Robert Herjavec quit Shark Tank after its first year.
Technically speaking, he quit Dragons’ Den — which was the show’s name in Canada, where it appeared in 2006 before expanding to the U.S. in 2009. In the beginning, the show seemed destined to fail. The producers had low expectations. And the premise made no sense: Very serious investors were supposed to put real money into…random little products?
“I thought, What am I doing here?” Herjavec recalls. Before this, Herjavec’s entire career had been in enterprise sales. He’d founded a cybersecurity company, Herjavec Group, around 2003. Humble at first, it would go on to expand from a single employee to about 1,000 people globally, and has an enterprise value of about $1 billion today. He describes himself as “very, very technical.” His background is serious. “Then I do the show, and people are pitching me socks,” he says. “What do I know about socks?”
So Herjavec quit. Let someone else invest in socks, he figured.
Then Kevin O’Leary took him out for dinner. O’Leary was also on that inaugural season of Dragons’ Den, long before anyone called him Mr. Wonderful.
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“There are two things I’m gonna say to you,” O’Leary told Herjavec. “Let me start with saying you’re an idiot. This show is going to be huge. The second thing is: You have to let go of the subject matter. You have to focus on the execution of the dream.”
Here’s what O’Leary was saying: Shark Tank is not a show about investing in things like socks. It’s a show about aspiring entrepreneurs’ dreams. Therefore, the sharks (or dragons) aren’t there to be “serious investors” in a traditional sense. They’re there to help test people’s dreams against reality, and to show what it truly takes to execute those dreams.
“I thought about that,” Herjavec says. “I realized that, in starting a business, there are certain execution steps that you do. You have to have an idea, you have to sell, you have to market, you have to raise money. Like, none of those things are related necessarily to the subject matter.”
Which means that, in fact, Herjavec did know a thing or two about selling socks.
So he stayed. You know the rest: Dragons’ Den spawned Shark Tank, which turned Herjavec and O’Leary and the rest of the sharks into global business celebrities. Herjavec has since done 17 seasons of the U.S. show, along with versions of it in Egypt and Australia.
In the process, the show also brought investing into the mainstream. Venture capital became a TV spectacle. And there’s one problem with that, Herjavec says: Sometimes, people don’t see Shark Tank as a show about dreams.
They see it, as Herjavec originally did, as a show purely about investing — and a parable of what’s required to succeed.
“I sometimes worry that we’re telling people, ‘You can’t start a business without an investor,’” he says. “And that’s simply not true. Very few businesses need funding. Businesses don’t fail because of a lack of funding; businesses typically fail because of a lack of market acceptance.”
But you can see how people would get the wrong impression. In the real world, someone like Herjavec would almost never invest in the companies that appear on Shark Tank. In fact, many of these companies might never raise serious money at all. But there it is on TV. An entrepreneur says, “I need a shark to grow this business.” And a deal is made.
When people watch Shark Tank, Herjavec hopes they draw a more nuanced lesson. It isn’t about the need to get an investor. It’s simply the need to think like an investor.
“How many people get to be in the room when people like us are asking those questions and valuing a business? Before Shark Tank, nobody ever had access to that,” he says. “So even though not all businesses may need the investment, there’s a discipline in being able to answer the questions that investors are going to ask you.”
So, as you’re building a business, it’s helpful to wonder: What would Robert Herjavec ask me?
He’s happy to tell you.
Image Credit: Juan Veloz
If you want to think like an investor, you must get into the mind of one. What is an investor looking for? What motivates them? How do they value an opportunity?
The investor Mike Maples Jr. once described investors to me this way: “The investor doesn’t care about your desire for money,” he said. “The investor cares about getting paid for the risk they take with their money. So all investing must answer a specific question: How do I get paid for the risk I take?”
Maples Jr. is a cofounder of Floodgate, a leading pre-seed and seed-stage fund with a knack for picking winners. It invested in Twitter (back when it was called Odeo), as well as Twitch, Okta, and more. And to Maples Jr., everything is about that word: risk. When he looks at a company, he’s simply making a risk assessment: The lower the risk, the more likely it is that he’ll invest. The greater the risk, the higher his potential upside must be.
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I share this perspective with Herjavec. “Is that what you’re doing when you meet entrepreneurs?” I ask him. “Are you essentially just assessing risk?”
Yes, he said. Then he went further.
“The most common mistake I see in entrepreneurs is they think the investor is their friend,” Herjavec says. “They think when they get an investment, it’s like we’re partnering, and we’re in this thing together. To a certain degree, that’s true. But what you’re also doing is selling a piece of your business. So, what information does your buyer want to see?”
In other words: What information can help lower the perceived risk?
The sharks talk a lot about this on set, Herjavec says. Between pitches, they’re often chatting amongst themselves about what impressed them, or what didn’t, and what entrepreneurs need to do to really stand out.
They all agree: To succeed, an entrepreneur must be able to answer these three questions.
The first question is: Are you resilient?
In every segment of Shark Tank, the sharks ask about a founder’s background. Viewers often think that’s just for TV, Herjavec says — a way to create human drama. But it’s more than that.
