This Is The Worst Deal Kevin O'Leary Ever Made On Shark Tank
It's been 14 years since Kevin O'Leary joined the business reality TV series "Shark Tank" in 2009, and in those years, the Canadian investor says there's one deal that stands out as his worst. A deal that cost O'Leary half a million dollars, and one that most upsets him because he knows he could've avoided it altogether — at least, in losing $250,000 more. Speaking to CNBC's "Make It," O'Leary said that he identified what was holding this particular startup back from success: A founder who couldn't pivot.
During his time on "Shark Tank," Kevin O'Leary has made 40 deals (as of this writing), and 26 of them have been made in partnership with another Shark, per Sharkalytics. In the case of O'Leary's worst deal, which he won't name because of "ongoing litigation," it appears to be a solo deal. What's more, we could perhaps narrow down possibilities even further, given that O'Leary says his initial investment was $250,000 and that the startup was in telecommunications. But, regardless of what the actual deal was, the big takeaway of it all is that O'Leary considers it his worst for one reason: He didn't trust his gut.
Ignoring his gut cost O'Leary
For Kevin O'Leary, it didn't take long for his worst-ever "Shark Tank" deal to show warning signs. According to O'Leary, the startup's founder contacted him four months after his initial investment, only to tell him that the cash was gone (via CNBC). However, in that time, O'Leary says he became friends with the founder and, though his gut told him something was wrong, he agreed to another round of funding of $250,000.
As O'Leary explains, this second time around, the startup's founder burned through the cash in half the time. And in the end, O'Leary was left with a $500,000 loss, with nothing to show for it. Yet, he said investment disappointments are more likely than successes, estimating it happens about 70% of the time. However, when it comes to this worst deal, it seems it wasn't so much that his investment didn't pay off, but that O'Leary feels he should have cut his losses sooner.
As he said, he already recognized that this founder wouldn't pivot, i.e., "listen to anybody else," change "bad habits and tactics," and make adjustments. As he told "Make It," "I ignored it [his gut], and it cost me half a million bucks. That was really stupid. I'm pissed. And I don't forget that."
His most lucrative deal
Per Sharkalytics, Kevin O'Leary has made 40 deals in 131 episodes on "Shark Tank." His average investment is a bit lower than the $250,000 he gave to his worst "Shark Tank" deal ever, at $213,575. His median investment, meanwhile, is $100,000. Further, his average equity stake is 17%, and his median is 15%.
While O'Leary lost half a million dollars in his worst "Shark Tank" deal because he didn't trust his gut, he can also credit his gut for his most lucrative deal, so far. The business was Plated, a meal-kit company O'Leary invested in a year after the startup appeared on "Shark Tank," in May 2014 (and Mark Cuban dropped out).
When presented with the opportunity to invest again in Plated, O'Leary's gut told him that it was a good one, but, as he explained to Barbara Corcoran on her YouTube show "UNCORC'D," he didn't want his stake to get diluted as Plated brought on more investors. So he did invest in the startup, but only after negotiating a "ratchet" to ensure his percentage wouldn't diminish. Later, in 2017, when Albertson's bought Plated for $300 million, O'Leary says his 2.5% stake netted him $3.5 million.