Mark Cuban and Other 'Sharks' on What Makes a Hot Business Idea

LOS ANGELES--Would you buy sunglasses made out of wood? Or a frozen "gumbo brick" you add your own chicken or sausage to? Or a bird feeder that zaps squirrels with an electric shock, to dissuade them from feasting on seed meant for birds?

These were some of the next big ideas pitched recently on the set of Shark Tank, the ABC reality show in which entrepreneurs seek funding from a panel of "shark" investors, including billionaire Mark Cuban, fashion magnate Daymond John, Canadian venture capitalist Kevin O'Leary, QVC diva Lori Greiner, tech multimillionaire Robert Herjavec, and former real-estate tycoon Barbara Corcoran, who alternates with Greiner.

The popularity of the show, which airs Fridays at 8 p.m. and is now in its fourth season, reflects a rise in entrepreneurship in recent years, due to the declining appeal--and availability--of corporate work. Entrepreneurship has also become sexy, thanks to rich celebrity innovators such as Steve Jobs, Mark Zuckerberg and, well, Cuban, who owns the Dallas Mavericks basketball franchise and has appeared on Dancing With the Stars, among other adventures.

[See The 10 Youngest Billionaires in the World.]

Everybody, it seems, has a great product that will become the next Snuggie, Razor scooter, Facebook, or Twitter. Two that got offers so far this season: a belt buckle that doubles as a beverage holder and a bedbug early warning indicator.

U.S. News sat in on two days of intensive taping earlier this fall as more than a dozen hopefuls made their case. (We were allowed to publish details of the pitches, which haven't all aired yet, provided we don't reveal whether they led to a deal or not.) Entrepreneurs who are already running a business typically ask the sharks for investments ranging from $10,000 to several hundred thousand dollars, in exchange for partial ownership of their companies. The sharks dissect the business plan, with some typically being supportive and others skeptical. Sometimes, the sharks attempt to trump each other's bids in order to get a piece of the action. Other times, everybody takes a pass. And occasionally, a gutsy entrepreneur will turn down a lowball offer or one that comes with too many strings attached.

Hanging out with entrepreneurs is a welcome antidote to the gloom that pervades much of the economy these days, since they tend to have an infectious optimism, no matter the unemployment rate or the direction of the stock market. But building a successful business can be crushingly difficult and far less glamorous than anything you'll ever see on TV. And making a pitch to investors--whether on-air or off--can be a test of any business owner's ego and grit.

A lot of people clearly buy into gauzy myths about entrepreneurship that true pros know are bunk. Some of the most common misperceptions: A great idea will automatically lead to a great business; as long as you're passionate, everything will fall into place; and more cash or better connections are all it will take to "get to the next level," a common cliché. "Most of us started with no cash and no connections," Cuban said after taping ended one day. "True entrepreneurs find a way. Those who aren't true entrepreneurs find excuses." Cuban should know. As a teenager, the Pittsburgh native earned extra cash by selling garbage bags, stamps, and coins, sharpening entrepreneurial skills that helped him launch several successful technology firms in the early days of the Internet. His latest ventures include HDNet and the Landmark theater chain.

Each shark seems to prefer investing in a particular type of enterprise. Greiner, for example, looks for businesses that have patents, so competitors can't simply steal their idea or copy their technology. O'Leary likes people who have analyzed the cost of acquiring customers and can keep it relatively low. John likes ideas that can be licensed to more established producers, which is sometimes a more plausible way to make money than trying to take market share away from entrenched companies. But all of them tend to look for innovators who can answer certain basic questions:

Would your enemies buy it?

One common mistake entrepreneurs make is falling in love with their own idea or testing it out only within the comfort zone of family and friends. "Entrepreneurs constantly tell me, 'My friends love it,' " said Corcoran. "I can't think of a worse test. Instead, pitch your ideas to enemies. Take it to your mother-in-law. Falling in love with your own concept is poison."

While seeking funding for his "Gobie H2O" water bottle with a built-in filter, entrepreneur Rusty Allen of San Diego did a demonstration for the sharks in which he filled one of his bottles with dirt, poured in water, attached the filter, and then drank the crystal-clear water that came out. It must have wowed his friends, but the sharks raised a few tough questions. "You're drowning in perceived opportunities," Herjavec told him, pointing out that other companies--including big ones like Brita--sell similar products. "Tell me one unique thing about your product. When you're small, you've got to know what's the one thing that makes you different." Allen countered that his bottle is good for the environment and also saves money, since it eliminates the need to buy disposable plastic bottles of water.

