Home Radio Segments Guest Segments Daymond John Takes You Behind The Scenes On “Shark Tank”

Daymond John Takes You Behind The Scenes On “Shark Tank”

2717
SHARE
Daymond John, Behind the scenes of Shark Tank

Daymond John rose from humble origins in Queens, New York to become a highly-respected entrepreneur.  His apparel startup, FUBU, short for “For Us, By Us” was hugely successful.  Today, Daymond is a marketing and branding guru.  He is a featured investor on reality television series Shark Tank and mentors entrepreneurs.

FUBU’s Humble Beginnings

In conversation with Steve, Daymond takes us back to 1992 and how he started FUBU.

At that time, young inner-city kids were communicating their anger, sorrows, joys, and triumphs through hip hop’s rap lyrics.

Daymond John saw this ecosystem build up and realized that mainstream brands did not want to associate with hip hop’s sub-culture.  Frustrated with being ignored, Daymond started making apparel for this sub-culture.

He called his brand FUBU, short for “For Us, By Us”.

Daymond’s Unique Branding Expertise

Daymond worked hard at making FUBU successful.  He made mistakes but learned how to expand from a one-man show to a full-fledged company.

Later, Daymond used his experience to help others.  He established a respected brand consulting firm.

Daymond John knows there are better, more experienced brand consultants than he is.

However, Daymond knows his niche better than anyone else.  He differs in his untiring dedication to working hard and learning from his mistakes.  He is committed to soldiering on even when 99 out of 100 doors are slammed shut on the opportunities he’s pursuing.

Learning From His $6 Million Mistake

Earlier in his career, Daymond invested $6 million in an accessories company with really amazing designers.  Soon, he found out that his designer-partners did not have the skill-sets necessary for their ready-to-wear ladies-apparel line.  Daymond, too, was no expert in women’s apparel.

Not willing to back down, he threw money at the problem.  But that did not help.  He realized then that money should be invested after you prove the concept.

Insider Details On Shark Tank

Daymond likes all his partners on Shark Tank.  But he hesitates doing deals jointly with Mark Cuban because Cuban does not share Daymond’s frugal mindset with money.

“Mr. Wonderful” isn’t the obnoxious person you’d think he is from the TV series.  He’s a shrewd investor, who will often call people out for throwing good money into bad ideas.

Vetting Each Business And Closing The Deal

Daymond John relates that in the first season, one entrepreneur got $500,000 but used that money to pay off bills and buy a new car.  Another took $150,000 and moved to Australia.

On Shark Tank, deals appear to get done in a matter of minutes.  In reality, the sharks invest their own money and spend hours vetting each deal.  Then, it takes three to six months to actually close the deal.

Making A Successful Pitch

Daymond says the most effective pitches are where you can get the idea across in a very short amount of time.  Sharks want to invest in businesses that are scalable and entrepreneurs who have what it takes to succeed.

Tips For Entrepreneurs

Daymond has heard over 3,000 pitches from startups.  He wants entrepreneurs to keep the pitch simple, sell the story, and not get too technical.  To get a deal, entrepreneurs should also be realistic about their valuations.

Daymond John’s #1 recommendation to startups is to take an affordable step forward.  Don’t mortgage your house and get too deep.  Bootstrap it one step at a time.


Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital.  Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.  Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances.  The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.

Read The Entire Transcript Here

Steve Pomeranz: If you’re addicted to Shark Tank, like so many people are, you know my next guest. In my view, he’s the coolest guy in that room. His name is Daymond John. Daymond is the guy who literally started with nothing. He was raised in Hollis, Queens, New York. And slowly, sometimes painfully, built a huge business and an even bigger reputation built on integrity and giving back to the community.

Let’s find out about him and Shark Tank, and what he’s got going on right now. Hey, Daymond, welcome to the show.

Daymond John: Hey, Steve, thank you for the kind words. I appreciate you having me.

Steve Pomeranz: Tell us how you began your first business, FUBU, For Us By Us.

Daymond John: Well, at a certain time where, as we look at technology today, there was a disruptive way of communication coming out. It was basically called hip-hop. And it was a different form of music, where kids were talking about their sorrows, their joys, and their aspirations throughout this music and communicating with each other.

And it started to create a certain ecosystem which were brands that the kids were gravitating towards. But the brands weren’t really marketing toward the kids and they actually started to deny that the kids were even supporting or wearing the brands. And I was pretty frustrated by that, and I always wanted to create something or a brand that really respected and valued its consumers.

So we came out with a name called FUBU, For Us By Us. People actually thought it was purely for African-Americans when that wasn’t the case, ‘cause we didn’t want to be prejudiced, like we felt the other brands were against us. So it was an inclusive brand. It actually started to pick up in Japan and Seattle, Washington, at first.

