COLLECTIONS: What makes a great entrepreneur? Kevin O'Leary: A great entrepreneur is someone who realizes that thereis no balance in life when you're on the journey of building yourbusiness. You basically sacrifice everything to get that business upand running. And I don't mean you shouldn't have balance in your lifefor your lifetime. I mean during the period that you're an entrepreneurand you're focusing your energies into making that business work, youneed to dedicate 110 percent of your effort. The entrepreneurs thatare successful, the ones that I invest in, get that. If you look historicallyat terrific businesses, they're founded by people like that. Myopicfocus on success during that initial period is required. C: You're outspoken about your refusal to work for anyone. What'swrong with being the employee? KO: Nothing, it's just not for me. and it's not for many entrepreneurs.In my book, I talk about what makes a great employee and what makesa great entrepreneur. There are differences, and sometimes you haveto ask yourself what matters most to you in your life, and that willdetermine which path you take. I like to control my destiny. I have avery simple mantra: Every day, I want to go to bed richer than when Iwoke up. That requires being an investor, and that??is the freedom I'veearned for myself. C: What makes a great pitch? KO: Well, I've done a little work on this. I've been on Dragons' Denfor six years and on Shark Tankfor three, and I've seen thousands ofpitches. I find there are three attributes every single successful pitchhas. First, the entrepreneur was able to articulate their vision and theopportunity in 90 seconds or less. In every case, in the space of aminute and a half, they're able to say "Here??is my idea and here??ishow it's going to make you rich if you invest in it." When an idea isso pure and so ingenious and so easy to understand, half the battleis done. The second attribute is that they are able to articulate whythey should be the person or the team to execute the business plan.That takes a little longer, about five minutes. So now we're at aboutsix minutes, when all of a sudden something happens. When thosetwo fall into place, the individuals or the team start to sizzle like anisotope and they emerge as leaders. You start to believe, even thoughthere??is risk inherent, that they can actually pull it off and you wantto write them a cheque. C: You??are always asking for the numbers to determine value, yet evenfrom your own experience selling your Learning Company to Mattel,it??is not uncommon for an acquisition to underperform. In that light,how do you find the truth in the numbers, and what indicators shouldinvestors be looking for? KO: I invest in businesses that have shown some level of success; inother words they have sales. But the most important decision inmaking an investment is to not overpay. If you want to make a return,you have to pay a fair price for it. I??am not trying to steal businessesfrom people, but I don't want to overpay because I will have no chanceof getting a return on my capital. I also often go for control because ifthese people can't execute their business plan, I want to be able tofire them and hire someone who can. It doesn't mean they'll lose theirmoney. they??are still an owner, they??are just not good managers. Ithink valuation is absolutely crucial. I've got pretty good experience atdetermining value, and I don't worry about a deal that doesn't happen.If we can't get there, I'll forget about that deal in two seconds. Thereare a thousand more coming. C: How many have you invested in through your shows? KO: It's not just those, I have many other venture investments. At any time,I've got about 20 positions open. On Dragons' Den, when you see adeal with a handshake, one in three of those close. So two thirds don'tsurvive due diligence. Of the ones that we invest in, one in 17 makes money.C: Do you find that the opportunities are different on the Americanshow versus the Canadian show? ntagonistic personalities in the media are often more interestingthan those that tow more progressive lines, and O'Leary, nostranger to marketing, is thriving in the role. It should come thenas no surprise that he's emerged as one of the leading lights of the CBCshowcase, standing out in stark contrast from others within the nation's mostliberal broadcaster.Between his new book, The Cold Hard Truth, at the top of the best seller'slist, his business O'Leary Funds managing over a billion and a half dollars inassets, and a variety of TV projects well-ensconced in the popular culture,there is seemingly little O'Leary can't succeed at. He's even a pretty decentbluesman with a collection of vintage guitars. COLLECTIONS'JeremyFinkelstein sat down with the multi-millionaire at a recent press junket for acandid conversation on entrepreneurship, investing and family. A45