Michael DeSanti of Honesdale, Pa., tried to convince the sharks that there were millions of potential buyers for his "Squirrel Boss" bird feeder, which comes with a remote control the owner can use to send a nonlethal electric current through the feeder when a squirrel starts gobbling up the seed. The sharks found it to be an entertaining idea--but wondered whether millions of people would be willing to shock squirrels. "It's a quirky product," Herjavec told him. "We're just not seeing the business." DeSanti buffered his case by explaining how he might be able to lower the price and add features that would appeal to more people.

Does it target the right niche?

Entrepreneurs can also become so attached to their original idea that they lose sight of broader opportunities. Robert Gifford of Everett, Wash., pitched a line of modular, multifunctional furniture, which he called "Geek Chic" because of his own predilection for slide rules and protractors. The sharks liked the product, but challenged the positioning. "We have to take the geek out of it," Greiner insisted. "I don't know how that helps your marketing." The sharks suggested that he try to broaden the appeal, and make sure potential female buyers didn't get turned off. Gifford staunchly defended his geek label, confident he had identified an underserved niche.

Have you tested the market?

Any investor willing to fund a business is likely to ask for evidence of thorough testing in the marketplace. Dallas entrepreneurs Aimee Miller and Megan Carreker, who sought backing from the sharks for their upscale line of "Hip Chixs" jeans, got an earful on the importance of rolling out their products in more than just a few boutiques before asking for money. The Dame brothers of Boise, Idaho--Brooks, Tanner, and Taylor--earned some quick credibility with the panelists by explaining how their company, Proof Eyewear, already has a contract with retailer PacSun to sell thousands of pairs of its trendy wooden sunglass frames at prices starting at $90. "The good news is, in a down economy, you're getting interest in your product," John told them. "It's also good that you're in the only thing that's selling right now, and that's accessories."

[Read: How to Build a Creative Business.]

Is it scalable?

One of the trickiest moves for any startup is scaling the business from a small company with modest sales and a few employees up to an operation that can fulfill large orders, finance lots of inventory, and absorb the shock when something goes wrong. Getting over this hump is a main reason entrepreneurs seek outside financing, along with the kind of expertise the sharks and other investors might be able to offer. But many businesses aren't as scalable as their founders think. Established competitors can be powerful and ruthless. And a product that's popular among a small band of enthusiasts won't necessarily be a mass-market hit.

Lani Lazzari, an 18-year-old from Pittsburgh, wowed all of the sharks with her entrepreneurial zeal when she described a line of all-natural exfoliating scrubs, called Simple Sugars, that she started developing when she was 11 to treat her own eczema. While other kids were jabbering on Facebook or going to the movies, Lazzari was researching the properties of creams and oils for scrubs that have racked up more than $55,000 in sales so far. "I love the story," O'Leary--perhaps the surliest shark--gushed. "The Kumbaya moments. I want to cry."

But the business plan made him want to cry, too. "The cosmetics industry is the most competitive on earth, because the only products that have higher margins are illegal," he instructed her. "You've found a niche position, but to scale it is going to be very, very challenging. There's nothing proprietary, it's a brand nobody's heard of yet, and it's so simple that, well, an 11-year-old can do it."

Lazzari stood her ground. "When I hear 'no' I'm just not talking to the right person," she retorted. More funding, she insisted, would allow her to hire some salespeople and sign bigger contracts. Still, many small business owners have learned the hard way that bigger competitors will happily squash young upstarts if all they need to do is copy a clever new set of products. A technology edge, a celebrity endorser, or a hot brand can help prevent that--but also can be prohibitively expensive.

What does impress the sharks, and many venture capitalists in places like Silicon Valley, is a well-researched business plan that anticipates what might go wrong and accounts for the way bigger competitors might react to a newcomer trying to grab market share. "This is all about risk management," Cuban explained. "You've got to do everything in your power to reduce your risk, and 98 percent of that is about information. You can't get it all, but there are so many things you can do to get information about your industry or your competition."

Researching them on the Internet is an obvious place to start. Interviewing possible customers might yield insights on market opportunities and competitors' vulnerabilities. The more data you can gather on the size and contours of your target market, the better prepared you'll be when investors start peppering you with questions.

What's your personal story?

Sometimes the final decision to fund may come down to intangibles that don't show up on balance sheets. Carole Foster of Los Angeles came on Shark Tank looking for $200,000 to help expand her food business, which sells frozen "gumbo bricks" that serve as the stock for a meal serving up to eight people. She had one big point in her favor: A starter deal with the wholesale giant Costco to sell her bricks at a few of its stores. But when Cuban asked how she did her accounting, she admitted, "Not very well. I need the business acumen. I don't have that."

[See 10 Books Investors Should Read.]

