Success Requires Determination
Now, I have one key philosophy as it relates to startups:
Know when to hold them and when to fold them.
You might ask: “Kevin, is there any wisdom or advice that has helped mold your investment philosophy?”
I would say this…
First: I get so many deals pitched to me and I’m involved in dozens of companies, so I’m not funding all the deals that I do myself, which means I also need to raise money.
Sure, I hand over cash on some deals, but I also bring other investors in — I raise capital.
People ask, “What motivated the Sharks on Shark Tank to buy? What are some of the things you look for, and why did you invest?”
People would always ask me those kinds of question and I’d say:
First of all, I’m a Shark and I invest. But I’m also the guy sitting there pitching to the Sharks, because I’m an entrepreneur too and like many investors, including you, I raise money.
I don’t get nasty with people, because I realize I’m them in other shoes. If I sit there and start beating up on somebody, I think, Do I want someone to treat me that way? Of course not.
Entrepreneurs that come on Shark Tank come on thinking all about me, me, me, me. They’re all focused on what they want and what they need, as opposed to how do you get the Sharks to write the check?
When I raise money, I focus on finding the sweet spot of the entrepreneur. Do they want long-term assets with payment dividends along the way? Do they want a 10x return? A 100x return? Are they risky?
Second: What I also try to do is define the timeline — I try to give an investor an accelerated payback scenario…
Imagine someone comes on Shark Tank and they say:
Look, I need $100K. I’m going to give you 100% of the profits until you get your $100K back, plus a 10% return on your money. You get all the profits until you get $110K, and then for the rest of your life I’ll give you 10% or 20% equity in the company.
When somebody tells me about that kind of an accelerated payback structure, I realize they’re interested in making sure I, the investor, am happy and taken care of.
That’s what a lot of entrepreneurs forget about when they’re investing or raising money — making sure that the investor can see their return on an investment. Remember, when you’re good you get on the nice list, but when you’re not you’ll get a lump of coal in your stocking.
In my case, an accelerated payback is the kind of thing I like and it will get you on MY nice list.
A final word of caution: If I can’t see my money back within a couple of years, I’m not in. If somebody knows that’s my sweet spot and they play to that, that’s what I like. I play to that as a money raiser myself.
That’s the wisdom for the day from a Shark who’s also a guy that raises capital.
Have a safe Christmas holiday, everyone! I’ll talk to you on Thursday…
Sent from a Shark,