169: Billionaire Business Lessons with Shark Tank’s Mark Cuban
Mark Cuban – CEO, Entrepreneur, Business Leader
Mark Cuban: The Billionaire’s Playbook
Self-made billionaire entrepreneur Mark Cuban calls himself “the luckiest guy in the world,” but that’s not to say he didn’t work to get there. Dig a little deeper, and you’ll find some failure, tons of grit, and more than a few winning plays.
If there’s one rule Mark Cuban seems to live by, it’s that if the rules aren’t working—write your own.
The larger-than-life billionaire owner of the NBA’s Dallas Mavericks, and the richest judge on ABC’s Shark Tank, has always done things his way. At 12, he sold garbage bags door to door to make money to buy tennis shoes. In college, he opened a bar even though he wasn’t of legal drinking age yet. At one of his first jobs after college, he was fired for closing a deal with a client instead of opening up the store.
Never one to shy away from the limelight, Cuban is now a popular face on American television, where his appearances span a dizzying variety of topics.
If he’s not tearing up the dance floor on Dancing With the Stars, then he’s tearing apart pitches on Shark Tank.
If he’s not speaking his mind with political pundits on CNN, then he’s celebrating courtside with his team after a game.
“I love my life,” Cuban says. “You know, I always say someone’s gotta be the luckiest guy in the world—I’m just glad it’s me.”
Down, But Not Out
Of course, that’s just his highlight reel. No entrepreneur is immune to failure, and Cuban has had his fair share of setbacks. Which one was his most memorable?
In his 20s, Cuban started his first company, MicroSolutions, and had landed $85,000 in the bank from the two-year-old software firm. After having slogged through job after unfulfilling job, living in a three-bedroom apartment with five other roommates, and gaining 30 pounds from filling up on free bar food, Cuban had finally done it. He had launched his own successful business in an industry he was passionate about. Life was good.
And then it all came crashing down.
“One day we get a call from the bank saying that somebody who worked for us who was supposed to be going and depositing payroll checks … instead had just come through the drive-through and cashed a bunch of checks where the payee had been whited out and her name had been put in place instead,” he recalls.
Just like that, Cuban’s receptionist had run away with more than $80,000 of the company’s money. He never saw her again.
“I remember vividly, I was mad initially,” he says. Rather than dwell on the anger, though, he got to work to earn that money back.
“We didn’t die from that wound,” Cuban says. Far from it. In the years that followed, MicroSolutions grew from four to 80 people and hit $30 million in sales.
“There were times I questioned everything,” he says, “but I had my goals, and one of my goals was not to work for anybody else.”
In 1990, he sold MicroSolutions to a subsidiary of H&R Block for a reported $6 million, walking away with about $2 million after taxes.
At 32 years old, Mark Cuban was a millionaire.
Party Like a Madman, Hustle Like a Boss
When he started out, Cuban knew he wanted to retire by the time he was 35. “I didn’t have to be the richest guy,” he says, “but I wanted to be able to live like a student, travel the world, and party like a madman.”
So after he sold MicroSolutions, he did just that. He bought a lifetime pass on American Airlines, flew around the world, and partied to his heart’s content—for four years.
But once an entrepreneur, always an entrepreneur. When Cuban finally touched down in the mid-1990s, he noticed the internet was starting to take off and saw an untapped market that he wanted to be the first to seize—audio and video streaming. In 1995, inspired by this insight, he founded AudioNet.
AudioNet became Broadcast.com, and in 1999, was sold to Yahoo for $5.7 billion in stock.
And just like that, Mark Cuban became a billionaire.
In It to Win It: Mark Cuban’s Tips for Business Success
After amassing billions of dollars (Forbes puts his net worth at $3.3 billion), one could, understandably, call it quits and settle into a very comfortable retirement. But Cuban has remained active in the business world, mostly as an investor, using his hard-learned lessons in serial entrepreneurship to find the best up-and-coming companies.
So what rules can we snatch from this billionaire entrepreneur’s playbook?
