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When we sat down with the Angel Investing legend, Kevin O’Leary…

He revealed the formula he uses to pick winning Startups.

It’s the same strategy he used when he struck a deal with this Startup… 

The Startup we were able to invest in BEFORE Kevin! 

Getting to invest in a Startup before a Shark is pretty rare and kind of a big deal.

And right now, you can invest in this Shark Tank deal during their rapidly closing round. 

Hey––We’ve indicated we see this one as a winner and Kevin has echoed our belief by making his investment.

But when it comes to your startup deal, consider applying Kevin’s winning startup formula… 

I’ve laid out his top advice angel investors, including his #1 deal-breaker, in a short summary post.

 

Kevin’s Angel Investing Strategy

 

When we spoke to the legendary angel investor, Kevin O’Leary, he revealed his investing secrets.

You know him from the hit TV show, Shark Tank, but did you know he struck a deal — on national television — with a startup that we had already invested in?

Well, the stars aligned, and through our common investment, we got the chance to do a full-length interview with Mr. Wonderful himself.

The most powerful takeaway from the live-streamed event was Kevin’s formula for investing in startups. 

What does one of the best angel investors in the game look for in a startup? What makes him invest, and what makes him walk away from a deal?

He gave us all of the juicy details — from Shark Tank secrets to his personal strategy to finding outstanding deals.

To see the streamlined video where Kevin O’Leary shows us what he looks for in a startup, click here.

 

Look at the Product

 

One of the most important parts of the equation is that product or service. 

What Kevin O’Leary looks for is that the product solves a problem. The best way to address the demand for a product is to see the problem it solves. This shows you: 

  1. The customer
  2. The market size
  3. The overall gravity of the product

And, the more understandable the product is, Kevin says, the easier it will be for the startup to grow. 

The customer should understand the value instantly. They should have one of those, “Ahh, I see” moments. Maybe even an, “I need that!” to top it off  — without much digging or research. 

What’s more, if the product aligns with what is happening in the world, like serving the home-workforce during COVID-19, you’ll have a perfect-storm-product on your hands.

That is if you want to invest like Kevin O’Leary or something… 

 

Look at the Entrepreneur

 

Kevin says that the best salesperson for the product is the entrepreneur. 

The entrepreneur needs to touch on all bases. But, probably the most important thing to consider is their overall entrepreneurial spirit.

Some would call it grit, tenacity, or hussle

O’Leary doesn’t think you can learn to be an entrepreneur — the adaptability in particular he says is something they can’t teach in school. 

“You either have the ability to pivot or you don’t. You are either an entrepreneur or you’re not.”

Kevin doesn’t tell his founders what to do. He guides them, shares his mistakes, gives them exposure, but in the end, it’s up to them. They need to be able to execute and persevere. 

More specifically, he looks for entrepreneurs and teams that understand Customer Acquisition Costs

With what Kevin brings to the table, mainly a massive business and social media network, a founder needs to know about scaling. This is essential.

If it costs the entrepreneur $5 to acquire a new customer and they make $20 per sale, that’s a good enough margin for Kevin to work his magic. When he plugs his network to the business, they should be able to scale like crazy. 

As long as the entrepreneur knows how to steer the ship, both parties thrive in this relationship. 

Kevin goes more in-depth on the business models he likes in this video interview.

 

Look at the Pitch

 

We all know that on Shark Tank, it’s all about the pitch.

When a founder stands before the Sharks under those bright lights — legends are born or dreams are shattered. The pitch needs to be perfect.

The most important thing, according to Mr. Wonderful, is that the founder can explain their product and the problem it solves in less than ninety seconds. The entrepreneur’s salesmanship can make or break a deal.

Expectations on Shark Tank are incredibly high. Kevin explains

“You have to create great television, tell your story, be compelling, explain the product…People think they can rehearse 100 times in front of a mirror and experience what it’s like to go under those lights with the 26 cameras and the Sharks in front of them. No, you can’t…You either nail it or totally screw it up.”

