Could the next great business idea be an animal shaped medicine dropper for kids? A Bluetooth literally implanted into your ear? Sweet potato pies? Welcome to ABC's new reality series, "Shark Tank," where businessmen and women with great ideas in need of money pitch the five 'sharks' � Barbara Corcoran, Kevin Harrington, Daymond John, Robert Herjavec and Kevin O'Leary � in hopes of gaining not only their interest but their deep pockets of money. The difference with "Shark Tank" and other reality shows is that there is no contest and no single winner in this Mark Burnett produced series but only knowing how to come up with a great product and, then, how to pitch it to the millionaire sharks. To find out the best ways to make the mouths of these crafty sharks water, our Jim Halterman went to Herjavec and O'Leary for a lesson in business investing (and pitching) 101.
Jim Halterman: How did the two of you get involved with "Shark Tank?
Robert Herjavec: Kevin and I both do the Canadian version of the show and Mark [Burnett] called us and that was it. We came down and... I know Kevin spent a lot of time in Boston and I spent a lot of time in Miami and we split our time between both places and that's it.
JH: In listening to these people tell their stories with their pitches, how difficult is it to say no to them especially when you like the people or like the story?
Kevin O'Leary: I couldn't care less about them. I don't get emotionally involved with them individually. I'm looking at the opportunity to take on a venture investment and there are so many opportunities that the minute I figure out a deal has no potential it's like they're dead to me. I just want to get them out of there and get the next guy on. It's a process to find out of a hundred deals maybe the three that make sense. There's no time to get emotionally involved with any of these people.
RH: That's Kevin's philosophy but my philosophy is a little different. I can't disassociate the individual from the investment. I'm similar to Kevin in that there are a number of deals that I weed down but in those deals that I get down to I can't take away the emotion of the person involved and my association with them. I mean, it's an investment but I also want to help somebody build a business and give them a certain amount of guidance. Obviously I want to make money along the way but I think I come at it from a different end than Kevin does.
KO: The problem with getting emotionally involved is you can see how it often bankrupts them. It's very simple. Here are people that go to their families very often � the first place they initial get investors � and they ask them for their money and they never do a reality check whether it's a good business proposition because they let emotions get in the way. They spend all their family's money, they mortgage their homes, then they get in front of us and then they find out it has no merit. That's why it's such a crime to let emotion get involved in the investment process.
RH: This is the great American dream. I don't think too many great companies in this country were started purely for money. Obviously I want to make money and I need the person investing it to have that same goal but I'm looking for the next great business. I'm looking for the next Google and you have to a lot of passion to put in the hard work required to get there,
JH: Kevin, regarding your philosophy of no emotions/no tears, it that something you have always had in business?
KO: No, I learned it along the way and I learned it because I made mistakes initially and I think that's what's so important as time passes. You know, investing is about understanding your mistakes more than your successes because losing capital is like losing a child. Something died and you can't get it back. It's extremely difficult and I don't take my losses and gains the same way. I cry like a baby when I lose money and I always remember how that happened to me and that makes me a better investor everyday. I have a very simple objective � I wake up in the morning and I want to go to bed richer than when I woke up. It's that simple.
RH: Jim, I think Kevin was scarred by his mother not loving him enough as a child. [everyone laughs]
KO: The challenge is that you have the weak like Robert to actually be protected by the strong like me.
RH: I came to this country as an immigrant. I started with nothing and built a great business so I love to build and operate a great company and I think great investments come from great companies and great people first. Kevin is a pure investor. At the minimal value, throw some money at it and hopefully it grows in a garden of much better investments. That's my philosophy.
KO: I add huge value by bringing great discipline that every business needs. They need a solid investor that keeps them on course and doesn't get emotionally involved. It's that simple.
RH: And I think we've seen where that kind of investment has led us in the last few years.
JH: Do you think it's necessary to be a shark to be successful in business?
RH: I think you've got to be brutally honest but you have to be brutally honest with yourself. Yeah, I think a shark is a good term. I think the biggest lies in business that you tell are the ones you tell yourself. You gotta be tough out there. There are a lot of people who go home and the end of the day beat their dogs so you've got to protect yourself.
KO: What I love about this process is there's no grey. There's only black or white. You either make money or you don't make money. It's that simple. And after a year or two investing in something and it's not making money, you have to take it behind the barn and shoot it. That's what happens in business. Sometimes people cry. Who cares?
