Shark Tank star Daymond John discusses common investment mistakes and startup genres that have him excited
Throughout the massive CES event in Las Vegas every year, the theme of entrepreneurship is everywhere. Over 4,500 exhibiting companies showcased their work in robotics, AI, gaming tech, and more at this year’s CES, each fighting for their chance to get recognized in a crowded tech space full of potential. If anyone understands this entrepreneurial spirit, it’s Daymond John, who hosted the first annual CES Pitch Competition, hosted by AARP Innovation Labs, in 2019.
Daymond John’s story is one that would inspire any aspiring entrepreneur. From waiting tables for a chain restaurant and taking out a $100,000 mortgage on his mom’s house to founding a billion-dollar company and establishing himself as a host on the popular program Shark Tank, John has experienced a journey most business-minded individuals dream of.
The CEO and founder of FUBU, a global fashion company with over $6 billion in sales, John is the recipient of over 35 different awards, including Ernst & Young’s New York Entrepreneur of the Year and the Brandweek Marketer of the Year. He is also the author of a number of books, such as Rise and Grind, The Power of Broke, and The Brand Within, each presenting his motivational perspectives on the business landscape. In this exclusive interview from CES 2019, John explains the mistakes that many investors make when putting money into startups, how turning 50 will change his entrepreneurial style, and the type of company he’s most likely to invest in.
Innovation & Tech Today: What’s a company that you’ve done business with recently that you’re excited about?
Daymond John: I’ve recently partnered up with AARP and we were pitching today [at CES] about trying to reduce social isolation for people because, as much as we say we’re all connected, we’re really not that connected. We don’t get to touch and feel and go out with people anymore. We’re texting them. You don’t really get to talk to them. They’re trying to solve these types of issues as well as with the Baby Boomers and people my age, they all don’t want to necessarily retire.
Yes, they have an answer for that, but so many of them want to become entrepreneurs as well. They dedicated so much time to somebody else’s dream and now they want to execute their own. I’m fascinated by a trusted organization like AARP, as well as by how much information I’m getting from them. And I’m learning to make myself a better investor as well.
I&T Today: What would you say is one major trend at this year’s CES?
Daymond John: The trend here at CES is really AI. It’s improving. Today at the AARP pitch, we’ve seen somebody who is taking care of World War II veterans, giving them that feel of being able to go out and see the monument that they have not been able to travel to. It’s actually increasing the brainwaves and potential to grow the way they process information. So much AI. Everything from gaming all the way to changing lives. I’ve even seen AI for acidic welding because, for acidic welders, it’s very dangerous, and you need to be able to practice enough so that you can hopefully secure a job without hurting yourself.
I&T Today: What’s a mistake that investors often make when looking at startups?
Daymond John: A common mistake that investors make when investing in startups is only thinking about the profitability that the company can potentially make and not thinking about the people running the company; the data behind the company. Just saying, “Oh they have a good product, and if they only have 10 percent of this type of market or five percent, then they’re going to make ‘X’ amount of dollars.” However, the execution is really the key to the profit.
I&T Today: To flip it around, what mistakes do startups make in the investment process?
Daymond John: I think the biggest mistake that startups make is actually overfunding. They go out and raise $100,000 when they only needed a thousand dollars or two thousand dollars. They don’t build their community. They think they can have whatever they have and go and advertise and make sure that people buy more of it. But if you have something that’s really not great, well, then more inventory and more advertising is just going to highlight how bad it is.
I&T Today: Speaking of, I know you’re turning 50 this year. How do you think that’s going to change how you view companies that you’re considering investing in?
Daymond John: As I turn 50 this year and I’m thinking about the new companies I want to invest in, I think about what I want to do only for the next 10 years. Listen, hopefully I’m going to be around another 30 or 40, but I want those final ones for me to be relaxing. Before I was an investor at 25 or 30, I would think about the 30-year plan in regards to investing. Now I think about just 10 years in regards to investing in startups and then I have my other investments that already have really taken care of me.
I&T Today: What do you think makes your personal investment style unique?
Daymond John: I’m not sure my personal investment style is unique because I think [Shark Tank co-host] Barbara Corcoran and I share the same theory. We invest in people. You can have anything you want, but it’s the execution. Listen, I didn’t create anything new. I came up with a t-shirt and I put FUBU on it. There’s a million t-shirts out in the world. I happened to find the better way to execute it. There’s really nothing new in this world. I always say that everything is just a new delivery, a new customer.
Listen, Uber is still a limousine service, just with geotracking. Facebook is still a nasty chain letter. You think emojis are new? Those were just called hieroglyphics a million years ago. However, if you know how to execute it and you know how to bring it to a new audience, make it lighter, faster, or stronger, then you’ve got a winner.
I&T Today: If you were to invest in a startup that you saw at this year’s CES, what type of a sector would it be in?
Daymond John: I think it would probably be in the subscription sector, where somebody’s getting the product direct to them every month, every week, or every day. You’re cutting out the middleman because you no longer you have to pay the middle man. You’re cutting out all the advertisers and marketers because if somebody is getting it right away, they don’t want to hear about anybody else, and you know the data on that person. You know their age, their gender, what they like, where they live, if they like dogs, cats, if they’ve got dandruff – whatever the case may be. You can keep selling them and then you get the feedback from them on what they want to see tomorrow. Then you create that because, if you get a whole bunch of other people saying the same thing that they want to see tomorrow, you’ve got a hit. Make it for tomorrow.