The season debut of "Shark Tank" (tonight at 9:00 p.m. on ABC) is poised to chew up the competition (last season it was the top Friday night network show among adults aged 18 - 49), and that's just fine with the tough cookies who tear apart the fledgling business owners who come begging. Mark Cuban, Barbara Corcoran, Lori Greiner, Robert Herjavec, Daymond John and "Mr. Wonderful" Kevin O'Leary have no problem telling entrepreneurs what they really think. I had a chance to talk to Mr. Wonderful during press tour, and he revealed the three things that make him interested in investing, the companies that have disappointed, and why everyone should want to invest with a shark... if they can.
"Shark Tank" is fun to watch, but if I had a business, I doubt I could stand the heat.
What I find so interesting about it, I notice as we're taping this year, season 5, I don't even know we're making TV anymore. The deals are really big, the companies are real they have sales, I get into it, and I'm looking at them as real investments. It gets competitive. You have to decide are you going to collude with a shark to keep the price down, or are you going to compete and the price goes up? It's all strategy.
Are most of the business owners making smart decisions when you talk with them?
No. Let's take something like a total commodity, like cupcakes. There's nothing proprietary about cupcakes. Anybody can make them. Anybody. Cupcakes are hot these days. So you take a cupcake company in Boston, no one's ever heard of them. They come on the show and want to raise $75,000 to start a commercial kitchen to up their production. Their sales are $16,000 a week. Not a lot. That's a deal that I did because I liked the mother daughter team. I put $75,000 into that company, and the next week we sold $280,000 in cupcakes. I was just blown away. Since then, sales have gone up. I think "Shark Tank" is a platform you can launch a business on. So many people are watching it, and the repeats, and the follow-ups.
What's the biggest mistake people make?
They don't know their numbers and they ask too much.
Are they greedy?
I think they make the assumption that just because they got on the show, they're done. But it's not true.
How important is it to be in business with a shark?
It's important to be in business with a shark, because 10 million people a week see the shark. It's like "American Idol" on steroids. It's the voice for business. It wasn't that way years ago, but it is now. Every deal that we do, sales go up.
I would think sales would level off, but you're saying they go up even long after the show airs?
What happens is, if the company's successful, we start shooting follow-ups six months later, and they stay in the eye of the public. The good, the bad and the ugly. Some of them work, some don't. [Mark] Cuban and I invested in a company called Toygaroo. It went to zero. We lost half a million bucks. And then we did Talbott Teas, Damond [John] and I. Jamba Juice bought it, a public company bought six months later. I think that's the highest return on investment on any "Shark Tank" deal ever.
What do you look for in a deal?
I like companies that have sales, that have already proven they know what they're doing. I'm a financial investor. I'm a disciplined guy. I don't overpay for anything. And I'm really good at looking at a balance sheet and seeing [if a company needs to] modify its cost structure, do better with the banks they're working with, whatever. I look for an opportunity where I can grow their sales, cut their costs. If the concept has not been proven, a clothing deal, I hate that stuff. I want Daymond to do that. Another jean, blouse, jewelry, all that.
You stay away from clothing? Why?
The risk [with] fashion, you can't control [it]. I'll tell you something. "Shark Tank" has self made millionaires and billionaires in every segment of the economy. It's not like an ordinary venture capital. I don't care what the deal is, one of us has invested in this before. It's not like you have a bunch of MBAs who aren't operators. We all run our own businesses. Give us fifteen minutes, and whoever you are, we've ripped your business apart from the perspective of running it. I don't care if it's in technology or education or clothing or food, we've been there. We're a tough audience.
How much are we not seeing on the show?
I think the editors have done a great job of capturing the essence of the deal. But some of them go on for an hour and a half.
That much time on one deal?
The longest has been an hour and thirty-seven minutes. Those are very large deals, and they get cut down to eight minutes.
When does your investment in the show stop paying off? You're a busy guy, and you're spending a lot of time on this.
I've been doing this a few years now, and it's just getting bigger and I'm enjoying it more. It's a hobby gone crazy. I'm an investor, that's what I do for a living. I have many investments. And these are some of the most interesting I've ever done. Because they have the platform of television supporting them.
There are a lot of good ideas that come through, but so many of these business owners don't seem to understand what's ahead.
I think that's good television. Some of the ones you think aren't going to work at all end up being the best ones. I would have never thought RuckPack, which was a Marine sniper in Afghanistan brought an energy drink, that's on fire. It's going into Walgreens now. That's "Shark Tank," the emotion of television. Even the buyer at Walgreens knows the story.
How important is story versus product?
If you look at the common string of success over hundreds of people, there are three things. They're able to articulate the idea in 90 seconds or less, secondly they're able to explain why they are the right person to produce this. That's important; it takes longer. And in everything, they know their numbers. They know the economics of their business. There's nothing worse than asking questions about the economics and having this person not know.
Any memorably horrible ones for you?
There's been a few of those. I remember a company that made cookies, so sugar, no fat, gluten-free, and when I tasted it, it tasted like sand. That was bad. Then there was one that did caffeine cookies. Like, five cups of coffee in a cookie. I thought if a child eats that, their head will blow off.
Are there any ways you're going to shake things up this season?
We have two billionaire guest sharks. We have Steve Tisch, who owns the New York Giants, and Paul Mitchell, the hair guy. Plus, Barbara and Lori are appearing in the same episode. The fans wanted it, and they got it.
Do you pay attention to fan reaction?
I don't worry about that. My view about business is black and white. You either make money or lose it, and I'm the only guy up there who tells the truth. If you can't take it, I couldn't care less.
Do you sharks hang out at all?
In five years, I have never seen all the sharks together except at tapings and the [TCA] Awards. We've never been together. I don't know what it is, but never. We get along, but there's something about the awards. Maybe it's the fear of the critics, but it gets us here.
Follow Liane Bonin Starr on Twitter @HitFixLiane