Know Your Competitors
It can be easy to experience tunnel vision as you double down on growing your business, but don’t forget to stop and look around. A key component of Cuban’s business wins is that he always keeps an eye on the competition.
“Now, I’m never intimidated by [my competitors],” Cuban says, “and I never slow down. But how am I going to crush them if I don’t know what they’re doing? How am I going to crush them if I can’t stay ahead of them? And in order to stay ahead, I’ve got to keep on grinding to figure out not only how I can do what I’m doing better, not only how I can make my customers happier, but also how to anticipate what the competitors are going to do.”
Speed Isn’t Always an Advantage
Young entrepreneurs with a taste of success often feel an urgency to grow big and grow fast. But Cuban has words of advice for you:
“If you’re early in the market, and you don’t have a lot of competition, or any competition, then speed is what you need. You want to get ahead and try to own the market.” But for everyone else, he says, cool your jets. Gear for profits, not speed.
“You’ve got to figure out how to sell, and you’ve got to figure out how to make those sales profitable,” he says. “There’s never been a company that’s ever succeeded without sales, and at some point, you have to be profitable.”
While Cuban is all about having a competitive edge, he acknowledges that speed isn’t necessarily an advantage. “Unless you’re opening up a market and you basically have a monopoly on that market or just some critical advantage, speed isn’t necessarily an advantage. Just going fast to go fast usually gets companies out of business.”
Avoid Raising Money
In the startup world, founders dream of seeing their company name in a headline ending in “…Raises $15 Million.” For many, it’s the sign that they’ve made it, and many tech reporters won’t bat an eye at a bootstrapped startup.
But Cuban views things differently. “You’ve got to do everything possible not to raise capital, because the minute you take someone else’s money, then all of a sudden, instead of just your obligation being to the success of the company or your customers or your employees, you add another perspective.”
That might sound odd coming from someone who stars in a show about investing in startups. But when you take on investors, you take on a new responsibility to make them happy. “So wherever possible, I always, always, always recommend that you bootstrap.”
So if you’ve got a company in its third or fourth year of business, and it’s profitable with steady growth, keep doing what you’re doing. Cuban says if you need extra money for equipment or to enter a new market, go to the bank and take out a loan, which if you’re profitable, you should be able to pay back. But don’t go running to investors.
“Raising money is not an accomplishment,” Cuban says. “It’s actually a negative in a lot of respects. … There’s enough work, enough obligation, in running a startup or young company that investors just complicate.”
You Don’t Need a Mentor
In entrepreneurship, having a mentor is frequently touted as a necessary part of success, but Cuban admits he’s never been big on mentors, preferring on-the-job training and DIY methods instead.
“I get a lot of requests to be a mentor,” he says. “I’ll help people where I can, but I really try to encourage people to go through the process of learning on their own. Maybe it takes them a little bit longer, but it gets them in the habit of how to figure out problems, and that’s what I do.”
So if you haven’t found that all-knowing mentor to guide you, don’t fret. After all, Cuban’s come this far without one.
But don’t confuse a mentor with an advisor. Remember, advisors are typically compensated financially, such as when you take on an investor who also wants to serve on your advisory board. So the relationship is different. One is interested in your personal growth, while the other has a vested interest in your business.
Speaking of advisory boards, should your business have one? If you’re bootstrapping, Cuban recommends having a general network of people you could call for advice; you don’t necessarily need to set up a formal advisory board.
“I never with any of my companies, at the beginning, set up an advisory board,” he says. “And even towards the end, it wasn’t till we went public that we had to set up a board. So I tend to try to keep it open-ended in general. … If you’ve raised a lot of money, chances are the people who have given you the money are going to want to be in an advisory position just to keep an eye on and to help you. I think I’m the exception rather than the rule, so each entrepreneur’s got to figure it out themselves.”
Staying Ahead of the Game
So what’s on Cuban’s radar now? Artificial intelligence. “Machine learning, deep learning, neural networks. … They’re going to change the nature of work,” he says. “It’s kind of the new internet for me.” In fact, when we caught up with him, he told us he was reading a book called Machine Learning for Dummies.
