Surfboards for workouts and all-purpose blankets. Fresh vegan honey and quick-fire starters. Adult sippy cups for wine evenings. These are a few of Mark's favorite things.
There are dozens of companies Mavericks owner Mark Cuban has invested in since he became a permanent fixture on the popular ABC TV series Shark Tank, and each one produces a unique product or offers a selective service.
"Season 3, he started really accumulating some companies," said Abe Minkara, director of Business Development for Mark Cuban Companies. "Season 4 it grew even more. Season 4 is where the really interesting companies started to enter the portfolio."
When you see the handshake, the deal is far from over. That's when Minkara and his team members in finance, accounting, legal and business development take over.
For those unfamiliar with the show, an entrepreneur pitches his or her business to a handful of potential investors. After the investors (known as sharks) pepper the business owner with questions, they compete against each other to secure a deal. If you're a company on Shark Tank, you've survived a lot of cuts. Show producers pore over 40,000 applications. After whittling that number down, around 200 lucky participants travel to Los Angeles to film during a one-week stretch in the summer where the sharks' days are packed with pitches.
While Cuban has a good understanding of the business he just invested in — each clip is edited down from the original pitch which usually lasts one to two hours — his legal team at Mark Cuban Companies must dig deeper.
The group looks for any red flags: Maybe sales don't match what the entrepreneur said in the pitch. Or the intellectual property isn’t airtight.
"Due diligence can take three months or more," Minkara said. "When everything’s in order and it’s formalized and the documents are signed and the money’s transferred for the equity that was agreed upon, then the deal starts."
Then comes the biggest break many of these businesses will ever get: Their company appears on television.
Cuban's team gives each entrepreneur two weeks before their episode airs to help them prepare for the thousands of people that will come to their website.
The work Mark Cuban Companies does for its portfolio businesses doesn't end with an episode’s airing. It offers everything from help with graphics to accounting to legal services for its nearly 80 portfolio companies from Shark Tank. And the services are free.
Through the years, Mark Cuban Companies hasn't always picked successful ventures. Minkara said they've had a few companies go out of business and have a few more he would classify as hobby businesses. When faced with a tough situation of adapting to stay alive, such as the one Power Practical faced, Minkara said not all entrepreneurs execute.
"I think in most cases when companies don’t make it or they don’t grow, it’s when the entrepreneurs don’t grow or really lack on execution and don’t have a sense of urgency to act now," Minkara said. "Every day as an entrepreneur, you have to make a move. It really is about building momentum. And if you don’t take action, you’re losing momentum."
Unlike a private equity firm, Mark Cuban Companies is a minority investor. They can't go into a company and start telling employees what to do. Everything Minkara and his team propose to a portfolio company has to create value. For example, if a company focuses more online, its margins must improve.
"By doing that, we’re been very successful at building those relationships with our entrepreneurs early on and building trust," Minkara said. "In some cases, we have small companies that are hobby businesses, and it’s really amazing to see them evolve into actual businesses with employees and millions of dollars in sales."
To read more about that process, Business Journal subscribers can click here.
Season 9 of the show just finished airing in February, and Cuban scored a couple more deals to add to the Mark Cuban Companies portfolio. To see the companies that pitched investors on Shark Tank now count themselves part of Mark Cuban Companies, click here.
Even though there are 75 Shark Tank companies in the Mark Cuban Companies portfolio, many are still undergoing their due diligence so they aren't represented. That process can take some time.
"Due diligence can take three months or more," Minkara said. "When everything’s in order and it’s formalized and the documents are signed and the money’s transferred for the equity that was agreed upon, then the deal starts."
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