And then it really started to spread amongst everybody who loved this new emerging form of communication and entertainment, which was called hip-hop, and FUBU, For Us By Us, was born.

Steve Pomeranz: So with all your experience throughout the years, you became an expert on branding and manufacturing and selling.

But there are a lot of people out there who know how to do that very well. What made you different?

Daymond John: You know what? I’m not going to say that I was any different. And when you talk about branding and manufacturin, and things of that nature, I think that there are many people that are way better than I am.

It’s just that I knew my niche, I knew my consumer, and I’m the type of person that no one’s going to get up before me, nobody’s going to go to sleep after me. I’m going to learn from my mistakes, and I’m going to repeat whatever I’ve done in a better way after I learn from my mistakes.

It’s all about just being really willing to get 99 out of 100 doors slammed in your face and keep returning.

Steve Pomeranz: Yeah, that’s a good lesson. In a recent episode, you chose not to invest in a new company that made these cool sunglasses out of wood, and you told them that earlier in your career you had invested in a company that had cool products, too.

And then you said that all the cool brands are broke and that this mistake cost you $6 million. What did you learn from that mistake?

Daymond John: Well, I learned that to understand the business, and my partners, and how they’re really amazing designers. But they were not designers who could make a ready-to-wear product, which is really where a bulk of the business is done.

And because I am an expert in men’s apparel, I also could not help them make ladies’ ready-to-wear. So I’m not pointing the finger at them and saying that they weren’t great partners, and they weren’t talented individuals. But I didn’t really take inventory of the situation because I didn’t realize that they didn’t have the skillset, and I didn’t have the skillset in where the business needed to go.

Steve Pomeranz: And throwing money at them didn’t really help either, did it?

Daymond John: Throwing money at them did not help. Most of the concepts out there, money does not help or does not make it. Money is a tool that’s used after you prove the concept. And that’s actually something I’m putting in my next book called the Power of Broke.

It’s utilizing knowledge and utilizing drive and studying the market to get your product out there in an original way.

Steve Pomeranz: Yeah, I think you frequently make that point on the show. So let’s talk about the show for a minute. Which panelist on Shark Tank do you most like to go into a deal with and who do you try to avoid?

Daymond John: I like going into deals with anybody that can add value to it, a great strategic partner. I tend to avoid doing deals with Mark. The guy is liquid, a couple of billion dollars. And I’m pretty frugal with my money, and Mark will pay a guy $1 million just not to call him every single day, and that’s it.

Steve Pomeranz: I know you’re speaking of Mark Cuban, and I notice that he’s not afraid to pay high prices for the businesses he bids on.

Daymond John: It’s a rounding error for Mark. It’s real money for me, as far as I’m concerned. I give you $20, I want your dental records, so-

Steve Pomeranz: [LAUGH] Yeah.

Daymond John: That’s just what it is.

Steve Pomeranz: Is Mr. Wonderful really that obnoxious or is that just his TV persona?

Daymond John: Well, it’s not a TV thing. You have to think about what every investor is on that show for and where their specialty is. He’s really a great guy, but a guy who has $1 billion under management.

If you have some money that you want to invest in one of his funds, do you want to see a guy up there who every time somebody sheds a tear, he’s giving away money? So-

Steve Pomeranz: He’s a shark.

Daymond John: Yeah, I think he’s a disciplined investor. And sometimes you need that honesty.

You look at somebody who sits there, and they have an idea in a company and they’re spending their kids’ college fund, and they’re not really doing their due diligence on a company. And sometimes you need a Mr. Wonderful to say stop doing that. You’re wasting yourself and your loved ones’ money.

And you take this thing behind the barn and shoot it and stop. So sometimes you need that person.

Steve Pomeranz: Well, the entrepreneurs who present on this show are very well-rehearsed. And all the decisions seem to be made in about eight or nine minutes. That can’t be. So what goes on behind the scenes?

How long does it actually take to vet each individual business idea?

Daymond John: The shortest pitch has been 18 minutes; the longest pitch has been 2 hours and 45 minutes. We absolutely don’t have any knowledge of who the entrepreneurs are. Because, trust me, if I got a piece of paper on half those bozos, I would tell them don’t come down the aisle.

And it takes us three to six months to vet the company afterwards and actually physically close the deal. But like I said, that’s the beauty of the Tank.

Steve Pomeranz: This is your money on Shark Tank, right? I mean, there’s no doubt about that, and that’s why you guys have to be so careful. I mean, if it were the network’s money, you’d be passing out millions of dollars left and right.

