Emmanuel Itier: Why the name change for this series? It’s been successful as Dragon’s Den in a lot of other constituencies. Is “Shark” scarier? Is it more resonant with American viewers?
Clay Newbill: The change is because I think the “Shark” analogy for the American public is…you’ve heard of business sharks. You haven’t heard of business dragons. The show originated, as you know, in Japan, and dragons are big in the culture there, but in the Western culture, we’ve all heard of business sharks. Also, it’s a perfect description of what actually happens in the tank, because if the sharks hear something they like, it’s unpredictable what will happen. They act just like a pool of sharks in that they may take a piece of an entrepreneur or they may fight each other and take a bite out of each other at the same time. So it’s a perfect analogy.
Barbara Corcoran: Also, there’s never been anyone in America who’s been attacked by a dragon. Sharks are scary.
EI: A quick follow-up for Kevin and for Robert: You guys have been both dragons and now sharks. As this translates to an American network and the entrepreneurial spirit being the American dream, are you finding that the people who come in with ideas are coming in with either different attitude? Is your interaction with the entrepreneurs different here than it was on the Canadian series?
Robert Herjavec: I think the biggest difference right now is that the economy is tougher so it’s more that we’re seeing people with better businesses, real ideas, and that’s one thing we haven’t seen before. We’re seeing businesses that have real sales, real potential, and can’t get funding from the bank. I think that’s the biggest difference I’m seeing — these are real businesses that want to get involved.
Kevin O’Leary: The U.S. is still the largest consumer market on Earth, so the opportunities are significantly larger here. The real concept about this format, which is so interesting, is draw this analogy: if you think about it this way, it’s probably analogous to American Idol giving a tremendous platform for the music industry. This is a venture community’s platform, so I as an investor can think to myself, maybe this launches a new consumer good or idea in a way that could never be done before, with millions of people seeing it on the show, and I can get a piece of that deal very early. That’s what’s interesting about this.
EI: For the investors, you think it’s a complimentary term to be called a “shark”?
KO: It’s irrelevant. I think what matters is do they get the money? That’s what matters.
RH: I don’t think it’s irrelevant. I think there’s a fine line there. I think there are people who come on the show who have a real idea, and you’ve got to be careful. In life, you don’t want to put somebody down to the point where you discourage them and get them to stop their dream, but at the same time, we’ve had people on the show that have invested their life savings and every penny they and thier family has into an idea, and no one’s ever told them it’s a bad idea until they get in front of us. But I think it’s a fine line there.
EI: What is the biggest single mistake you see from people who are pitching an idea? Is it lack of confidence? Is it overconfidence? Do you respond more to someone who’s polite and succinct, or do you respond to somebody who really…
KO: No, it’s the dangerous combination of greed and stupidity together. That’s when you ask so much for an idea that it’s a ridiculous amount of money. You come to me with something that doesn’t even have any sales, it’s not even in production, and tell me it’s worth $3 million and I can buy a tiny percent of it for $300,000? That’s ridiculous.
Daymond John: I think it’s also the lack of being able to present it in a very short time span where you can just understand the idea. Anything that’s too complicated is usually too complicated for the consumer to buy as well, so I like to get the information short and sweet.
RH: I think there’s a fine line between arrogance and confidence, and that’s the biggest mistake I see. People come out and they’re too confident, and they verge on the border of arrogance, and that turns me off right away.
DJ: And it’s the same person that mismanages money. If he puts that high valuation on his company, he’s going to go and spend and buy cars and jets and boats and planes while your money is invested in it, and then later on you realize that you’re both broke. So he needs to be sharp with the money as well.
EI: What would be your visceral reaction if somebody came in and pitched you an idea for a new reality show?
RH: Only if it was ABC or Disney.
EI: Why are you successful, powerful people doing a TV show?
Kevin Harrington: I think, from my side, I’m in the business of looking for products. I put products on television. So this is an extension of what I’m already doing. My day-to-day business is very shark-like in that I look at new items on a daily basis, so it’s a very nice extension for me to find additional products for my main business.