46KO: No, they??are just larger reflecting that the market is ten times thesize. The deals tend to be in the millions in the US and in the hundredsof thousands in Canada, but there are great opportunities on both sides. C: O'Leary Funds has the tagline "Get Paid While You Wait!" referringto a policy of only purchasing securities that pay yields. Why is thisgood business? KO: When I was young and my mother was working at Kiddies Togs, sheused to come home and invest a third of her pay cheque. She used to saytomy brother and I, "Never buy a stock or bond that doesn't pay interestor a dividend. You always have to get paid for everything you buy."That??is how I live my life. I realized that it is such a simple investmentphilosophy. While you are sitting around waiting for the markets to goup, at least you??are getting your dividend which is equivalent to sixpercent. So she was absolutely right, and when I founded O'LearyFunds just to put my own money into, I realized there would be tensof thousands of Canadians who agreed. We now have over a billion anda half dollars being invested and every security we own has a yield. C: You advocate conservative investment values, yet equities areinherently risky. How do you reconcile that? KO: Well, I have 20 different funds and there are all kinds ofmandates, but essentially I put securities into two baskets. There arecompanies that are growing free cash flow every quarter and paying adividend, and there are companies that are not. I never own the onesthat are not. I only own companies that are growing free cash flow,paying their dividends, and increasing their dividends. So what I endup with is the thesis that a company that is profitable, even though itsprice may be volatile, doesn't go out of business, and continues to pay.I tend to own things like Telcos and diaper companies and pipelinesand railways and storage facilities. things that are not correlated withrecessions. They??are not exciting, they??are very boring, but they pay alot of cash. The older I get, the more conservative I am. I don't wantto take risks. So when people say buy gold or get this hot new miningstock, I don't even hear them. C: Like Donald Trump, the boundaries between your TV persona andyour business dealings have become obscured. How do you preventbecoming more brand than substance? KO: I look at it this way. there??is no grey in making money. You makemoney for your shareholders or you lose it. So what I want to be measuredon above everything is not my performance on TV, but rather theperformance of O'Leary Funds. Currently we're the top performingCanadian equity fund in the country in Canadian dollars, and we have oneof the best global bond funds in the country, always in the top quartile.These are things that are measurable, there??is no brand to that, it's justperformance. I love what I do on television. I meet amazing people andit keeps me hopping, but I keep my feet grounded in O'Leary Funds. C: Since you wrote your book, you??have separated from your wife. Withthat new development, do you think it's possible to achieve thebusiness success to which you??are accustomed, as well as success inyour personal life? KO: I think you can, and I did so for 21 years. I was an entrepreneurfor over two decades, was successfully married, and raised kids thatI??am very proud of. Our separation is very amicable, so it's not a badsituation by any means, but the pressures of being an entrepreneurand the time constraints probably were a factor. However, my wife wasat the book launch with my kids. We??are still a family unit, that's howwe look at it. It is unfortunate, and I try to deal with it the best I can,like any adult would. But there is pressure. Certainly television is verytime consuming and is probably a factor in what happened. C: In a recent interview, you spoke about raising kids, saying that youwould give them an education as long as needed, and then set themfree with no money so they can earn it on their own. Was that true? KO: Yeah, it is. I??will tell you an anecdotal story that I think isimportant. My dad is 81. He lives in Geneva and just celebrated hisbirthday. I go over there a lot to see him and I take whatever child isavailable so he can see his grandkids. My daughter is currently in NewYork but my son is in Toronto. So my son and I get on the flight, andhe says to me, "Why is it I always have to go left and sit in the backand you get to sit in the front with the good food and movies?" And Ianswered, "Because you have no money." I think that??is a veryimportant lesson. He'll have to go and get that on his own. I think itwould be a huge disservice to just give him money. What motivationwould he have to go out and make it on his own? I see lots of reallymessed up rich kids and I don't want mine to become like that. I maygive my money to a cat. I haven't decided yet. C: What advice do you have for the next generation of wealth builders? KO: You have to be very disciplined about money and not be emotionalabout it. I look at situations where I'm looking at an investmentopportunity and it??is clear to me that it??is not a good idea. Maybesomebody used their family's wealth or mortgaged their homes to pursueit, and yet they have never tested the market. They??have never gone toan arm's length investor and asked "Would you invest in this at thisvalue?" I see them getting very emotional about it, but I don't see whereemotion fits in. Money has no emotion, it has no soul, and it doesn'tcare. It just takes the path of least resistance, trying to get a return. The Cold Hard Truthisavailable in bookstoreseverywhere, and catch Kevin on CBC's Dragons'DenWednesdays at 8:00.