People were not sitting around in 2020 waiting for the quarantine to pass. Millions of Americans used this time to get their business ideas off their notepads and into reality. With new business applications on the rise, entrepreneurs are looking at the “new normal” to create exciting, new products and services.
One of the most common questions entrepreneurs ask is, “When and how do I get investors?” Who better to ask than a shark? I had the pleasure of speaking with Daniel Lubetzky, founder of KIND Snacks. Daniel is also a second-year shark on ABC’s television series “Shark Tank.” His insight can help those entrepreneurs who are just starting to test the waters and those who are ready to take the dive.
How do you take a business idea and create a product or service that you can bring to market?
An entrepreneur’s journey unfolds in three distinct, dependent, and yet entirely separate phases— the three C’s. The first one is to be a curious creative. The second one is to be a consummate critic. And the third one is to be a committed crusader.
Curiously creative is the stage where you look at the world and you question assumptions and you say, ‘Could we do things better?’ A lot of us are trained to be concrete thinkers, but this first phase is about brainstorming without filters and banishing the word “no” from the creative process.
During the consummate critic’s phase, we should now start to apply filters to our idea to protect ourselves from our own dreaming. This is a time to poke every hole in your idea to make sure it stands up against heavy scrutiny. It's very important to separate the first and the second phases because if you introduce the second phase at the outset you’re never going to explore that creative territory. But if you don't introduce the second phase, you'll end up pursuing some really bad ideas.
Once you have walked through the fires of doubt and criticism and emerge convinced that your idea still stands to reason, you can enter the committed crusader phase. Then it’s time to flick a switch and ensure nothing sets you back. Put the doubt of the critic’s phase behind you and ground yourself in the conviction and determination that will give you staying power throughout the challenging journey ahead.
Do you think it's good to run things by your own test market group?
During the consummate critic phase, you're going to revise your original thinking and uncover new ideas that you may want to test on some focus groups. You should bring your concept to your family and ask for their honest feedback. You want them to be candid, even with their criticism, which is far more valuable than blind support.
What would be some tips for a brand before they go to an investor with their product?
First thing is to ask yourself if you really need that investor. Is it possible for you to bootstrap and do it yourself by borrowing money with a credit card, getting an extra job or working with your suppliers to finance your orders?
You should ask yourself whether you need that money up-front because the earlier you raise the money, the more you’re going to dilute yourself. So, ask yourself if there’s any chance that you can pull off getting to the next stage on your own. When you're doing proof of concept, you're ideally still doing it on your own because otherwise you're going to end up giving too much away.
Once you've determined that the product is well received in the marketplace, that's the ideal time to bring on investors.
What are your insights on being a second-year shark versus a first-year shark? Are the sharks “sharky” with each other?
The first year you're a newbie. You're a guest in somebody else's house, and they're treating you as such. It’s very stimulating but it’s also overwhelming. After I was done recording, I thought, “I should have said that or I should have done this.”
The second year, it's still very stimulating, but you know what to expect. I'm not a shy person. But when you show up in that studio, the sharks are really being “sharky” and so quick — it can be hard to get a word in edgewise.
In the first season I did a deal in which the entrepreneur chose me over Mark Cuban, which is a rare occurrence given how good Mark is. In the second season, I was a little bit unprepared for the assertiveness that Mark deployed. He took deal after deal from me…Mama Mia! I thought Lori was going to be my best friend, but even Lori threw me under the bus a couple of times. It really can be competitive.
But all the sharks are such great and authentic people. What you see is what you get. Whether you are on-set filming or getting lunch together off-set, they’re the same personalities.
When you're looking for investments, what are some of the factors that you look at?
Let’s look at the creators of Float "N" Grill, Jeremy and Mike. I did a deal with them and some people asked, Daniel, are you crazy? A grill that floats on water? I think it's so quirky and fun and makes a great gift. But that’s not the only reason why I invested. It’s also because Mike and Jeremy have this incredible energy that’s very rare and special. They are really fun inventors. I'm investing in them because I think we're going to create some fun things together, both in terms of content and in terms of products. So in large part, I made this decision based on their great personalities and creative minds.
So, the relationship that people have with their investors is as equally as important as the product, right?
Absolutely. The most important thing is integrity. When I invest, I am looking for good people with strong values. I'd like them to be smart. I'd like them to be resourceful, entrepreneurial, have grit, a hard work ethic, creativity and all of those things. But, they must have integrity. If they don't, I'd rather not work with them.
Any other words of wisdom or advice for the person that's out there thinking, “I have this great idea but I'm afraid to do it?” I don't necessarily think everyone should quit their day jobs to start a company, especially if they have responsibilities, but how should someone go about that?
This year has just shown us so many things, right? One of these things is ‘carpe diem.’ You never know what's going to happen tomorrow. You need to keep your eyes wide open, your ears wide open, and look and absorb as much as you can.
Think critically and question all of your assumptions, because there are so many opportunities to uncover when you engage in that relentless curiosity. It's very overwhelming to all of us as human beings to live through so much disruption and change, but this kind of landscape can also be a playground for entrepreneurs, because there's so many opportunities to constructively disrupt the world.
The other thing I would say is spend time talking to yourself and understanding what gives you meaning. If you find something that gives you purpose, that gives you energy and that makes you feel good just by pursuing it, you're already going to be achieving your goals. And you're much more likely to have financial success if you are pursuing something you really believe in and care about.
Jeanette Pavini is an Emmy Award winning journalist specializing in consumer news and protection. She is the author of “The Joy of $aving: Money Lessons I Learned From My Italian-American Father & 20 Years as a Consumer Reporter.” Jeanette is a regular contributor to TheStreet. Her work includes reporting for CBS, MarketWatch, WSJ Sunday, and USA Today. Jeanette has contributed to “The Today Show” and a variety of other media outlets. You can follow her moneysaving tips and ways to give back on Facebook: Jeanette Pavini: The Joy of $aving Community. Find links to her social media and her book at JeanettePavini.com.