DJ: I have a similar reason, but I’m in the fashion business, and everybody always puts me in the box of just fashion. I’ve built and I have a system to distribute to countries and stores around the world various other products, but I rarely get pitched on something outside of fashion. If I buy 12 fashion lines, I’m just going to cannibalize my current business. My daughter was friends with somebody in Europe whose dad sold that hot sauce — the Jamaican hot sauce or something like that — and she said, “Daddy, if you don’t get on this show, I’m not speaking to you…”
KO: I look at it this way: I put about 10% of my portfolio into venture ideas every year, and during the heyday of the Internet bubble between ’95 and 2000, one in ten deals was successful and provided liquidity. Although, as we know now, many of those companies never made any money. Today, the venture statistics are significantly worse. It’s one in 26, so you’re really looking for an opportunity to comb through a lot of different transactions. Think about it this way: if I wasn’t on this show, I would go to find the deals. Now they come to me. I sit here. I listen. And also I have the platform to promote these things, should I elect to invest. I think it’s a very interesting model.
RH: I want to make money just like every one of us wants to make money, but I came to this country on a boat. My parents escaped Communism, and somewhere along the way, people helped me and got me to the next step. So sure, I want to make money. Who doesn’t want to make money? But if there’s an opportunity to give somebody a little bit of guidance and maybe advice and money and help them along the way, absolutely. Oftentimes, you just need some guidance instead of just the money.
EI: How about Barbara? Let Barbara talk.
BC: This is the problem with the show. I have to learn to shout to be heard, but I’m learning.
RH: Oh Barbara, knock it off. Let me get a word in.
BC: This is what happened during the first whole taping. They were railroading me.
DJ: Barbara was taking notes.
KO: Stop your incessant whining.
RH: Are you going to talk?
BC: I would like to. And I see it as a great opportunity to return a favor. Some guy walked into my life and gave me a thousand dollars to start my business while I was a waitress behind a counter. If not for that guy walking in that day, who the hell knows? I would probably be behind that counter today, still waiting tables.
DJ: But Barbara, what was the business that day?
RH: Did you marry him, Barbara?
BC: No, but I slept with him!
RH: Don’t give her a thousand bucks.
BC: And that’s how I got the damn thousand dollars, and I’m happy for it. [Laughs]
RH: You’ll do anything to make money.
BC: But picture this: every one of these entrepreneurs walking in might have the talent. They might have a half-baked idea or a great idea. What they’re looking for is somebody who is going to give them the ticket in. So think about if you had been given that ticket and, in your life, worked out beautifully. Wouldn’t it be a wonderful opportunity to be able to sit there and spread that wealth around? For me, it’s like somebody handing you a magic stick.
RH: And who knows, we might find the next Google.
KH: What I like about this is Shark Tank has been on an audition tour all around the country. They went to New York, L.A., Chicago, Orlando… They looked at thousands and thousands of products, whittled it down to the handpicked products that we get to look at, so we’re looking at the cream of the crop. So from my side, they’ve done the due diligence. They’ve spent tons and tons of time and money getting the best products for us, and that’s an attractive situation.
RH: But hang on, Kevin. It’s not all products. We’re not all in the infomercial, let’s-flaunt-stuff-on-TV business. These are also businesses and all kinds of other ventures. This isn’t just inventors and products.
DJ: But to build on something that Barbara said, as some of you guys are veterans in this business in your respected area, the excitement for a young entrepreneur that is going through something that you went through 20 years ago in a space that is new now…I hate to say it — I’m actually an old dog in regards to some of my businesses. It gets an excitement to see those new things and those things that you went through 20 years ago. It really is fulfilling in another sense, and making money and having fun.
KO: I don’t care about any of that crap.
DJ: Yeah, we knew that…
KO: I like the fast, repeating opportunity to look at different transactions over and over again. Next, next, next — that’s what it’s about.
BC: You’ve just met the hammerhead shark. He’s a bastard.
EI: It sounds, if I can characterize – help me if I’m wrong — like the three of you are in it to get the money, and the two are in it to help the nice young people.
DJ: No, I’m in the middle. He’s about the money. I’m in the middle.
KO: They’re lying. They’re all lying.
RH: Hang on a sec. This isn’t a charity. I’m definitely here to make money. I just think what you’ll find is we all have a different approach about making money. Some of us don’t give a crap about the individual and dump on everybody. Some of us are a little more empathetic with people.
DJ: I’m making way more money in the stock market now, actually. I’m really excited about everything.
