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ENTREPRENEUR, INVESTOR AND business titan Kevin OLearyalso known as Mr. Wonderful on ABCs hit show Shark Tankstarted a software business in a basement with a $10,000 loan and then sold it to Mattel in a $3.65 billion deal. Todayhe is worth more than $400 million.
In this exclusive interview with COMMERCE, Kevin OLeary discusseswhy he became an entrepreneur; hisbest investments; the principles heapplies to daily life and business; histhree simple rules for investing; histhoughts on economic growth and jobcreation; and the need to curb the gov-ernments over-regulation of businesseson the local, state and federal levels.
Unleashing the Inner Entrepreneur. I got my first job as an ice cream scoop-er while in high school. I wanted the jobbecause the girl I was chasing workedacross the hall, and would be able to seeme. On my second day, the owner, whowas a woman, told me that I had toscrape the gum out of the Mexican tiles.I told her I couldnt do that. I didnt wantthe girl across the hall seeing me doingthat. I was an ice cream scooper, not agum scraper. Well, she fired me. It was a powerful moment in my life because I realized that she had that control overme because I was an employee. I vowedthat day that I would never work foranyone again, and I never have. Best Shark Tank Investment. The
highest IRR, and my very first royaltydeal, was with a Boston-based family
business called Wicked Good Cupcakes[which sells decadent cupcakes in glassjars]. I decided to fund it by creating a commercial kitchen for them, but not taking any equity. I did not want a minority position in a family businessand wanted to come up with a royaltydeal. Its amazing that you can take acommodity, put it on Shark Tank, andthe platform is just so powerful with 10 million viewers per week, that even a cupcake gets differentiated. Red Flags that Signal Risk. People
keep coming up with consumer prod-ucts, like hot sauce, for instance. Hotsauce is a multi-billion dollar market,but it has been around for decades. Its extremely difficult to get shelf space. So they are not really bringingnew innovation into the market. I lookat it and say to myself that regardless of the entrepreneurs, the chances ofsuccess are limited at best because itsvery hard to say that your hot sauce is
unique and proprietary when there are thousands of other hot sauces.Spotting a Winner. I prefer to invest
in the entrepreneurs who have failed atone point because they understand thatbusiness is extremely hard and that theroad is rocky and full of treachery. Thatto me is far more interesting than some-one who comes out and says, Ive neverdone this before, but I have a greatidea. The chances of success are verylow because you learn from your mis-takes and your failures. I love teams thathave had a long history of both successand failure. Then, of course, I look atthe product and determine if I can cre-ate a market where I do not have tosteal market share. Evaluating the Entrepreneur vs. the
Idea. A great idea is a great idea. If Ifeel that I am at risk because of theentrepreneur, I structure a control deal,and we agree to an execution plan. If they cant meet it, I will simply swapthem out. Great management is fungi-ble. I have lots of entrepreneurs workingfor me. If they do not deliver and can-not meet certain targets, then you haveto realize the reality of the situation.They retain their shares, but they needto step out of the way of being man-agers. I am constantly looking for bettermanagers in all of my businesses.
BY SAMANTHA J. HENRYCONTRIBUTING EDITOR
Being an entrepreneur is all about achievingpersonal freedom, explains OLeary. What you get with success is the
ability to do whatever you like, wherever you like and whenever you like.
COVER STORY: FREE ENTERPRISE
EmpoweringEntrepreneurs:A Conversationwith Shark TanksMr. Wonderful,Kevin OLeary
A Leadership Challenge. Its a compe-tition. This kumbaya or save the babywhale of the managers has to end. The truth, in business, is there are win-ners and losers. I do not have time forlosers. You need managers who under-stand that they can pivot. They need toknow how to move and be flexible andbe very focused on delivering resultsand figuring out whats working andwhat is not working.Data IDs the Great Entrepreneurs.
