It's not everyday you get to sit down with a shark.
At South by Southwest in Austin, I had a chance to speak to Daymond John from the show Shark Tank. He's here doing what he does best: evaluating startup pitches. This time, it's an event sponsored by PayPal judging pitches between two companies, one that helps earbuds feel more comfortable and one that makes nut butter you order online. (The earbud company won.) I asked him about what makes a startup pitch a winner.
What do you look for in a pitch?
The only thing that allows me to say [a pitch is a good one] in some sense is a proof of concept. They went out to the market and got 10,000 likes or a bunch of views somewhere. They sold a bunch of units in a small amount of time.
I am not talking about someone that needs to have a million dollars worth of sales, they can have $50 worth of sales. But they sold 50 of them in an hour. What I look for is if can they share the concept and idea in a short amount of time.
If you have to over-explain, then most likely you don't understand it yourself. I also look for the history of the entrepreneur, if they made either a large amount of mistakes and now they think they have taken the bugs out of their system or do they have a history in the business. And last but not least: Is it scalable? Some people do not need an investment.
You said not to over-explain. How should one still get a point across but in a succinct way?
I think the initial part needs to be short so you grab attention, then you let the potential flow and you answer the questions they need to know. You are never going to be able to cover every aspect, from distribution to finance to profits to everything else. Tell it in a short story. [Make it so] I can feel a pain point or you solve the problem in my life. Then tell me how other people have agreed, how this is a proof of concept.
Which pitches have blown you away and why?
You don't normally know in five seconds that you are going to tank, because usually the ones that are going to tank are the ones that make it sound really great. You know, "I have this water-ski type of device," then you find out the guy has been working on this for 15 years and it never took off. He never got a sample [out on the market].
Initially, you see the great idea, a video that takes 10 seconds, and then you go, "Wow." Then you find out and ask the questions to see the business side of it. They need proof of concept and operations. One I have seen where I "got it" was Scrub Daddy, that [Shark Tank investor] Lori [Greiner] invested in for $30 million. They just sold 15 million of them. Some of them just get it.
If readers here were going to sit down with you to explain their new mobile app or whatever their product is, what is the one thing you would want them to make sure they tell you right away? What's the most important thing?
Like I said before, proof in concept and that it is somewhat out on the market. I don't want to learn with them [as they go] and I definitely don't want my money to be used for their education. I want my money to be used to fuel the car, not make it.