"Your product is great, but your business is not investable yet," O'Leary told her. Then Foster explained that to keep her operation going, she and her 12-year-old daughter had been living without a home of their own, alternating between temporary arrangements with family and friends. Instead of paying rent, she said, she put every available penny back into the business. Meanwhile, six brothers and sisters took orders and made deliveries, to help keep the gumbo flowing.

O'Leary took it all in, then declared, "That's what makes America great. People like you willing to work their ass off."

For a brief moment at least, it seemed that Foster might have tamed a shark.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

More From US News & World Report


Get stories like this on the Yahoo app and discover more every day.
Download it now.
  • US alarm as Turkey warns Syrian Kurd militia of more strikes
    US alarm as Turkey warns Syrian Kurd militia of more strikes AFP News - 40 minutes ago

    Turkey warned Monday it would carry out more strikes on a US-backed Kurdish militia in Syria if it fails to retreat, as Washington said President Barack Obama will meet his Turkish counterpart over the weekend. Turkish forces pressed on with a … More »

  • Mondelez abandons pursuit for U.S. chocolate maker Hershey
    Mondelez abandons pursuit for U.S. chocolate maker Hershey Reuters - 49 minutes ago

    The abandoned deal, which would have created the world's largest confectioner, underscores the grip that the charitable trust, set up by the company's founder Milton Hershey over a century ago to fund and run a school for underprivileged children, … More »

  • Shell restarts gasoline-producing unit at Puget Sound refinery Reuters - 53 minutes ago

    HOUSTON (Reuters) - Shell (RDSa.L) restarted a fluid catalytic cracking unit (FCCU) at its Puget Sound, Washington refinery on Aug. 23, according to a regulatory filing published on Monday. The unit was ... … More »

  • Most Asian Index Futures Pace U.S. Rebound; Oil Holds Above $47 Bloomberg - 57 minutes ago

    Contracts on equity gauges in Australia, South Korea and Hong Kong rose at least 0.3 percent in most recent trading, while futures on Japan’s Nikkei 225 Stock Average diverged after the yen failed to build on Friday’s selloff. U.S. crude was above … More »

  • Business Highlights Associated Press - 1 hour 27 minutes ago

    ___ Mylan launching cheaper, generic version of EpiPen The maker of EpiPens will start selling a cheaper, generic version of the emergency allergy shots as the furor over repeated U.S. price hikes continues ... … More »

  • Island Standoff Again Clouds China-Japan Ties in Run-Up to G-20 Bloomberg - 1 hour 34 minutes ago

    One of the reasons China may be escalating its activity in the East China Sea is to warn Japan against getting involved in the South China Sea spat. While not a claimant in those waters, Japan has drawn China’s ire for supporting Southeast Asian … More »

  • Tokyo, Wall St. shares boosted by Fed rate hike talk
    Tokyo, Wall St. shares boosted by Fed rate hike talk AFP News - 1 hour 36 minutes ago

    Japanese shares pushed sharply higher and Wall Street got a boost Monday by rising expectations of an interest rate increase this year by the US Federal Reserve. The rate hike talk, which came out of the Fed's central banking symposium at the end … More »

  • Yale grad students file petition seeking union certification Associated Press - 1 hour 49 minutes ago

    Yale University graduate students on Monday petitioned the National Labor Relations Board for union recognition, saying they have organized to address concerns surrounding pay and benefits and give themselves ... … More »

  • Dollar rises following uptick in US consumer spending AFP - 2 hours 8 minutes ago

    The dollar rose against the euro, the yen and the pound on Monday as US Commerce Department data showed consumer spending had risen in July. The rise in the dollar also followed a comparatively bullish ... … More »

  • Consumer Stocks That Fueled U.S. Bull Market Remain Mired in Rut Bloomberg - 2 hours 20 minutes ago

    Consumer-discretionary companies, the engine of the seven-year rally in U.S. equities with a gain of more than 400 percent, remain on course for the worst year since the financial crisis even as the American consumer continues to show signs of … More »

  • Rates on US Treasury bills rise at weekly auction Associated Press - 2 hours 28 minutes ago

    Interest rates on short-term Treasury bills rose in Monday's auction, with rates on six-month bills climbing to their highest level since March. The Treasury Department auctioned $40 billion in three-month ... … More »

  • Shell to sell certain Gulf of Mexico assets to EnVen Energy
    Shell to sell certain Gulf of Mexico assets to EnVen Energy Reuters - 2 hours 31 minutes ago

    Houston-based EnVen plans to buy the Brutus/Glider assets, which include a subsea production system, and the deal is expected to close in October. The Brutus/Glider assets have a combined current production estimate of about 25,000 barrels of oil … More »

