Sharks, Their Big Personalities, and Their Big Portfolios
While many generally consider finance and business to be some of the less thrilling topics for a TV show, ABC’s hit reality show Shark Tank brings the workings of business startups and venture capital to life for viewers, albeit in an overly dramatic and simplified way. The show brings us into the minds of the “shark” investors, and interests us as much in their unique business preferences as in their outsized personalities. Everyone has a favorite character on the show, and everyone knows who the optimistic sharks are, who the big egos are, and perhaps most notably who the biggest jerk is. But how do these character traits reflect the actual investing track records of each of the sharks on the show?
I have taken analysis from sharkalytics.com, which compiles information about each shark’s rate of investment (the percentage of offers taken), median deal valuation (the amount the startup claims to be worth in total – the value of a 100% equity stake; a smaller deal valuation often indicates an earlier stage of investment in the company), median bid discount from asking valuation (the difference between the startup’s larger valuation and the shark’s smaller, perhaps more realistic valuation), and deal collaboration rate (frequency that the shark teams up and shares profits with other sharks). In this article, pairs of two sharks are compared and contrasted in terms of investment strategy, and described individually in terms of personality.
Barbara and Daymond
To Barbara, the staples of a worker that is naturally driven to success include the need to prove oneself, tenacity, and the potential seen in success without real guidance or help previously. This profile is very inclusive to potential investments of any stage, particularly earlier stage investments, as the payoff for investing early in an entrepreneur of the highest potential can be very large. Human capital can be observed at any stage. This disproportionately high upside is reflected in her high rate of success in media, especially when considering her low net worth. Barbara’s criteria for what makes a high-potential entrepreneur seem to be accurate, and therefore conducive to her acclaimed success as a shark.
Daymond gives an inclusive and worldly list of his greatest successes – a white house visit, work ethic in his earlier odd jobs, and various big breaks in business. He is very humble, and he credits his success to many mentors – his mom, the guidance of countless clothing and style experts, among many others. He is also holistic in how he qualifies success; to him, success can be social, financial, or many other value sources. That is why he takes so much pride in the consulting work he provides to the entrepreneurs he meets in the tank and beyond.
This is also why we often see him on the show refusing some risky investment opportunities, but also making sure to offer the entrepreneur ample guidance in growing their business. From his unique goals and strategies, Daymond has an outstandingly low investment rate, and high early stage investment rate because early stage investments often need the most guidance. Overall, Daymond’s holistic goals lead him to less acclaim financially, but a rich track record for the help he provides to entrepreneurs that don’t meet his investment standards.
Kevin and Robert
For Kevin, business is all about directness, objectivity, and success. One route to a consistent and potentially impressive success record is through investing in lower risk companies. He invests most frequently in late stage companies because their financial viability is best defined, and with fewer unknowns the financial risk is lower. This approach has yielded him much success made visible by online articles.
Kevin is also highly collaborative with other Sharks on the show, even though he is perhaps the biggest ego and most difficult character on the show. One possible explanation is that Kevin, Robert, and Mark all have been involved extensively in tech ventures, so it is likely that they have related yet complementary experience for some of the investments they make. In any case, two sharks are intuitively better than one, and Kevin certainly takes advantage of this fact.
Robert views business as necessarily connected to the entrepreneur’s life to make it successful, and sees the need for the business to make the owner’s life better through inspiration and day-to-day experience. Following this perspective, he invests in companies not only for financial reasons, but he also looks for a culture and vision that is appealing to him. Take for example his most successful venture, Tipsy Elves. Robert chose to invest because of the company’s impressive sales record and model, as well as the company’s funny culture and the way it facilitated the company’s success (they make sweaters with goofy designs). Such compatibility between culture and product is a rare sight in business, and Robert was keen and inclined enough to seize this opportunity.
This tendency to make investments more for non-financial reasons leads him to be generally pickier with the types and number of companies he chooses, so he has a lower-than-average investment rate. Intuitively, a company’s culture gets more visibly defined in its later stages, so this also explains the connection between Robert’s need for cultural information and his tendency to invest in later stage companies. Robert also seems willing to pay a premium for these more fundamentally compatible deals, as he discounts the Startup’s asking valuation least compared to his peers – meaning he is willing to pay more than and perhaps outbid his peer sharks. Beyond financial success, Robert is an investor in vision, and his portfolio certainly reflects that.
Lori and Mark
Lori’s experience at QVC in creating hundreds of products has prepared her to recognize opportunities in certain products presented in the tank – those that would be most successfully marketed and sold through QVC and connected companies. That adds a security for her to invest in some products since she knows more certainly than other sharks whether or not there is a path to success for the business.
In other words; Robert, Kevin, and Mark’s tech ventures; Daymond’s fashion ventures; and Barbara’s real estate ventures don’t give them the retail and distribution networks that Lori has gotten from her work at QVC. Because of this particular experience, Lori’s risk is low for a very large portion of potential investments. This means that she is willing to pay a premium on the relative certainty of success, and is also willing to invest in more products. This is also why Lori takes one of the lowest discounts on the companies’ asking prices – because she is paying that premium and outbidding other sharks.
Most of what differentiates Mark from the other sharks is his outstandingly high net worth, which affords him the highest investment rate, investment size, discount on asking valuation, and ability to outbid his peer sharks. Perhaps his most prized investment is his ownership of the Dallas Mavericks. This demonstrates his need for investments that yield him novelty and fun as well as financial success, not dissimilar to Robert’s investment goals. As a result, his preference towards later stage investment reflects his need to understand a company’s culture and compatibility. He is often the first shark out of the tank, for purely cultural or industry-related reasons. Mark is defined by his outstanding net worth, as well as his unique preferences.