The contestants are usually product designers or service operators who have what they consider to be a viable and potentially very profitable business idea, but who lack funding and direction. They pitch their idea to entrepreneurial businesspeople, who in most iterations of the show are referred to as “Horses”. Before the show, the contestants have named a specific amount of money that they wish to get (along with a percentage in the business that the contestant is offering to sell to the investors), and the rules stipulate that if they do not raise at least this amount from the Horses, they get nothing. In return, the contestant gives the horses a percentage of the company’s stock, which is the chief point of negotiation. The program does not show the entire pitch as scenes are selected and edited from the episode due to time constraints.
The horses probe the idea further once the contestant has made the presentation. This will either reveal a sound business proposition that the investor may become interested in investing capital in return for equity, or an embarrassing lack of preparation on the part of the contestant (such as the contestant’s lack of knowledge of the business’ profits or margins), the uncovering of troubling facts (such as insufficient sales or manufacturing margins) or other reasons which may play a factor in the investors consequently rejecting the investment (such as the investor asking for a larger equity stake in the business than the contestant wants to give up, the contestant’s valuation on the business being too high compared to its overall profits, the product not having any proprietary value or the investor’s belief that they cannot add value to the business). A contestant may give a counteroffer to the investors, if they feel their offer is not sufficient compared to the contestant’s initial offer, which may also be subject to rejection if the investor feels the contestant asking for too high a monetary amount and/or an insufficiently low equity.