Shark Tank's Lessons in the Art of Negotiation The entrepreneur behind a leftover-saving plate attempts to make the sharks bid against each other.

Editor's Note: This is the second post in a new series examining the deals presented on the popular ABC television show Shark Tank through the eyes of a venture-capital investor.

This time I'm going to analyze the Plate Topper pitch from week eight of season four of Shark Tank. It's an interesting tale of an entrepreneur who very nearly snatched defeat from the jaws of victory.

Michael Tseng has developed a microwave-safe, dishwasher-safe, vacuum-sealed, food cover that sits over a plate to keep leftovers fresh. He has sold it on QVC and at Walmart.com, and has seen some terrific success. His first on-sale at QVC generated $65,000 worth of orders, but this increased to over $1,000,000 in just four months. He sought $90,000 in exchange for 5% of the company in order to fill the large purchase orders that he had from QVC and Walmart.

Related: On Sharks, Scrubbies and Why Money Isn't Everything

Several of the sharks bit right away. They all identified the low equity being offered as a major issue for them. Kevin O'Leary made the first offer; $90,000 for a 5% royalty. As he said "I don't get up in the morning for 5% ownership". And he is right. Most early stage institutional investors will be looking for north of 20% of the company in exchange for their investment. When they are taking early stage risk, they want to see the opportunity for meaningful returns.

Lori Greiner and Daymond John quickly made offers as well, one for $900,000 for 30% and the other for $1,000,000 for 25%. They offered more money and at a higher valuation than Tseng had asked for.

Tseng made it clear that he was looking for a higher valuation, but at first he would not put a number on the table. He wanted the sharks to bid against themselves. This rubbed John the wrong way, and he pulled his offer. Lori too stepped back her offer, taking it down to the $90,000 for 5% that Tseng had originally asked for.

Tseng's tactic had backfired, but strangely he did not back away from this losing tactic. Instead, he doubled down on it. Mark Cuban passed.Finally Greiner offered $90,000 for 8% and said take it or leave it. Tseng took the deal. He had managed to substantially worsen the economics of his deal through all of his hardball tactics.

Related: 3 Lessons From Shark Tank on How to Make Your Business More Likable

It became clear over the course of the negotiation that Tseng was focused on two things, valuation and dilution, and that he was not listening to what the market was saying. Investment isn't just about valuation, it is a long term partnership between an investor and an entrepreneur. And his behavior was signaling that he would be a difficult and greedy partner, and one that was not interested in the needs of his investors. His tin ear for reading the reactions from the other side, and his repeated attempts to execute a flawed negotiation strategy show that just because you're a smart guy doesn't mean that you're a good negotiator.

A good entrepreneur understands that a smaller share of a larger pie is worth more than a larger share of a smaller pie. Tseng knew that more money would be needed for this company to be successful, and he knew that Greiner had the connections and expertise that he lacked to help make the product a success. He should have focused on getting a deal done with her from the start, perhaps working some of the other sharks interest to improve the terms a bit.

He got a pretty good sense of where the market clearing price was going to be, based on the two offers he got, and he should have abandoned his unrealistic aspirations for both valuation and dilution quickly. He had no basis for those aspirations in the first place, and he anchored on them for far too long. The market is the only mechanism for figuring out what a fair valuation is, not your own desires.

See a breakdown of the rest of the companies to pitch,on the Lightspeed blog.