It's 6:30 on Friday evening, and six of the world's most famous investors are gathered in a conference room at Sony Pictures Studios in Culver City, Calif., T-shirts on and smartphones out. Barbara Corcoran, real-estate mogul and founder of The Corcoran Group; Mark Cuban, billionaire businessman and owner of the Dallas Mavericks; Lori Greiner, the "Queen of QVC" and holder of more than 100 patents; Robert Herjavec, founder of $125 million technology firm The Herjavec Group; Daymond John, founder and CEO of global fashion brand FUBU; and Kevin O'Leary, chairman of O'Leary Funds and star-slash-villain of several business TV shows, have just wrapped a long day on set.
You might know them collectively as the Sharks, from ABC's Emmy-nominated reality show Shark Tank. They are fed by producers with a steady stream of cash-strapped business owners and wantrepreneurs hoping to mine them for funding, mentorship and connections.
When pitches go wrong, it's blood, sweat and crushed dreams on the floor of the boardroom set. But there's a lot at stake for the Sharks, too. By the end of the third season, they had committed investments totaling more than $15 million of their own money. While some deals fall through before airdate, the success stories are many. Last season, when Greiner invested in ReadeRest, a company that makes magnetic holders for reading glasses, she plucked the founder out of his garage and, in less than a year, turned his product into one of the most successful businesses to come out of Shark Tank, with distribution through Walmart, QVC and other retailers and more than $3.5 million in sales.
Related: Google Hangout With Stars of 'Shark Tank' On Funding Your Business
America can't get enough. ABC, which currently airs Shark Tank on Fridays at 9 p.m., upped the show's episode count from 13 in the first season to 24 in the current, fourth season. This season's premiere on Sept. 14 drew the series' biggest audience ever, at 6.4 million viewers, and was the most-watched show of the night, according to Nielsen.
The show is a success, according to Cuban, because it serves as inspiration to the entrepreneur in us all. "Anybody with an idea can see how the business process works, see that these are normal people, and there's nothing magical about coming up with an idea," he says.
But the other key component to the show's winning formula is the Sharks themselves. "Shark Tank is a VC firm on steroids," O'Leary declares. "Most venture capital firms are jampacked with MBAs who do analysis on deals. They've never run a business. We have lots of cash; we've all come from different sectors; we've all run businesses. There are no other firms like that."
We asked the Sharks to share with us some of what they have experienced and their visions for entrepreneurship moving forward. True to form, things got a bit heated.
Entrepreneur: You've heard the good, the bad and the crazy all calling themselves entrepreneurs. How do you define the word?
O'Leary: Somebody with a willingness to take risks to pursue freedom.
Herjavec: Someone with a passion to build something great and make money along the way.
John: Being consistent in strive or drive to be what they consider to be successful. They don't try it one time and give up; they just keep trying until they figure it out.
Greiner: I also think it's drive. Entrepreneurs are willing to work 80 hours a week to avoid working 40 hours a week.
Corcoran: I'd say they value freedom above everything else. Every one of us is in business for ourselves. Could you imagine working for somebody?
Herjavec: I don't know. The only reason I went into business was because a guy fired me, and I couldn't get a job in time to pay my mortgage. I don't want to give people the impression that we all sit around and say, "Gee, I want to be an entrepreneur for all these wonderful reasons." I think sometimes people do it because they have to.
John: But we all want the freedom to make our own decisions.
Herjavec: I think you get to a point where you think about freedom, but at the beginning, it's about necessity.
Mark Cuban: You can define it a lot of different ways, but I think it comes down to finding something you love to do and then just trying to be great at it. You can be passionate about a lot of things, but just because you have passion doesn't mean that's a good place to put your effort. Typically you find out that the more effort you put into something, the better you get. And the better you get at something, the more fun it is. And the more fun it is, the less you realize you're working, and the better things will go.
Herjavec: But here's the beauty of being in business for yourself: Look at the six of us. There's no formula for success.
