Every week, the celebrity investors of ABC's hit reality TV show Shark Tank use their unparalleled experience, resources, and connections to ferret out the best investments from among the show's aspiring entrepreneurs looking for a life-changing opportunity.
As season two approaches its climactic episode -- disbursing more than $10 million overall -- 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.