Sharkology: Mark Cuban

This post will be our the first in a series we are calling "Sharkology". A study of how some of the most well known Angel Investors approach investing. Today we look at Mark Cuban.

By now you all know who Mark Cuban is: billionaire, angel investor extraordinaire, shark from Shark Tank.

As one of the most successful and famous early-stage investors in the world, we always keep an eye on him and try to learn from his successes. Also, he is one wildly entertaining dude who really doesn’t care what other people think… and I like that!

Mark gives a ton of great advice to investors, but a lot of that is general investing advice, not something specific for startup investors.

Just for fun, let me give you a quick rundown of the quintessential general Cuban investing tips:

  • Pay off your debts before investing.

  • Don’t waste time with stocks, stocks are “probably the worst investment vehicle out there.”

  • Make risky investments, but do so with only around 10% of your money.

  • And his “number one rule of investing:” when you don’t know what to do, do nothing.

That’s all great advice, but what if you are ready to go one step further? If you’re like me, what you really want is to learn the rules Cuban himself uses to invest in startups- what I’m calling the ‘Cuban Code’.

I dug deep on Mark Cuban to unearth his greatest startup investing tips and habits for you guys, and here they are.

Let’s dive in.

If after this you’re still hungry for more angel advice, check out my personal investing strategy in the 5X Formula workshop—click here to learn more.

Mark Cuban’s Mission Statement

The core tenet of Cuban’s investment philosophy, as stated on his personal AngeLlist account, is to invest in startups that are “compelling, differentiated and run by motivated entrepreneurs."

In a world where investing advice is usually riddled with cliches and too-good-to-be-true promises, such a subtle and straight-to-the-point message might just underwhelm you.

But in that one line, those three simple terms, we find the clearest glimpse into Mark Cuban’s angel investing methodology. Here’s what he means.

Compelling: A compelling startup is one that instantly grabs your attention. For Mark, it’s about those simple ideas that automatically present their value to you.

For example, on an episode of Shark Tank, Mark was instantly compelled by a brand called Eterneva. Eterneva takes cremated ashes or hair from humans or pets and turns them into real diamonds. Mark quickly connected this idea to his own taste, saying he would have loved to turn his childrens’ hair into jewelry to give to his wife.

He also made a sizable investment in BeatBox Beverage that we have featured on StartupWire. You can watch that interview where the founders: Brad, Aimy & Justin talk about their experience with Mark as an Angel Investor.

These are the results you should be looking for when studying a startup.

When you just get it right away, or you can imagine friends and family, or yourself, using the product, you have found something compelling.

Differentiated: For the next part, you can take the long list of startup buzzwords you've been compiling over the years and toss them out. Cuban doesn't look for "revolutionary," "groundbreaking," or even "innovative" startups. He looks for differentiated startups.

This tasteful term lets us know what piques Mark’s interest. If a startup is doing something better than its competition, that’s enough. It doesn’t need to create a new market, “disrupt” a market, or anything like that. If a company does what other companies are doing, but better, it is differentiated.

Motivated Entrepreneurs: Finally, when Mark says “motivated entrepreneurs,'' I think deep down he’s looking for founders like himself.

When Mark founded his first company, MicroSolutions, he had nothing—no clients, no investors, just him and a truckload of grit. To make his first few sales he convinced his customers to pay in advance for software he didn't even have yet. He promised them that if things didn't work out, he would wash their car, walk their dog, basically do anything it takes to gain their trust and close the deal.