Daymond John: Yeah, I mean if it’s the network’s money I would have my mother pitch in.

Steve Pomeranz: [LAUGH]

Daymond John: And I would make sure that she gets $10 million.

Steve Pomeranz: Exactly.

Daymond John: It really is our money. And people tend to say, well, why are you so mean to people or so hard on them?

But they don’t know the story of Kevin Harrington first season gave a woman half a million dollars. And I believe that she paid off all her bills and bought a car or something and sent him more bills. Or Barbara working with somebody named Cactus Shack, the producer, moved to Australia with $150,000.

So, you’re really looking at deploying your own hard cash and capital to people who, some are responsible, some are amazing, and some are a little irresponsible. And some don’t even know what they don’t know.

Steve Pomeranz: You know what I like about the show? It instructs people on what it takes to present an idea to real investors.

So what are they key elements that make a successful Shark Tank pitch?

Daymond JohnThe most effective pitches are somebody who can get the idea across in a very short amount of time.

Somebody who you really feel that the business is scalable and it’s worth investing in. And the person that you feel is worth investing in, because we invest in people.

Steve Pomeranz: All right, so that’s good.

So you’ve heard your fair share of good, bad, and spectacular new ideas, right?

Daymond John: Sure, I’ve heard probably in upwards of maybe 2,500 or 3,000 pitches.

Steve Pomeranz: Yeah, so you can probably tell when they’re walking in the door, or as soon as they start to speak, if their ideas are going to fly. What are the biggest mistakes some contestants make?

Daymond John: I think some of the biggest mistakes that contestants make sometimes are being extremely technical and not selling the movement or the story, in general, of why there’s a need for it.

I think that many of them could overvalue their company if they have little evidence on why their company is of value. And then I think that, speaking hypothetically, and assuming that this is a $50 billion market, and if I only get 1%.

Steve Pomeranz: Yeah, I know what you mean.

Daymond John: And listen, the saying is you can make up your own opinions but you cannot make up your own facts. And going out and doing pitch competitions such as this, where you win actually $200,000 or you get favorable votes from the judges. Well, you walk into another room with investors and you say those types of things.

These are reasons why you get validated as a company that potentially will be investment-worthy.

Steve Pomeranz: I guess a lot of it is to make sure that you’re not lying to yourself, and you take a hard look at yourself in the mirror and say, do I have this concept nailed?

Because you have a lot at risk here. You’re asking people to risk their money and take mortgages on their homes. Perhaps you’re taking one on your own, or you’re raiding your 401k. And there’s a lot on the line here, and people are counting on you. So, Daymond, what is the one piece of advice you can give to somebody who thinks they have a good idea enough to go on the Shark Tank?

Daymond John: Yeah, you know what, my number one recommendation is take an affordable step forward. Affordable, meaning like you just said. Don’t go mortgage the house and do other things. Listen, you go to pitch competitions such as this, that’s an affordable step. What is it taking out of your day?

Just time, but you have little to risk. But if you go and talk to just your family and friends who are very supportive of you, and you say, you know what? Everybody thinks this is a great idea. I’m going to mortgage my home, I’m going to spend my kid’s college fund, and then you then go out to the real world, and they tell you your idea may not be that great.

You may not be able to recover from that big move; it could be fatal to you. So I always say just take affordable next steps.

Steve Pomeranz: You wrote that when you had your business, FUBU, you remained open to a lot of ideas from all places. And I wanted to stress this for those who are going into this kind of field, to keep their options open, and to keep their ears open to new ideas.

As a matter of fact, you wrote that a lower level employee told you that certain products were being stolen out of the warehouse, and your response first was to ask him if he was tattling on them. But then he said, no, look, if they’re stealing this product, they really want it.

Daymond John: [LAUGH]

Steve Pomeranz: Maybe you should make more of it. Tell us about that.

Daymond John: Yeah, it was that stage in the company when they were telling me that people were stealing out of the showroom. And what we did realize was the styles that the kids were stealing, that worked in the company, were the styles that they desperately wanted.

And we would go out and make those styles. So we learned to take and value everybody in the company and everybody’s opinion. And I’m not saying that they got rewarded for stealing.

Steve Pomeranz: No, no.

Daymond John: Obviously, we had to let them go.

Steve Pomeranz: It’s the idea behind it, of course.

Daymond John: Yes.

Steve Pomeranz: My guest is Daymond John. You know him from Shark Tank, and I’d say he is definitely the coolest guy in the room.

Daymond John: [LAUGH]

Steve Pomeranz: Well, Daymond, thanks for taking the time to spend with us.

Daymond John: All right, thank you for having me.