Why Mr. Wonderful Banks on Female Founders
He's
heard a zillion pitches on Shark Tank. The startups that are most successful do
three things well, are more likely to be led by women--and more likely to get
his investment money.
Executive director, Ed Kaplan Family Institute for Innovation
and Tech Entrepreneurship, Illinois Institute of Technology
We
hosted Kevin O'Leary from Shark Tank, aka "Mr.
Wonderful", at the Kaplan Institute for a talk and a fireside chat last
week in front of about 400 of our student entrepreneurs. He shared some
important and serious thoughts about the entrepreneurial journey in general and
about his own education as a successful investor in so many different startups
(more than 50 in his portfolio as of now). He covered both things he learned
through the TV show and, more importantly, some lessons for anyone looking to
start or invest in a new business.
Here
are a few of the most interesting notes and comments.
1. It's all about sales and the costs of customer
acquisition.
Kevin
likes to meet the CEO of a potential investment and ultimately the main players
on the management team, but the person he wants to meet first is the head of
sales. Because if you don't have sales, you've got nothing. And, if you
don't understand what the cost is for your business to attract (CAC) and retain
new customers, you're doomed. So, he likes to meet the person who's putting the
meat on the table right off the bat.
With
the World Series under way, I'm reminded of an old baseball truism:
"pitchers in baseball can never win a game, they can only lose it."
It's the hitters who get it done. Raising money is easy for a lot of people --
they're great storytellers -- selling customers is much harder because when you
make them part with their rubles, that's where the rubber really hits the road.
2. We're much more brand loyal to consumer products
than to tech products.
We may
use a favorite laundry detergent or shampoo our whole lives, especially if it's
what our parents used, but that kind of loyalty doesn't play in the tech
world today, where everyone only wants the latest and greatest. If you show me
something that's better, cheaper, faster, easier and available today, I'm
yours. And no one worries a bit about changing horses in midstream
as long as switching costs like equipment replacement, re-training, etc. are
modest.
In the
software business, it's certainly important to take care of your existing
customers. But as I always tell our portfolio companies, the real measurement
of your long-term success isn't simply the size of your installed base,
it's your ongoing share of installations of your products on new machines and
new technology implementations because those are the customers who'll
matter the most in the future.
3. Winners on Shark Tank do three things well.
After Kevin
had watched zillions of presentations and studied exactly who won and
which deals got funded on Shark Tank, three specific attributes of
winning pitches emerged.
1. They could convincingly
tell their story in 90 seconds or less.
2. They demonstrated that
they had the right team to execute their plan.
3. They knew their numbers
(backwards and forwards) and they had a full understanding of the economics of
their business model.
Everything
else was fixable especially with the vast benefits of the exposure these
companies received on TV which often drove their customer acquisition costs
close to zero.
4. Women make the best startup CEOs.
He said
he was a little worried about being accused on being a reverse sexist because
such a huge percentage of his investments are made in companies with female
CEOs. But here again, he has consistently observed a set of skills and
attitudes among these leaders that he even goes so far as to suggest to the
other male-led companies in his group. The four skill sets that were most
important were:
1. They have great time
management skills. They didn't run around trying to do everything at the same
time or taking on too many projects or challenges all at once. They are focused
and centered and consistently triaged and re-proritized what they needed to get
done in the moment.
2. They set goals that are
achievable and hit those goals far more often than their male counterparts. He
said that he encourages this strategy of manageable and somewhat modest
targets even at the cost of some rapid growth, because it
makes for successful employees, which leads to the third differentiator.
3. They build company
cultures that have lower overall employee turnover, which in turn dramatically
reduces their operating costs. Happy workers are healthier, more productive and
stick around.
4. Women executives are
simply better listeners.
There
was a lot more in the conversation, but these seemed to me to be the key items.