the key terms of an investment, such as amount, equity, royalties, board rights and conditions. It's typically the first written step after a handshake.

Vesting

A schedule that releases equity over time, often used for advisory shares or founder shares. For example, an advisor's 2% might vest in equal monthly portions over two years, so they only keep what they've earned if they stop helping.

Board seat

A right to sit on the company's board of directors and vote on major decisions. Smaller deals often don't include one, but larger investments sometimes do.

Purchase order financing

Short-term funding that pays a supplier to fulfill a confirmed customer order. It's useful for product businesses that land a big retail order before they have the cash to make the inventory, and it's often discussed alongside lines of credit.

Exclusivity

An agreement that one partner has sole rights to something, such as selling through a particular channel or region, or negotiating a deal for a set period. Exclusivity can be valuable to an investor and restrictive for a founder, so the scope and length matter.

Quick reference table

How to use this glossary

Terms matter most when you're comparing offers. Two offers with the same headline valuation can be very different once you factor in royalties, loans, contingencies or vesting. Before any investor conversation, make sure you can explain each of these terms in your own words and calculate what they would cost your business. Pair this glossary with negotiation lessons from the Tank and the metrics Sharks grill founders on.

Note: these simplified definitions are for general education and aren't financial or legal advice. Real term sheets should be reviewed by a qualified attorney or advisor.