You don't have to be tall, you don't have to be short, you don't have to be fat or skinny or have hair. Sex, race, whatever--nobody cares. It's all up to you.
Lori Greiner, inventor of more than 400 products, including jewelry and cosmetic organizers, kitchen gadgets and travel gear; prominent QVC personality.
Entrepreneur: How can you tell if the person making a pitch is the real deal?
Herjavec: The six of us rarely agree, but we can all quickly spot a bad idea or businessperson. If there's a problem with your business or you're not telling us something, we'll find it out.
Corcoran: I think we all spot on the set someone who comes back at you. If we're hammering away at them and they keep bouncing back, they win our respect immediately, and that's a deal that's almost always bought.
O'Leary: I think people put too much weight on the individual, when really it's the idea and the market they're approaching.
Herjavec: That is such crap, Kevin! It's always about the person. In this economy it's even more about the individual.
O'Leary: In this economy, if you find a growing market and a great product, you can always swap out weak management with strong management. In a very competitive market, you can get a very motivated, good team that experiences no growth and makes no money at all.
John: Even in that scenario, it's about the person, because who's going to spot the team?
O'Leary: Listen, even if you don't like the idea, it's still the truth. It's more than half dependent on product and market. Lots of great leaders have blown their companies up lately.
Mark Cuban: Yeah, but those are big companies; those aren't entrepreneurial.
Herjavec: Tough times never last; tough people always do.
O'Leary: At the end of the day, we can agree to disagree on this one.
Corcoran: Let me give you an example of why this bald-headed bastard is so wrong.
O'Leary: That's Mr. Bald-Headed Bastard to you.
Corcoran: Remember Tiffany, with the elephant medicine dispenser? She knew nothing about business, but what did she do when it wasn't doing well? She invented a new product.
Mark Cuban: Lots of people pivot out of desperation.
Corcoran: What I'm saying is, she reinvented herself. The product wasn't as good as we hoped, and she totally turned her universe around and invented something else.
O'Leary: That's an example where the product killed her.
Corcoran: No, that's an example of the entrepreneur overwhelming problems with the product.
O'Leary: If you knew that the elephant enema market was going to be so flat, you would never have invested in that.
Corcoran: Not important. I invested in her. Rightfully, because she came through loud and strong.
Robert Herjavec founded technology integration firm Brak Systems, which sold to AT&T in 2000 for a reported $100 million; brought in to run public technology firm Ramp Networks, which sold to Nokia in 2001 for $225 million; founder of technology firm The Herjavec Group.
Where the Opportunities Are (Hint: Everywhere)
Entrepreneur: So about those growing markets and great products. What trends are you seeing?
Corcoran: Crowdsourcing. Two of my entrepreneurs are doing crowdsourcing, and one business I share with Mark [bicycle-maker Villy Customs].
Mark Cuban: And crowdfunding. We had someone on the show today who was crying for money. Literally, tears! I asked her, have you looked at Kickstarter? She has an MBA and had no idea about Kickstarter, which was shocking. One of the huge trends right now is that the cost to start a technology-service business has dropped to 1 percent of what it was 10 years ago.
O'Leary: But that means it's more competitive as well.
Mark Cuban: Well, not if you're innovative. It used to be that if you started anything related to technology, you had to have servers, you had to have programmers. Now, with the cloud, if you have a phone, a laptop, a broadband connection and a subscription to some service provider, you have a business. So any kid can come up with an idea, can innovate and, for less than $1,000, start a really unique, compelling business.
Greiner: I think the most interesting trend is that the way people buy things is changing. There used to be a need to touch, feel or see it in a retail store, but I've watched my web sales on QVC go from 5 to 10 to 40 percent of the entire business in the last decade. I would predict more than 50 percent within the next year.
Corcoran: Personality-driven branding, because of social media. If you have a big personality at the front end of the brand, then they'll drive it. [Mail-order bakery] Daisy Cakes is a perfect example.