“In the past, we would use technology to be descriptive,” he explains, “and then we started using technology to be predictive; you used algorithms and if this, then that, if this, do that. Now with deep learning, AI, and machine learning, et cetera, it’s becoming prescriptive, meaning you can feed information in, and the machines now are starting to think and will give you not only suggestions but strong recommendations on what to do.
“That’s earth-shattering. That’s going to change everything. So if you don’t understand machine learning and deep learning, now’s the time to get into it, dig into it, and get ahead before everybody else does.”
Mind you, it was Cuban’s determination to teach himself how to program in the 1980s that led to his $6 million success with MicroSolutions, and his foresight to pursue internet streaming in the 1990s that led to his $5.7 billion success with Broadcast.com.
Given his track record, we think it’d be a good idea to keep your eyes on AI.
5 Questions to Ask If You Want to Build an All-Star Team
No man is an island, and that rings especially true for founders. Even if you’re a champion at programming, marketing, and sales, as you scale your business, you’ll need to make key hires to take it to the next level.
“You can have the best product or service in the world, and that’s not enough if the people aren’t good,” Cuban says.
Based on Cuban’s process when hiring and managing employees, here are five questions you should ask yourself in order to build a happy, thriving team.
1. Are they a good culture fit?
Before considering new hires, Cuban asks himself, “What’s the culture of the company?” That way, even if the person doesn’t have the best qualifications, they can be trained and add something to the company as a whole.
“Maybe individually they’re not the best, but in aggregate as a group, we are, as a company, the best. And so, I really try to take a holistic approach.”
2. Can they do something I can’t?
Look for any missing skillsets in your company that you need in order to help your business thrive. Instead of hiring someone who’s similar to you, try to find someone who is complementary. “I don’t need more Mark Cubans. I need people who do everything that I don’t do and make me stronger.”
3. Do they reduce stress in the company?
“So often, particularly in startups, you get people that think there’s no way the company can live without them,” Cuban says, “and those people usually aren’t the ones that reduce stress—they’re the ones that create stress.”
So how can you tell if someone’s a “stress reducer”? If they get things done before they’re even asked. “If you tell them to do A, B, and C, they do it. And without telling you, they’re already working on D, E, and F. Those are the type of people and that’s the type of organization I want.”
4. What’s important to this person?
To help support your employees’ goals, and therefore increase workplace satisfaction, it’s important during the interview process to find out what motivates your potential new hire.
Cuban points out a few different types of job seekers: Those who just want a standard job so they can be home with their family by 5, those who want to rise up the ladder as much as possible, those who like the thrill of working for a startup, and those who see the job as a stepping stone to starting their own business. Knowing where they fall upfront is key to knowing if they’re the right fit for you.
“I try to understand what’s important to them. Because if I can convey my vision to them, where I see things going, and then convey to them how they fit into there and what I can do to help them reach their goals, then people tend to be happier at work.”
5. How can I make work fun for my team?
Cuban says he tries to find ways to make work fun so employees like coming to the office, rather than dread it. In his book, How to Win at the Sport of Business, Cuban writes about how he used to walk around handing out $100 bills to salespeople when they had a record sales month, and for two of his companies, he would occasionally take employees to a bar for the company shot, the Kamikaze.
- 04:30 – Mark’s answer to “Can you have it all??”
- 12:30 – The art of finding and nurturing the talent in your team
- 16:00 – How to deal with problem employees, without just firing them
- 18:00 – Whether mentors really matter—when you need them, and when you don’t
- 20:30 – The surprising reason you shouldn’t be looking for investment
Full Transcript of Podcast with Mark Cuban
Nathan Chan: Hey guys, let me ask you a couple of questions. Question number one, are you ready, and I mean really ready, to build a business that generates over a million dollars and beyond? And question number two, are you serious about growing your business and leveling up, giving and getting how by boosting your network with hungry hustlers and entrepreneurs just like you who think big? If you answered yes to both of these, then I would ask you to consider applying for Foundr Club. It’s our private community and training ground for entrepreneurs just like you to learn and grow your business and get access to the latest tips and insights of what’s working right now. To find out more and see if you qualify, just go to Foundrclub.com/podcast. Hello and welcome to another episode of the Foundr podcast, my name is Nathan Chan and I’m the CEO and host of Foundr Magazine and also this show, the Foundr podcast.