JH: Watching the premiere episode, I felt remnants of "The Gong Show" because, for example, when the guy is pitching the Bluetooth implanted in your ear I was waiting for you to cut them off and send him on his way.
RH: What's remarkable is I remember that some people make the point that you have to be way out there to think out of the box and there is some merit to that; there's some truth to it. You can argue that Coca-Cola, which is a multi-billion dollar franchise, once started as just sugar and water and if you put it in front of investors, 100% of them that day would have passed on it.
KO: The truth is the crazy ideas make money and that's why we have to turn over every stone even though we find a lot of cockroaches underneath them sometimes.
JH: Have you had big deals that you passed on and then regretted it?
RH: No, not really. I think the parameter for me is that these people have a very set, specific amount of time they have to convince me to invest in them and their business. If they can't do that within the allotted time, as far as I'm concerned, it's over and done. There are no second chances and there's no second-guessing. Once they leave, I don't think about them ever again.
KO: There are a million deals in the naked city and you're going to miss a few sometimes. It's the ones that you actually invest in that make money that matter. There's stuff that I missed that I don't care about either.
JH: With the economy in the state it is right now, is it a good time to start a business?
RH: I think it's a great time to start a business because the discipline you're going to have to apply with the lack of what I consider to be the blood of business, money... you can't borrow from a bank on a start-up. Very few venture capitalists are investing in deals right now because there's no liquidity in the market. What it does for us as sharks and why this is interesting is because things are so tough out there we see more real businesses that have revenue that really need capital to grow something that's already working. That's why it's so interesting. Here you have ABC, Sony and Burnett scouring the country for opportunities and we just have to sit there in those chairs and listen. This is something I do everyday anyways and now I have people feeding me the deals. This is wonderful for us.
KO: I think it's interesting when the economy is tough and people are watching the bottom line they are more open to opportunities. For small business, which is 80-90% of all business in America, this is a great time to start a business because you might get a chance that you normally wouldn't get when the economy is doing well.
JH: Do you get to see any of the footage that the viewers see about the people at home and their lives before they come in and pitch?
RH: This is the real deal. Yes, it's a TV show but it's a real deal. We don't know anything about these people. We 're meeting them, in some cases, with less information than the audience. We don't see any of the background footage. It's real. They have to convince us in that time as they walk out into the shark tank.
KO: I don't care about any of that stuff. It has nothing to do with what the opportunity is as an investment. I don't care what the name of their dog is or what farm they came from. Completely irrelevant. Would be a waste of time to show me that anyways.
JH: When you do invest in the pitch, is it you who is actually in business with them?
RH: There's a fine line. I have a pretty good-sized company and a lot of other stuff going on and that's part of the challenge; people have to disassociate between being my friend and a mentor and an investor. Sometimes I'll want to get involved and sometimes I won't.
KO: Look, this is an investment, number one. It's my own money and not anybody else's. I really care about my money, I'm emotionally involved with it because it's my money and I don't want to lose it. So, I'll put the parameters, generally there are controlled provisions in place. I don't do deals very often where I'm a 10% shareholder. I do a lot of deals where I'm 51%. If they don't care, if that's a problem for them, then I don't care so my attitude is I'll take control, trust me that I'll always have the money in mind and that's what matters in the end. Make no mistake. It's our money.
RH: If you watch the show, and I think that's one of the reasons it works, you can see it in our eyes and you can see it in their eyes when we're genuinely interested. I don't care about the cameras. I don't care about anything else. It's my money at risk. This isn't some kind of Gong Show or game show where they're getting a prize. They have to work at it and I'm going to be an investor. That's why it's not like a contest where there's one winner. There are multiple opportunities for multiple winners here. In fact, portfolio theory tells you it's better to have five deals than one because you have no idea today what three years from now will bring and which one of these things will be successful.
JH: What's the one thing that the businessmen better have solid to impress you guys.
KO: They'd better be able to articulate their idea quickly and have their numbers ready to go. If you can't communicate your idea no matter how good it is you're not going to get anywhere.
RH: The mistake that's so often made and the thing that I weigh in the first 90 seconds is can you articulate to me how I am going to make money? How I, as an investor, is going to take risk with my own capital and then get it back. Articulate the business plan and the liquidity of it as well. I want to know why I'm doing this because I'm not doing it to be your friend. I want to make money and you can see the string of success in the deals that are funded. They all have that currency of vision to them.
"Shark Tank" premieres this Sunday on ABC at 9:00/8:00c.