Published in UT San Diego, February 16. 2015
Rule No. 388: You can never have too many dots.
I have been watching the television show “Shark Tank,” and I love it.
I am fascinated by the range of deals — inflatable balls, food trucks, sauces, cosmetics — and a guy even shows up with a hollow golf club that you can urinate into when you are on the course and need to go. Only in America.
But what fascinates me the most is not the sharks. Rather it is the supplicants and how they make decisions — how they value their company, deciding when to say yes to the sharks and how to negotiate. My charming and brilliant wife was actually yelling at the television a few weeks ago, telling the person “to take the deal, are you crazy, say yes now.”
Of course, the show is theater and it is manipulative, but it is also instructive. Mr. Wonderful, Kevin O’Leary, is the tough guy. He asks hard questions about revenue, product, margin, valuation, etc. I love this guy. If you come in with a crazy pre-money valuation, his only comment is “you are dead to me.”
The shark on the far right, Robert Herjavec, is always polite, but is also quick to drop a deal if the entrepreneur hesitates. The two women, Barbara Corcoran, real estate magnate, is tough, and her counterpart, Lori Greiner, of QVC fame, is a bit more cerebral. And there is Mark Cuban, who makes decisions in seconds. Daymond John, of FUBU fame is contemplative. I recommend that entrepreneurs watch the show.
Here are some recent “minnow” stories from the trenches of yours truly.
Two young women pitched my partner and me on the phone last week. The pitch was terrible. My partner and I were charming (in our opinion), but ruthless. They did not answer the questions, they did not know their numbers and they were not prepared. But after the call was done, I called back 10 minutes later and told them why we passed — and then remembering the sharks, I offered to let them come back in person and we will try again. Somehow, I think there might be a pony in there.
I have another company that needs a chief executive officer. We are desperate to the point that if we can’t find the right guy, we were going to bag the company. And then we catch a break. Right out of Central Casting, a guy with a perfect résumé to match shows up — a referral from a friend — on the second try. When this happens, don’t change your underwear. Breathe through your eyelids, buy a lottery ticket and go to Vegas. It is a “rara avis” indeed.
Dear entrepreneur, the problem is never the deal or the product or the market, it is the team. I know there is a demand for software developers, but being a founder is not the same as being the CEO. The gating factor to funding is having the right person in the right seat on the right bus going in the right direction. Finding the bus, buying the bus or painting the bus is not the same as steering the bus.
Recently, I founded a company that was cute, goofy, well-intentioned and a complete and utter failure. In December, I was reading a New York Times story about charity and one of the genius gurus in the story was a professor at University of California San Diego. I chased him down, hired him and rebuilt the company around him.
The second incarnation is funded and has a real chance to be gigantic. All that was required was a simple pivot. However, the theme here is that entrepreneurs need to read and study lots of sources, not just TechCrunch or Reddit. Information is never neatly packaged and what appear to be the random connections that are so powerful are never really random.
They result from connecting the dots — and you need to collect disparate dots from lots of places before you can connect them.
The above stories seem like I was just incredibly lucky. I was. But I am a voracious and relentless dot collector.