On the reality TV show, Shark Tank, where entrepreneurs pitch different ideas to investors in hopes of securing financing, there is a lot of business terminology that casual viewers may not understand.

The fact of the matter is that in order to get a full understanding of what is going on throughout the show viewers must understand certain business terminology.

Here is some terminology that is used throughout the show that you need to understand: 

  • Proof of Concept

  • Business Model

  • Sweat Equity

  • Licensing

  • Distribution

Shark Tank Terminology
Credit: ABC.com Shark Tank

Proof of Concept

Proof of concept refers to whether a product or service idea will work. Essentially it establishes whether there is a market or paying customers for a particular product or service idea and whether the product or service idea does what it claims it can do.

Most companies, large and small, will test out new product and service ideas using customer or product trials before investing large amounts of money on a large marketing campaign or product launch.  

Ultimately, the best way for a company to prove a concept is to have sales which includes repeat customers.

Business Model

The business model, which is very important for any business, refers to the way that a company delivers its products or services and receives payment for products and services delivered. The business model simply tells someone how the business works.

So when a investor asks you, "What is your business model?" You will answer by simply explaining how you will deliver and receive payments for your products and services.

Sweat Equity

Sweat equity refers to the effort or time, not money, that an entrepreneur has put into their business to get it up and running. Investors understand that most small business owners have limited funding, however they look favorably on entrepreneurs who are able to build their businesses without a huge amount funding but rather a lot of effort.

Contrary to what many people may believe, there are several things that business owners can do to build their business with a little bit of time, effort and no money.  


The term licensing is often used by the investors throughout the show. There are instances in the show where the entrepreneur has developed some type of technology or brand, also referred to as intellectual property, and the investors see it as an licensing opportunity.

Essentially, the person who has developed the technology or brand would authorize another company to utilize their technology in exchange for a licensing fee and royalties.   


Distribution is an extremely important aspect of a business. It refers to how a company gets their products and services to the consumer. If a company does not have any way to get their products and services to the consumer, then the company cannot make any money. There are several ways that a business can distribute their products and services.

Examples of ways that a company can distribute their products and services are:

  • Digital Distribution (Specifically for products that can be streamed or downloaded ie. iTunes or Amazon Kindle)

  • Direct-to-Consumer (Mail order catalogs or shopping channel)

  • Retail Distribution (Selling products to retailers who sell them to consumers)

  • Wholesale Distribution (Selling products to wholesaler who sell your products to retailers)

The different ways that a company can distribute their products of services is also referred to as distribution channels.

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