KO: It’s just wonderful to talk about how you care about their feelings all the time and then not write them a check. This is about money, and the only thing that matters to those people that are on the carpet pitching it is to get your money, and the only reason you would ever give them your money is to make more money. So all the rest of this is crap. [Laughs]
EI: In these economic times, do you find yourself having to be convinced even more that an idea works? Are you a little bit more hesitant than you would have been?
KO: It’s about the cash flow now. You want to see the cash within 12 to 24 months, and you structure the deal in a way that you have less risk. This is about the path of least resistance to your capital. You’re absolutely right. Liquidity is very hard to come by, so you really look hard at whether that person’s idea can get to cash sooner.
DJ: I look at it at a different level. If they’re here selling their product in this economic environment, and once I put gasoline on it, it will become a fire.
RH: The bar is higher because you’ve got people who, a year or two ago, could have gone to the bank or could have gotten funding from other sources. Today, we’re seeing great businesses that can’t get funding, so the bar is much higher for you to get my money today.
EI: You said you looked at all these people and got it down to the cream of the crop, but they have to let some crap get through too so you guys can reject them. If they’re all the great ideas of the world, you’d just be…
KO: Who’s to say what’s crap? Think about somebody 100 years ago pitching you an idea to have a brown, sugary liquid with bubbles in it. You would have thrown that out the door.
DJ: I got turned down 27 times, so they said from the bank when I was promoting my product — it was crap to everybody else.
KO: I think you don’t know. We look at everything because there may be the germ of a fantastic idea.
CN: One of the great things about the show, from my standpoint as the producer, is it’s completely unpredictable what’s going to happen. Every time we see somebody that comes in with a business idea, we do what we call a deep dive on all the information. I can’t help but think this is something the sharks are going to be interested in. I think this person is going to get an offer. There will be a negotiation. Possibly they’ll get a deal, and likewise, this might, but there’s something in the deep dive — some piece of information that actually could potentially kill a possible deal. But then it’s unpredictable what’s going to happen. Half the time I’m wrong; half the time I’m right.
DJ: When we start digging in, we find information that’s just hidden, and it just all of a sudden, you know…I want to retract the deal, or you know what? It’s not worth it for me.
KH: We each have a diverse background. Mine is infomercials. You’ve got fashion. You’ve got publishing. You’ve got real estate. You’ve got Internet. So each one of us has different skews on what we’re looking for.
EI: Who is the meanest shark in the tank?
BC: Oh. [Pointing to Kevin O'Leary]
DJ: [Pointing to Kevin O'Leary.] [Laughs]
KO: That’s so unfair. I just tell the truth. [Laughs] I’m the merchant of truth.
EI: Mark Burnett said the same thing.
CN: It’s all business for Kevin.
EI: You have to make these decisions really quickly. Any regrets in hindsight?
BC: Can I answer that? Because I bought 12 businesses and I haven’t slept well ever since, I must say. I’m worried sick every night in bed, wondering how did I size up that business in 20 minutes flat, put my real money on the table that I broke my butt off to earn my whole life and invest in this stranger I just met? There’s a lot of tension in this show. The one thing I think a lot of people forget other than the entrepreneurs is this is our money we’re putting on the line. It’s not ABC’s money. It’s not handsome Mark Burnett’s money. It’s our money we’re laying on the table. So after everybody goes home and says, “Great wrap. Great show,” we’re stuck with the prospect of writing the check and thinking to ourselves, “Did we make a great investment?”
DJ: Once the lights go down, they really go up with us when have to go do due diligence and check these people, and you’re talking to people that you really made a half-a-million-dollar deal in 20 minutes on television, and you have to…
BC: Tremendous tension.
DJ: …follow up with this. There are a lot of things that go through this afterwards.
KO: It’s like the real world.
DJ: We do so much more work after the show.
KO: You do the due diligence and you find out things you didn’t know in that 20-minute period. If it doesn’t stay on track and it’s not exactly what you thought you bought, it may not close, just like the real world.
RH: But there are no regrets. Success is forward momentum. There are deals I used to think, “Gee, I wish I would have gotten involved.” What I’ve learned now is you’ve got to keep going forward.
DJ: I’ll lose my money on half the deals, probably, and you know what? If one or two of them are an inkling of success, it makes up for everything I lost.