Lastly, Kevin is a stickler for the numbers. He will grill founders on their numbers — cash flow, margins, burn rate, valuation — anything financial. 

Founders that don’t know their numbers inside and out won’t be signing any deals with Kevin O’Leary (luckily THIS STARTUP’S founder knew his numbers and landed a deal).

 

Executional Skills

 

For this Shark, there is one trait that marks entrepreneurs for success or dooms them to fail — executional skills.

He says, when a startup fails, 90% of the time it’s because of a lack of executional skills. Once the business starts growing rapidly, founders who lack this freeze in the headlights. 

There is a critical moment in a startup — the sales period between $1 and 5 million. This is usually when an entrepreneur has success at their fingertips but will need to execute to grab it. Whether they need to keep things consistent, revamp, or push harder, they must possess crucial executional skills to pull it off.

When the pressure is on, a founder can bring their startup rocketing up through the stratosphere or let it come crashing back down to earth. It all comes down to execution.

 

Ability to Pivot

 

Something that came up again and again in our conversation with O’Leary was that entrepreneurs need to be able to pivot. This may be the core tenant of the patented Mr. Wonderful Investment Strategy

“If you have pivot skills and executional skills, you deserve to be in my portfolio.”

If you want Kevin on your team, you need to show an extraordinary capacity for adaptability. Curveballs, knuckleballs, even the occasional spitball nothing should phase you. 

You see, founders constantly find themselves in positions where they must re-brand, discontinue products, or even change industries. 

And now more than ever, the ability to pivot is vital. Kevin explained,

“Eighty percent of our companies are surviving this whole pandemic thing with better cash flow results than they anticipated. That just shows you — those teams pivot.”

 

Honesty

 

When we asked Kevin what’s the number one thing that will make him walk away from a deal he replied,

“If you lie to me. It’s that simple. I don’t have to do business with people that can’t tell the truth, and if it’s a blatant lie and we asked you a question and you just weren’t honest — it’s over.”

The investor-investee relationship is all about trust. Before you give someone your money, you want to trust that they will take care of it and honor your agreement. 

Someone who is caught lying or even embellishing any aspect of their business can’t be trusted. In the long run, the lies will pile up and you won’t have any idea what is going on with your investment. 

And at the end of the day, it’s pretty silly to lie to an investor. The things founders lie about are usually the kinds of things an investor could help them with! If there’s a problem, let it out, they might just have the perfect solution.

Lying doesn’t just break trust, it prevents problems from being addressed and solved. 

Kevin told us,

“I don’t need good news, I want the bad news so I can try and help.”

 

Be a Part of the Family

 

Lastly, Kevin looks for a founder that’s ready and willing to work with him. 

When you sign with one of the Sharks, you’re becoming a member of the Shark Tank family. The relationship doesn’t end when the cameras turn off, there are years of cooperation afterward. 

“We want to work with people that want to work with us…And we like to feel a good, family vibe as we bring that company into the portfolio.”

Kevin has so much to offer his startups in terms of guidance and marketing. To take advantage of this, the team needs to embrace its partnership and not be afraid to open up and cooperate. 

When both parties are in harmony, everyone wins. 

 

Going Deeper

 

If you like this article, you’re in luck. 

We have more tips and secrets from the man himself, Kevin O’Leary. 

We condensed the full interview into a new 10-minute highlight reel that shows Kevin’s recipe for angel investing success. See everything we just discussed in more detail and hear tons of other insights we couldn’t fit in this article. 

There isn’t another investor like Kevin out there. His career speaks for itself. And with his straightforward, honest way of speaking, he is an incredible person to learn from. 

Oh––the Startup we’re invested in with Kevin O’Leary is in the middle of a fundraising round.

While it’s closing fast, there’s still time for you to invest

This Shark Tank Startup and instructions for investing in it are waiting for you on the Angel Investing Insider dashboard –– Click here to join now.

Author:
Chris Graebe

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