If you’re new to this podcast, we interview some of the greatest entrepreneurs of our generation, and I extract as much gold from them as I can to really understand what it takes to build and grow a successful business from people who are either number one or two in their industry. And this person that I’m speaking to today, the one and only Mark Cuban has … he’s at the top of his game. He’s an incredible founder, he’s one of the richest people in the world, he’s in the category of the billionaires, and he’s sold his company Broadcast.com to Yahoo, which they later IPO’d. And yeah, he made over a billion dollars from selling it to Yahoo, which is an incredible amount of money, an incredible deal, and this is a fantastic conversation. I know you guys are gonna love this one, we talked about hiring. We talked about firing, we talked about … also we talked about strategies on investing and why he believes that you actually shouldn’t raise capital unless you really need to. And also we actually had a fascinating conversation on his thoughts around sacrificing profit for growth.
Uber’s growth strategy, oh man this one, you guys are in for an absolute treat. Me and Mark actually really hit it off like a house on fire, and I think you guys are really, really going to enjoy this one. This is probably one of my favourite interviews to date. So guys, if you are enjoying the Foundr podcast, please do take the time to leave us a review, it can help more than you can imagine. I know you guys also must have friends that are founders, and they’re building businesses just like yourself so please, if you can, just let them know. Let them know about this awesome podcast, this episode in particular, and share it with them. I know they’re gonna get a tonne of gold from this like you are. And then just lastly, make sure you do check out Foundr.com. F-O-U-N-D-R.com. It’s where everything that we’re up to, it’s where everything lives, you’ll see everything we’ve got going on, we’re working on a lot of different things. I really am on a mission to build a household name, entrepreneurial brand that serves tens of millions of people every single week.
And I can’t do it without you guys. So thank you so much to take the time to share your earbuds with me, and now, let’s jump in the show. Okay, so the first question that I ask everyone that comes on is, how did you get your job?
Mark Cuban: Which job? I’ve been an entrepreneur my entire life, and so I started my first company when I was 12 selling garbage bags door to door and I just never stopped from there. And today I do more investing than anything else, but I also run the Dallas Mavericks NBA team that I bought in January of 2000.
Nathan Chan: Yeah look if anybody … A lot of people know who you are, you’re a very well known entrepreneur in this space, I’m not gonna ask you so much about your background. I have a lot of, I guess, interesting questions that … I’m gonna be quite selfish and ask you-
Mark Cuban: Okay.
Nathan Chan: I’m curious, as a billionaire, is it possible to have it all?
Mark Cuban: Yeah. I mean, look, I love my life. I always say, “Someone’s got to be the luckiest guy in the world, I’m just glad it’s me.” I have the same worries about my family and my kids and how I raise them, what they’ll grow up to be and their health. But outside the normal stuff that money can’t buy, there’s nothing bad about being rich. It’s really nice. It’s really fun. And I’m glad I’m rich.
Nathan Chan: Awesome. Can you tell us about some of your darkest times? Since you have so many successful businesses-
Mark Cuban: Sure.
Nathan Chan: … a really great story just so people can draw that, there are so many tough times as well. I want to hear about the dark side of entrepreneurship.
Mark Cuban: Sure One of my first companies was a company called MicroSolutions. I was 24, 25, and what we did was, we sold PCs and connected them to local area networks and wrote software for them. And there were four of us in the company at the time. And we were chugging along, we had been in business for two years, we had $84,000 in the bank, and we had myself, a partner, a friend who worked for me, and a girl that was our receptionist/answer the phone/would run errands, that type of thing. And one day we get a call from the bank, saying that somebody who worked for us who was supposed to be going and depositing payroll checks, instead … money for payroll instead had just come through the drive through and cashed a bunch of checks where the payee had been whited out and her name had been put in place, instead.