EI: I went to a taping of the show — if you remember the man with the custom-made energy bars?
EI: That was an intense negotiation. It went on for a very long time.
RH: Seven hours, I think.
CN: No, it was an hour and a half.
EI: Felt like it. Obviously, will be edited for television. I found it riveting. Will longer versions of these negotiations be available online, other than just the edited version on the live show?
BC: He just decided. [Laughs]
RH: Thanks for giving him the idea.
EI: Will they be the complete negotiation, or will they just be a longer, edited version?
CN: It will be a longer, edited version, most likely.
KO: By the way, that guy was too greedy.
CN: That guy had a great idea. I actually thought that’s one of the ones I thought would get an offer, and it did. So I felt vindicated for a change.
DJ: But he was a mini-shark. I like him.
CN: He was really smart. It was mesmerizing to watch the negotiation that took place between these five and him.
DJ: Yeah, because he was pimping us at one point.
CN: He was smart and he had a really good business idea.
EI: Clay, the show comes, of course, at an interesting time. I want to be delicate about it with your sharks up there, but rich CEOs in particular, right now, are probably some of the most hated people in the universe. A lot of people think that that sense of greed is what got us in these economic problems in the first place. Do you see that?
KO: It’s going to get us out of this problem too.
RH: Absolutely not.
KO: Don’t ever use the word “greed” in vain. It’s a wonderful thing.
RH: He’s right. That’s what got us here.
EI: It’s funny that you continue to take that attitude.
KO: Because I’m a 100% right.
RH: You’re a 100% wrong.
EI: Obviously, you people are supposed to be sharks. You’re the shark tank. You’re supposed to be mean, I guess, for the lack of a better…
RH: Hang on a sec. I’m not a Wall Street guy. I didn’t do what Kevin did — borrow a bunch of money, try to greedily put together a quick get-rich scheme. I started my business out of my house with my credit cards and three mortgages on my house. I built it from nothing. I think there’s a difference. I think you’re dead-on. What got us into trouble here was the rich CEOs on Wall Street who had no risk, no pain if their business went down. That’s not what’s going to get us out.
DJ: I never went public for that reason. I spend everybody’s money who invests in me like it’s my own, as well as I didn’t get to sell my company at even a higher multiple because I didn’t want to cook the books and do all that type of stuff, so I’m here as a person who respects money, and I agree with you, actually.
KO: I don’t. I don’t at all.
KH: I don’t look at us as greedy because I took — and I can’t disclose who — but a person with a business, they were financing their business with their personal credit cards doing $8,000 a month in sales. They are now at $80,000 a month in sales.
DJ: None of us run corporations up here, actually.
KH: So this is a ten-fold increase that we’ve been able, with the capital that we’ve put into that company, to effect on that company.
EI: The question I had for Clay, though, in regards to the television show, is whether you see this as a built-in obstacle? Like they said, they’re supposed to be kind of hard-core, but do you see this as an inherent obstacle for viewers to get into this when they’re thinking, “I don’t want to see these people behave the way they do, talk the way they do about money,” because, again, a lot of people are thinking this is what got us in the mess in the first place?
CN: It is not a problem for us because I think these people are all self-made. As you’ve heard them say today, they all relate to these people, and it’s actually a tremendous opportunity, I think, for the entrepreneurs. This isn’t a show about greed. This isn’t a show about the things that got our country into trouble. If anything, this is about the entrepreneurial spirit and a show about the American dream. The sharks may not like to hear this but, from my perspective, this show isn’t about the deals. This show is about the people. The show is about entrepreneurs. I mean, they come in here, a lot of them have everything riding on it, and it varies from, as they said, you’ve got somebody who has an idea — no sales, no prototype, nothing else beyond an idea, but it could be a really good idea– and that’s the thing. That’s the American dream. That’s the entrepreneurial spirit, and they are passionate about it and they’re going to fight for it. It ranges up to somebody who’s got a business that’s making the perfect pair, which you’ll see in episode 2. She had $800,000, if I remember, in sales. So she just needs capital to expand her business to take it to the next level. That’s what this show is about. It’s about those people out there that have a dream, that have an idea, that have a business that they know, if they can get the money, they can be where these people are someday.