Greiner: With social media, advertising is changing. If you are savvy and have a good team and focus, then you can really get out so much information about your brand and the product you're launching. And if it goes viral, you're reaching so many more people than you would have dreamed of with an ad on TV--at zero cost.
Herjavec: Another trend is mass customization on an individual scale. You can buy running shoes [embossed] with your name; you can buy almost any mass-produced product but make it localized to an individual.
Mark Cuban: Another trend: Software is taking over the world. Wherever you can insert software and intelligence and data to reduce your employment costs, you're going to do it. The perfect example is an Apple store. Somebody walks up to you, they ask you what you want, they run your credit card right through a Square device, and you move on. You don't need all those extra bodies.
Corcoran: This might be a little tiny trend, but I'm seeing a lot more bartering of services. I've got an attorney who's bartering his legal services for free advertising.
Herjavec: How does the government tax that?
Corcoran: I don't think the government has a damned thing to do with it. I'm not asking. All I know is, the work is getting done, cheaply. [Note: The IRS mandates that the fair-market value of goods and services received via bartering be declared as income.]
John: You're dealing with junkmen.
Seriously, Barbara--are they just going to call up a guy and say, "Hey I got a couple paintings? A toaster oven? Let's swap houses?" I thought I knew guys in the 'hood, but damn.
O'Leary: But there is an underground economy emerging. Taxes are too high.
John: Well, I'm gonna clean out my garage next weekend and get a whole bunch of new employees.
Daymond John, founder and CEO of global fashion brand FUBU, with total sales of more than $6 billion; founder of consulting and branding firm Shark Branding; author.
Daymond On Shark Strategies (Or, What Happens When It Gets Late)
John: OK, so my MO is: "Hey, what are you doing? You want me to work for you?" Now, Mark's is, "I really, really, really, need you to put 400 hours into this business a week."
John: [As contestant] "But I have a child." [As Cuban]: "Well, sell the little bastard, because you need to work every single day."
Mark Cuban: What's your point?!
John: [As Cuban] "Because you're not committed." Now, the Croatian soul brother [Herjavec] says: "Even when I was on the boat with the rat, I didn't borrow from the rat. I never borrowed from anybody because I would have had to give back the money."
O'Leary: [As Herjavec] "I ate the rat."
John: And Barbara's MO: "What exactly do you make for dinner on Thursday? And you know another problem I have with you--you have gingivitis. Or whatever." [Corcoran sprawls out on the table.]
John: And this guy [points at O'Leary]: As soon as he throws on the switch that's right by his rectum, he wants a royalty of 4,000 percent, right away, with a contingency. And no matter whether I'm doing the deal with you or not, I'm gonna call you all kinds of f***ing names, and make you miserable. And when you do the deal, it's, "Let's get it established now."
Oh, and Lori, of course: "I'm gonna write you a check right away … Here's my e-mail, here's my check, you're a hero or a zero. And most of the time, you're a zero." [General pandemonium]
O'Leary: See what happens when you get us at this hour?
Barbara Corcoran, founder of real-estate firm The Corcoran Group, which sold in 2001 for $66 million; real-estate commentator on NBC's Today; syndicated columnist and author.
Crazy Ideas (Or, Everyone Agrees With Barbara In the End)
Entrepreneur: What have been some of the most memorable pitches--good or bad?
John: The one I'm mad about was this guy drawing cats for a living. I refused to get into an argument on television over a cat guy, but I miss him, and I want to still do something with him.
[Note: Cuban was the only Shark to invest in Steve Gadlin's online cat-cartoon venture during an episode that aired in January 2012.]
Corcoran: The one that got away …
John: Remember? [Sings] I want. To draw. A. Cat. For. You.
Mark Cuban: He's already paid me back my money.
John: I'm so mad at that. That is the new Hello Kitty for derelicts.
O'Leary: He's not going to be the next billionaire. He's an entertaining cartoonist.
John: Well, the guy is trapped on Twitter forever as a prisoner drawing Cat No. 7,497.
Mark Cuban: Doesn't matter. He's smart, I got my money back, and he's there to help me.
