For anyone who knows me KNOW I LOVE SHARK TANK just as much as I love SCANDAL so when I came across Carol Tice’s article about each Shark’s “quirks” I had to re post. The original article can be found here—>http://www.allbusiness.com/angel-investors-shark-tank/15590748-1.html?utm_source=zergnet.com&utm_medium=referral&utm_campaign=zergnet_115604
AllBusiness.com reached out to the some of the “Sharks” to get their unique take on what makes an investment-worthy business — and what makes a successful business pitch.
We talked to:
- Scrappy real estate mogul Barbara Corcoran, who parlayed $1,000 borrowed from her boyfriend into a $5 billion empire.
- Larger-than-life dotcom billionaire, Dallas Mavericks owner, and guest-Shark Mark Cuban.
- Infomercial king Kevin Harrington of TVGoods, who also helped establish the Entrepreneurs’ Organization (EO).
- Technology wizard and the son of Croatian immigrants, Robert Herjavec, who now lives in a 50,000-square-foot mansion and owns his own island.
- “Godfather of Urban Fashion” Daymond John, who built FUBU clothing into a fashion empire from scratch.
- Software industry billionaire Kevin O’Leary, known as a ruthless, opinionated businessperson — though the company he sold to Mattel for $3.7 billion makes learning software for kids.
Here are the Sharks’ characteristically unvarnished opinions on what turns them off — and what makes them whip out their checkbooks:
AllBusiness.com: What is the biggest turnoff in a business pitch?
Herjavec: A boring pitch. I say, it’s not my responsibility to listen to you, it’s your responsibility to make me want to listen.
Harrington: People who’ve seen me on Shark Tank will say, “You were so stupid to invest in that deal. You should do my deal.” Insulting someone up front is generally not a good idea. It’s also a turnoff when people don’t understand who I am, what I do, or what my sweet spot is for investing.
Cuban: When people start looking for sympathy: “I was in the hospital, it’s been a rough road, my parents divorced when I was three . . .” You just cannot go there.
John: People who know too much. They’re not willing to listen. You want me in there as a strategic partner, and then you’re not going to call me back. You’re not interested in my ideas. If I just want to pay to argue, I’ll stay with my ex-wife.
Corcoran: When they’re a plodder. I want a racehorse, not a workhorse. Good entrepreneurs are kicking and wanting to go, go, go. If they don’t have the fire to run hard, they’re not going to make it to the finish line.
AB: What gets you excited in a business pitch?
Cuban: When people have an operating business, they’ve already gone for it, and they’ve invested everything. They’ve put their heart, soul, and time into the business — they just need a little bit of help.
John: I want to hear a very good sales number, a patent, or a very large distributor or retailer who is taking it in the store — not “interested in it,” but it’s physically there.
Herjavec: A chance to make money. I also want to hear the amount of revenue and the time it took to get it. We’ve had people say, “I’ve got $500,000 in sales.” I’m like, “Great.” Then they say it took them five years to make that money . . . Not so great. I’d rather hear, “I got $100,000 in sales in two months.”
Corcoran: The product is something I can get my hands around. I love products that have female appeal because it’s a huge advantage to me against the other Sharks.
AB: What is the most important question entrepreneurs should be ready to answer about their businesses, but often aren’t?
Harrington: A lot of times, people haven’t done their homework on the marketplace and the cost to get into the marketplace. They can’t define the use of proceeds — what do you really need the money for?
Corcoran: Why is there a need for their product? They’re often in love with their idea, but they assume there’s a need, and very often there’s absolutely no need for another golf bag that holds beer cans.
O’Leary: A basic question comes up about the numbers, and they can’t answer. You say, “What are your gross margins?” And they have no idea. There are a million deals in the naked city — as soon as one question goes awry, I’m gone. You’re dead to me.
AB: What is the most common mistake entrepreneurs make when they’re pitching?
Harrington: They don’t know how much money it’s going to take and don’t know their market. Then I don’t feel confident I’m going to get my money back.
Herjavec: Number one is they don’t know their numbers. You ask, “How much sales do you need to break even?” And they say, “Gee, I don’t know.”
AB: What makes you pull the trigger and say, “I want to give you money”?
Herjavec: The quality of the individual. I need to be able to say, “I want to be in business with these guys — they can run their business,” because I don’t have time to run their business.
Cuban: It has to be a business I can see a future to, that really has promise and potential. I understand the business and can add value to it. And it’s got to be a person I believe in, who has the commitment and passion for their company.
AB: Do you ever invest in “prerevenue” companies?
O’Leary: I do 5 percent of my portfolio in prerevenue deals. The success rate is like 1 in 17 now, but every once in a while you get a hit that makes up for all the mistakes. I’m sectorally agnostic, too — I look at everything.
John: I do only [prerevenue deals for] technology [companies], or if they have a strong patent. I’m doing one now — they have patents on hospital gowns that have strategic openings for mammograms and such, so you can keep your privacy.
AB: What companies have you invested in from the show that you’re high on, and why?
John: One I liked from the first season was Treasure Chest Pets. Not sure how big it will go in revenue, but I do think it’ll do well. Lisa Lloyd is a great entrepreneur — that’s what I loved about doing that investment.
Corcoran: The Ava the Elephant medicine dispenser. It talks to the child and then squirts out the medicine. The guys were not buying it; they’d never been up in the night giving a kid medicine. When I realize the bidding is going to be thin, I can make a better deal.
AB: What’s your best piece of advice for owners looking for investors?
Cuban: Be prepared. You have to know your business better than anybody in the world because there’s somebody competing with you and wanting to kick your ass. Anybody who shows a level of success, it’s like a magnet for people who want to come take that away from you.
O’Leary: Successful entrepreneurs are able to articulate their idea in 90 seconds. Explain to me why it’s a great opportunity. Then spend the next few minutes explaining why you’re the right person to execute it.
Harrington: Understand how to structure a deal. If it’s a high-risk situation, I may need double or triple my money as a return, and I’ll seldom take less than 50 percent [equity stake]. I pitch investors myself for my company, and I’ll say, “I’ll give you 80 percent of the profits until you get a 20 percent return, and then 20 percent of the rest of the profits, forever.”
John: You have to research who you’re pitching to, because you want your pitch to resonate. A lot of times people [present] me with other urban clothing brands; I’d be cannibalizing my own product. But I did the HillBilly deal. It’s a similar product, and the urban space is 10 percent of the size this brand could be, potentially. It’s complementary.