Silicon Valley Style Investment And Startup Do’s And Don’ts

(Nashville Business Journal) – The first of many celebrity guests headed to Nashville this spring will touch down next week, when Daymond John, one of the stars of ABC’s “Shark Tank,” arrives for Inc.’s GrowCo conference (its second in the city).

In advance of his visit, I touched base with John to talk about Nashville, its investment style and what entrepreneurs should definitely not do if they want to land investors. Here’s what he had to say:

John’s investment style looks more like Nashville than Silicon Valley. Nashville’s biggest funding round in 2014 was the $24 million Series C raise by Franklin-based Digital Reasoning, a big number, but nothing close to the billions of dollars investors have pumped into companies like Uber. But John, who joined his other Sharks in dressing down a lingerie company asking for Silicon Valley-style terms on a recent episode, said he tends to be more “conservative” as an investor and less high-rolling. With his background in fashion (he founded FUBU), John said, it makes more sense to him to figure out a company’s worth from its cost of goods, its sales and its margins — hard facts, not the more nebulous estimates that get thrown around out West.

‘Shark Tank’ star Daymond John on the the real world vs. television

“I think it’s absolutely nuts, but unfortunately you have a lot of money on the streets, dumb money, that’s willing to put a million dollars into 100 companies and they won’t even blink an eye” since one may turn out to be the next Instagram, John said. “That’s just not my investment style … but I can’t blame those big companies for doing what they do.”

John has some local ties to Nashville, but no serious business interests right now.John’s mother lived in Lebanon briefly (which he pronounced “Lebn’n,” so it’s legit), and he frequently works with an attorney in the area on some of his deals. But while that professional tie brings him here occasionally and he loves the culture and night life, the invetor “hasn’t really rolled up [his] sleeves and gotten into it” to pass too much judgement either way on our entrepreneurial momentum.

He did say, however, that he’s heard, at least from his attorney, that things are “exploding down [here].”

The worst thing that an entrepreneur can do? Make assumptions. If you want to turn off John as a potential investor, make up estimates about what your company might be worth or how it might perform. He’d rather see real proof of what it can do. “I always like to say you can make up your own opinion but you can’t make up your own facts,” John said.

“When an entrepreneur makes up things such as ‘If I get one percent of this $50 billion market …’ ” the shark loses interest pretty quickly, he said.

And his best thing? Remember that you’re selling yourself. John usually shares five “shark points” with an audience, though they vary a little bit based on who’s listening. For entrepreneurs, the overall theme is to remember: “We invest in people, we don’t invest in companies.”

Nothing anyone builds is truly new, John said, most just create a new angle or approach. That means you’re most likely able to sway an investor if you remember that “you’re consistently selling yourself,” John said.