Corcoran: I can rattle off a few things that are bizarre that stay with me. The lipstick that makes you lose weight, the toothpaste that makes you go to sleep, the wacky engineer that swore to us he was turning seawater into pure gold, if we gave him $1 million to build his tower.
Mark Cuban: More than $1 million. He had to put a hurricane in a phone booth.
Herjavec: Remember that guy with the [gestures to his head]? So in the future you won't buy a phone, you'd have it installed right in you.
Corcoran: And if it malfunctions, you have to have it surgically removed to have the battery changed. You remember, none of us wanted to go to the bathroom outside? We were all afraid of him.
John: Yes, because he looked like he wanted to do the surgery.
O'Leary: In all fairness to the guy turning ocean water into gold, he said later, out by the snack room, had he come on the show 100 years earlier and told us he had a liquid that had molasses in it and bubbles made with cocaine, we all would have passed. He was talking about Coca-Cola. The truth is, from the wackiest people come some of the most interesting ideas.
Herjavec: Right, something that seems crazy today may be brilliant a few years from now.
Mark Cuban: When we were doing streaming back in the mid-'90s [at internet video portal Broadcast.com] everybody told us we were idiots because there was radio. The best deals can be the ones where people tell you you're crazy.
Corcoran: Maybe in the technology area. But in the rest of these products we've been seeing? Please. They're nut jobs.
O'Leary: I think what's important is that the platform, Shark Tank, stays very agnostic in terms of what we see. We've got to have a lot of different stuff to look at.
Kevin O'Leary founded SoftKey Software Products (which later became The Learning Company), which sold to Mattel Toy Company in 1999 for about $4 billion; chairman of investment management firm O'Leary Funds; author.
Entrepreneur: Why's that?
Herjavec: It shows you the power of this economy. People are coming up with all kinds of things. I think what we're showing people is that you can do it regardless of where you came from. A lot of people think you have to have the right education, the right background, to start a business, but the reality is you don't.
O'Leary: Nobody has a monopoly on good ideas.
Corcoran: Some of the worst pitches here are the people who talk all fancy who've been to business school.
John: It doesn't mean you should not have an education. It just means, don't make that your biggest challenge. You learn one way or another.
Mark Cuban Co-founded Broadcast.com, which sold to Yahoo in 1999 for more than $5 billion; prolific tech investor; owner of NBA team the Dallas Mavericks; co-owner of the Landmark Theatres chain, Magnolia Pictures and Axs TV.
Entrepreneur: What would you like to see more of?
O'Leary: I like the boring deals that have cash flow already, like tea companies with sales.
Mark Cuban: Ha--you know what Kevin would really prefer? Kevin would really prefer if someone walked in and said, "Hello Mr. Wonderful, I just want to deposit money directly into your account."
O'Leary: That'd work for me, too.
Herjavec: Mark, he'd probably find some fault with that.
O'Leary: The truth about America today is that small and midcap businesses are not being funded by banks anymore. I don't care what anybody says. There's a lot of opportunity in doing traditional balance-sheet factoring, which can be very profitable.
Mark Cuban: Argh. Write it down: Sweat equity is the best equity. When you take money from someone else, you're beholden to them. When you borrow money from a bank, if you don't meet their payments, they own you. They're not going to say, "Well, I like Kevin, I'm gonna cut him some slack." People think that it's all about connections and money when it comes to starting or running a company, when in reality, most companies fail not for lack of cash, but for lack of brains.
Corcoran: You know what I want to see more of on this show? A lot more of these total wackos, because I'm gonna tell you, when you're sitting on the set for how many hours, you need it. It's entertainment. Wouldn't you at least want to see one more a day?
O'Leary: We do, Barbara, we do.
Mark Cuban: You know what we need to see more of? Barbara trying to do math.
Herjavec: I think we all agree on that.
Corcoran: God, it's pathetic. Even I agree on that.
Mark Cuban: You can always count on some things.
This story appears in the December 2012 issue of Entrepreneur. Subscribe »