  • U.S. Venture Firm Aims to Break Corporate Hold On Japan Startups Bloomberg - 2 hours 34 minutes ago

    “We realized we had to create excuses for founders to contact us,” Riney said in an interview at his office near Tokyo Station. Riney opened the Japan fund for 500 Startups, a fixture of Silicon Valley that made its name backing entrepreneurs just … More »

  • Phibro posts 4Q profit Associated Press - 2 hours 37 minutes ago

    On a per-share basis, the Teaneck, New Jersey-based company said it had profit of 38 cents. Earnings, adjusted for non-recurring costs, came to 40 cents per share. The maker of animal health products and ... … More »

  • Wall St. gains as data points to budding economy
    Wall St. gains as data points to budding economy Reuters - 2 hours 41 minutes ago

    Financial and commodity-sector stocks led the S&P 500 higher in a low-volume session on Monday after consumer spending rose for a fourth straight month, pointing to a pick-up in U.S. economic growth. After Fed Chair Janet Yellen said the case for a … More »

  • Oil down 1 percent, pressured by glut, dollar, Nigeria outlook
    Oil down 1 percent, pressured by glut, dollar, Nigeria outlook Reuters - 2 hours 48 minutes ago

    Oil prices settled down more than 1 percent on Monday, snapping two consecutive days of gains, on renewed concerns about an oil glut, a stronger dollar and expectations that Nigerian rebels will stop hampering that country's crude output. … More »

  • Catalent misses 4Q profit forecasts Associated Press - 2 hours 57 minutes ago

    The Somerset, New Jersey-based company said it had net income of 46 cents per share. Earnings, adjusted for one-time gains and costs, came to 52 cents per share. The results missed Wall Street expectations. ... … More »

  • IF Bancorp posts 4Q profit Associated Press - 2 hours 59 minutes ago

    The Watseka, Illinois-based bank said it had earnings of 29 cents per share. The savings and loan holding company posted revenue of $5.5 million in the period. For the year, the company reported profit ... … More »

  • How the Dow Jones industrial average fared on Monday Associated Press - 3 hours ago

    Banks, one of the weakest sectors in the market this year, led stocks higher on Wall Street Monday as traders anticipated that the Federal Reserve could raise interest rates at least once this year. That ... … More »

  • US consumer spending data boosts Wall St. shares AFP - 3 hours ago

    Wall Street registered solid gains Monday on signs of firm US consumer spending and rising expectations that the Federal Reserve will raise interest rates as soon as late September. The banking sector, ... … More »

  • U.S. shares gain, European shares dip on Fed rate hike bets
    U.S. shares gain, European shares dip on Fed rate hike bets Reuters - 3 hours ago

    By Sam Forgione NEW YORK (Reuters) - U.S. stock markets climbed on Monday while European share markets slipped in the wake of comments by top Federal Reserve officials that bolstered expectations for an ... … More »

  • U.S. Stocks Close Near Record High on Economic Data; Oil Slumps Bloomberg - 3 hours ago

    Brazil’s Ibovespa extended the world’s biggest gain this year on speculation President Dilma Rousseff will be permanently removed from office. The monthly jobs report due this Friday may provide more clues on whether policy makers will have room to … More »

  • EU to hand Apple Irish tax bill of $1.1 billion, source says
    EU to hand Apple Irish tax bill of $1.1 billion, source says Reuters - 3 hours ago

    The European Commission will rule against Ireland's tax dealings with Apple (AAPL.O) on Tuesday, two source familiar with the decision told Reuters, one of whom said Dublin would be told to recoup over 1 billion euros in back taxes. The Commission … More »

  • Markets Right Now: Banks lead US stocks higher on rate hopes Associated Press - 3 hours ago

    The latest on developments in global financial markets (all times local): 4:05 p.m. Stocks are closing up on Wall Street Monday, tacking higher after a three-day drop as the financial sector benefited ... … More »

  • Kentucky First Federal posts 4Q profit Associated Press - 3 hours ago

    On a per-share basis, the Frankfort, Kentucky-based company said it had profit of 5 cents. The bank holding company posted revenue of $2.6 million in the period. For the year, the company reported profit ... … More »

Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
to view quotes in your portfolios.


  • Most Actives
    Most Actives
    NamePriceChange% Chg
  • % Gainers
    % Gainers
    NamePriceChange% Chg
  • % Losers
    % Losers
    NamePriceChange% Chg

Market Data

  • Currencies
    NamePriceChange% Chg
  • Commodities
    NamePriceChange% Chg
  • Bonds
    TreasuryYield (%)Yield Change