“Before you sell me on your company or product, you’ve got to sell me on you,” he says. “I want to know what makes you. Have you failed before? What have you started before? Because inevitably, every business is going to hit hard times, and I want to invest in somebody that I believe is going to navigate those rough seas.”
The second question is: Does the data support you?
Sharks are always asking for sales numbers, but what they’re really looking for is evidence.
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“The number-one thing the data tells me is: Is the story of you consistent with the data that you sent me?” Herjavec says. “You just told me how you’re great at sales, for example. Then you send me the income statement and your sales are wildly up and down.”
This is a useful way to think about data. Herjavec isn’t looking for some magic numbers or mysterious benchmarks. He’s looking for evidence of your story. If you say you’re great at sales, for example, then your data should show steady and predictive growth. It’s market confirmation.
You can even take this a step further: If you have an idea, but investors don’t initially believe in it, then stop trying to convince them with your words…and just go gather the data that makes the case for you. For example, I once interviewed the founder of a media company for a niche audience. In the beginning, investors dismissed him. They all said there was no audience for that type of content. So the founder started a small newsletter on the cheap, grew it steadily and organically, then took that data back to investors and said: See? The right people are signing up. They want this. That’s how he got funded.
Now, here’s the final question: What’s the value proposition that this investor can affect?
In other words, if you’re pitching Robert Herjavec, what can he add to your business? Are you facing a challenge that the investor knows how to solve? Do you operate in a market that the investor has experience in? If you don’t know the answer to that, then Herjavec is often uninterested in helping you. Because he believes that his help is more valuable than his money.
Remember what he said above: “Businesses don’t fail because of lack of funding. Businesses typically fail because of lack of market acceptance.” What he’s really saying is: If money solved all your problems, then all sources of money would be interchangeable — because who cares where it came from, as long as it’s in the bank? To successfully court an investor, you must show them why they are valuable, and why their partnership can be the X factor in your business. Because that’s what they believe will make the difference.
This means you need to know their strengths, your needs, and how they align.
So I ask Herjavec: Do most entrepreneurs even know what they need?
“No,” he says.
But here’s a starting point, he proffers: For a moment, set aside what your business needs. Just think about what you need. “In order to start a great business, the entrepreneur first has to work on themselves,” he says. “Show me a small business that’s in trouble. I’ll show you an entrepreneur that’s in trouble. Show me a great small business, and I’ll show you an entrepreneur that has their shit together.”
Here’s what he means by that.
Just the other day, Herjavec was talking to a new entrepreneur. “They were telling me all the things they were not good at,” Herjavec says, “because the advice they’d gotten from someone was, ‘Work on the things you’re not good at.’”
That’s wrong, he says. His advice is the exact opposite.
“The world is so competitive that you have to take the things you’re good at and become great at them,” he says. “Because if you focus on the things you’re not good at, someone’s going to eat your lunch.”
Herjavec learned this through his own businesses, and his own mistakes.
In his early days, he tried overcompensating for his weaknesses. He wasn’t good at financials, at managing costs, and so on, so he’d work on those things and then present himself as an expert in them. But he just couldn’t compete. So he stepped back and asked himself: What am I truly great at?
The answer: He’s good at reading people. “So I over-indexed on the human element,” he says, and he left everything else to others.
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Truth be told, when Herjavec first launched his company, he was no cybersecurity expert. But he was a seasoned tech entrepreneur, and he spotted an opportunity. So he leaned heavily into sales, and treated it like people management.
His competitors would walk into a room and start listing off their products’ features. Then Herjavec would walk in and say, “Before I tell you about my great product, can you tell me the problems you’re trying to solve?” At that, people would open up. They’d talk about their challenges and frustrations, and exactly what kind of solution they wanted. Herjavec listened and asked questions. When he finally made his pitch, it was personalized to their needs. He’d earned their trust.
Then he earned their business. Because he doubled down on himself.
Image Credit: Juan Veloz
Here’s a final point about money.
Herjavec is 63. He’s gathered a lot of wisdom in those years, much of it hard-earned. And like the value-oriented thinker he is, he’s come up with an interesting way to weigh that wisdom.
He lays out a scenario for me: When he was 22, he could have been given a choice — to get $5 million to start a business, or to get advice from his 63-year-old self. The question is: Which would have been more valuable?
And his answer is unequivocal: The advice is more valuable.
Why? Because the profits from his advice would vastly outweigh the value of that $5 million.
It goes back to what he said earlier — that very few businesses need funding, because funding isn’t the reason most businesses succeed or fail. Now he goes further: “If capital and a fancy education were the only requirements for success, then every MBA working at an equity firm would be Steve Jobs,” he says. But they aren’t. Money is good, and investors can be valuable, but make no mistake: Money does not solve problems by itself, and it does not accelerate businesses on its own.
“It’s the human element,” Herjavec says. “Ask: ‘What am I good at? What’s my skill set?’ Once you figure that out, how do you then convert that to a valuable product or service? You have to have a love for running a business. You have to have a love for your craft. So for me, the first thing you have to love is yourself.”
That’s how an investor thinks. And you can take that to the bank.
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