DJ: I think you have a theory that we’re all mean and we’re out there to shark, and we’re not. There are two theories. If you’re selling a product or I’m coming to ask you for money, this is really my money and our money, and when you’re asking for something so crazy, it puts us in a defense mode. Are you really going to take a million of my dollars and spend it like that? I’m insulted that you want to take my money like that. On the flip side of it, when an entrepreneur has a great idea and they’re a great person, we’re very kind. We’re very nice, but you have to really think about how they’re looking at us as CEOs. If I had this opportunity 20 years ago to put my plan in front of five people with five different backgrounds and they give me an honest opinion, and all the opinions are either, “You have a good idea,” “Make it better,” or “It’s crap,” you really get a litmus test of what reality is. How many people get to do that? Because I would have failed 20 years ago in my presentation. I’m telling you now. I would have.
KO: I want to go back to our original question, which we haven’t answered correctly yet. Let’s clear this up because a bad lie has been told here, and it has to be rectified. The powerful emotion the human being has to pursue — the freedom wealth gives you, period. You are seeing a window to that in the process that is Shark Tank. That’s what’s happening. It’s about the greed of freedom and financial flexibility and wealth. That’s what it’s about. It’s a great thing. It’s a powerful thing, and to lie about it is foolish. Greed is very powerful and important, and we should celebrate it.
DJ: If someone eats a ton of worms for $1,000 on TV, then it’s greed of wealth…
RH: I think that is such crap. This country was built by small business. Eighty to 90% of this country is small business. There isn’t some guy out there starting a small business just because of the money. You have to build a great business.
KO: You are absolutely wrong.
RH: Really. You’re telling me.
KO: How many people in the room would like more money?
DJ: How many people are in jail that would like more money? That’s not it.
KO: I didn’t say break the law. I said compete.
EI: Kevin, if someone comes in and has an idea for a device, for example, that you realize is not going to make any money at all — you may not lose any money but it will not make any money at all, but you find out it will help a lot of people — say it’s a medical device and it’s an amazing scientific invention that’s going to help a lot of people. Are you going to turn it down because it won’t make you money?
KO: There isn’t such a device. If it’s going to help that many people, there’s a way to profit from it. If you want to take the profits of your good enterprise and give it away, that’s your business, and everybody should, and I do that. I take a percentage of my income every year, and I give to charities that I support.
DJ: Charity by CEOs.
KO: You can’t create a society that doesn’t pursue profits. The company that’s going to make that device is going to be very successful. It needs capital from guys like me to build itself. It has to make money.
RH: It’s the blind pursuit of pure greed and profit that got us here today, and I think what we’re seeing in America today is people going back to trying build real businesses with great value. If you do that, you will make money. If you blindly pursue the profit, you’re going to hit a wall.
KO: Robert, I’m very worried that the great entrepreneur in the sky is going to get a spatula and just whack you.
RH: You know what I’m very worried about? You’re going to make friends in jail.
EI: Barbara, that $1,000 that got you started, did that show up on your income tax returns?
BC: Good news about that $1,000 is that bastard ran off seven years later and married my secretary. I never paid him the thousand dollars back, and I’m happy for it.
EI: Kevin, you’ve seen Wall Street obviously?
KO: Yes. I love that movie.
EI: It’s apparent. I’m wondering if you guys think print, meaning magazines or newspapers, is dead or not — investment-worthy, and if there will be any spin-offs following some of the companies that you do invest in as a reality show?
KO: I think Murdoch’s announcement to charge for content was a brilliant move because we have become so complacent to get free content on the Internet. It’s quality content that I want. I only have so many hours a day I can read information. I’m willing to pay for good reporting. I think we’re going to see a real change over the next five years that I will have to pay a subscription fee for the content I want to buy, and the rest is just crap, so I think there’s going to be a change. Print may slowly die, but good content will never. I’ll be willing to pay for it. Just like The Wall Street Journal charges me about $12 a month now for the content I buy. That’s the model we all need to aspire to. That’s the model I want to invest in.
RH: I think you’re at a crossroad of not just print media, but all social media. I think the idea of simply getting eyeballs to your site and then making money through advertising we’re seeing as a flawed model. I think websites today, including social media ones, are going to have to make money off subscription or user, or somehow charge for the content.
KO: I’m going to Twitter that right now.
RH: I hope the hackers don’t bring it down.