In December of 2014, I had about 27portfolio companies across Shark Tankin private equity investments. The audi-tor suggested to me to do a study acrossthe investments that were returningcapital and use that information in myfuture investing. I thought that was agreat idea, so we did the study. What I determined that I had not noticed was that all of my returns (not some,but all) were businesses owned or runby women. I thought that was reallyinteresting.Women Deliver ROI. What attributes
did women have in small cap/big capbusinesses that are showing such a performance? When you think about it, theres an old adage that says: If youwant something done, give it to a busymother. There is some truth to that. Itmay be that time management skills arereally paramount in managing big capbusinesses. I am not trying to have agender debate, but the performancereally speaks for itself. I am very skewedtowards women entrepreneurs becauseof the fact that their performance hasbeen absolutely spectacular.Different Approaches. Women set
goals that are more achievable withinshorter timeframes. They are able to delegate very well and set targets for people. Think about the success of Honeyfund. One of my rock starCEOs, Sara Margulis, runs it. Its thenumber one site in America now thatprovides gifting for honeymoons. We are processing about $300 million a year now. Tracey Noonan and herdaughter Dani, another set of women,are running Wicked Good Cupcakes and have done nothing but just contin-ue to execute over the years. The resultsspeak for themselves. I look at those
performances, as well as many others,and its clear that these are all differentsectors, different geographies, and justcompletely different businesses. But theone commonality is women ownershipor management. Clearly, we are not utilizing women enough in corporateAmerica. Its a huge mistake, and onethat I wont make again. A Conservative Portfolio that Pays
Dividends. I am the chairman of an ETF company, OShares Investments,which I created so that I can invest myown capital and that of my family trustin a way that I want. I am a very conser-vative investor with my balanced capital.I only invest in dividend-paying stocksbecause over the last 40 years, more
than 70 percent of the market's returnscame from dividends, not capital appre-ciation. I follow three rules of investingthat have saved me as an investor: neverput more than five percent of your port-folio into any one name; never put anymore than 20 percent into one sector;and never buy a stock that doesn't pay a dividend. Unlocking Economic Growth and Job
Creation. The problem we have now is that we are overregulated on the city,state, and federal levels. There is toomuch regulation that is holding backsmall business; 80 percent of the jobscoming out of the typical recession inthe past have been in small business.The regulations are insane. Our tax rates are crazy and not competitive. I am spending more money on lawyerswith just trying to comply with all of the ridiculous regulations on small business. So I am not employing people.I am employing lawyers.
Negotiation Tactics and Strategy.I teach my entrepreneurs to be honest. You have to be able to tell them the good and the bad about businessand service. Part of being a great sales-man is knowing that honesty builds rela-tionships. It does not mean you have tobe a weak negotiator. Great deals arecreated when both sides feel they gota tough deal. That means the value hasbeen created for both sides. The art ofnegotiation is that you do not get whatyou want, but you get what you negoti-ate. Its something you learn over time.Great deals make both sides cringe. That is what matters. I work with myentrepreneurs on doing deals. I lovedoing them. One great thing about
being a Shark is that everyone returnsyour calls. Its just fantastic. I can opendoors for companies in ways I neverimagined. Following a Passion to Financial
Success. I am passionate about wine.Ive been a wine collector for decades. I have five cellars around the world. I trade wine. I am a member of theConfrrie des Chevaliers du Tastevin, a secret wine society in Burgundy, butnot so secret anymore because I keeptelling people about it. If you look atthe wine industry, 97 percent of winesold in America is under $12.99 a bottle,and most of it is absolute crap. And Ithought to myself, Why does it have to be crappy? So I decided to createOLeary Fine Wines. If I put my name on it, its going to be spectacularbecause I know how to make goodwine, blend good wine, and know whatgood wine is. On QVC, we sold about$500,000 worth of wine in four minutes,
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COVER STORY: FREE ENTERPRISE
and its also going into Costco, which is the largest buyer of wine. I choose my partners very carefully.Being Called Mr. Wonderful. We
think it started when some otherShark was being facetious about one of my aggressive offers. I show up at places now, and people do noteven call me by name. They just call me Mr. Wonderful. There is a certainsanity to it because its true. I am theonly Shark who tells the truth, andthats just wonderful!
***Editors Note: COMMERCE asked the
following New Jersey accounting firms,banks and law firms to offer their bestpractices for entrepreneurs, and share a success story that shows how theyhelped a client company to thrive and grow.