Billionaire investor and Shark Tank host Mark Cuban revealed on the ‘Full Send Podcast’ that his overall investments from the show have resulted in a net loss, admitting, "I’ve gotten beat."
Since 2009, Cuban has invested approximately $20 million in 85 companies across 111 episodes. Shark Tank, a popular TV show, features entrepreneurs pitching their business ideas to a panel of hosts, who decide whether to invest based on the potential and feasibility of the proposals.
However, Cuban's disclosure of the losses gives three key lessons, according to a Moneywise report.
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Top three takeaways from Mark Cuban's portfolio
1) Startups can be very risky
Mark Cuban's net loss isn't unusual in these types of investments called angel investing or startup investing as they are all about early-stage startups with a short track record and data from San Francisco-based research organization Startup Genome shows that 90% of startups eventually fail.
Because of this, venture capitalists rely on the “power law” which means they expect only one or two firms in their portfolio to offer such massive returns that it balances out all losses made by the rest of the portfolio.
{{/usCountry}}Because of this, venture capitalists rely on the “power law” which means they expect only one or two firms in their portfolio to offer such massive returns that it balances out all losses made by the rest of the portfolio.
{{/usCountry}}Another thing to consider is that losing $20 million would barely hurt Cuban since his net worth is $5.7 billion, according to Forbes.
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2) Established businesses are much safer investments
Established firms with strong track records are a much safer investment than early-stage startups. For example, Cuban acquired a majority stake in the NBA’s Dallas Mavericks for $285 million from real estate developer Ross Perot Jr.
However, this was 20 years after the brand was established and it would go on to become one of his most successful investments.
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3) Diversification is paramount
Mark Cuban's portfolio goes far beyond the 85 companies he invested into from Shark Tank in categories ranging from affordable generic drug companies to tech and entertainment companies. This off-sets his losses a lot.
And most importantly of all, whatever he earns from the TV show itself can be an offset to the losses.