And I’m like, “You didn’t cash those checks, did you?” And they’re like, “Yeah, of course, we cashed them.” And so what had happened in the span of 20 minutes was this woman, Renee Hardy, had taken the checks that we thought were going out to pay vendors, used whiteout, and then wrote her name over the top of the payee, cashed them, and I’ve never seen her since. She took $82,000 of the $84,000 that we had in the bank. That obviously wasn’t a good day, but I remember vividly, I was mad initially, mad at the bank. Reviewed in my mind, could we have done anything to stop her, and I don’t think we could. And then came to the quick realisation that I had to go back to work ’cause I had to talk to the vendors, figure out ways to pay for the money we lost and get back at it and grow from there.
And fortunately, we were able to … we didn’t die from that wound and we were able to continue on growing, continue to grow. And we grew from the four people to 80 people and 30 million in sales, and sold the company to H&R Block, seven years, six years later.
Nathan Chan: Oh wow. And have you ever had times when you felt like giving up?
Mark Cuban: I don’t know that I felt like giving up, but obviously I felt nervous and scared that the company might not make it. I remember counting month to month to month, okay now we’re in business three months, we’re in business four months, five months. And every month was a victory and having $15,000 in the bank. And you also have to realise that during this time, it wasn’t like I was living the high life, I was sleeping on the floor, with six guys in a three bedroom apartment. If we went out during the weekend, we limited ourselves to $20. I mean it was … literally, I would go to bars and eat the free food … buy one beer for three bucks or whatever and eat all the bar food. And I gained like 30 pounds. So yeah, so there were times when I questioned everything, but I had my goals and one of my goals was not to work for anyone else.
Nathan Chan: So do you have a process for setting goals? Every year, even to this day, or do you have a meticulous process that you go through to make like-
Mark Cuban: No.
Nathan Chan: No?
Mark Cuban: No, I mean, my goal, when I was getting started was I wanted to retire by the time I was 35, and I didn’t have to be the richest guy. But I wanted to be able to live like a student, travel the world, and party like a madman. And so I sold my first company when I was just turned 30, and I bought a lifetime pass on American Airline and did just that. I quit for four years, used my lifetime pass on American Airlines to fly … I didn’t make it to Australia, but flew around the world and partied like a madman, and I did that for four years. And after that, I would just look for different business opportunities and did well in a few of them, but then the internet really started to take off and we saw the opportunity to really start putting audio and then video over the internet and took off … started a company called AudioNet, and really were the first people to turn audio streaming into a business and then went into video and that took off as well.
Nathan Chan: I see. I’m curious, when it comes to growth as well, you talked about you guys had running really lean, are you always big on, when you’re first starting a company in the early stages, to sacrifice profit for growth?
Mark Cuban: No, absolutely not. I mean, there’s times when you have to grow. If you’re early in the market, and you don’t have a lot of competition or any competition, then speed is what you need, right? You wanna get ahead and try to own the market. And it’s okay to not necessarily do a … to just gear for profit, but any other type of company, if you’re a service company, if you’re a basic operating company, you’ve got to gear for profit. You’ve got to figure out how to sell and you’ve got to figure out how to make those sales possible. There’s never been a company that’s ever succeeded without sales. And at some point, you have to be profitable.
Nathan Chan: I see. And when it comes to competing, I know you talk a lot about competing … I’ve read your book and it’s a great book, but I’m curious-
Mark Cuban: Thank you.
Nathan Chan: … when it comes to competition, how much should you worry about the competition to what they’re doing compared to just you, just not worrying. ‘Cause I know you love to compete.
Mark Cuban: Oh no, you’ve gotta be aware, you’ve gotta know your industry better than anybody. You’ve got to know your product, your service, whatever it is you do, you’ve got to know not only your own abilities and your own products and service but what your competition is doing because otherwise, you can’t figure out how to kick their ass. I always want to know what my competitors are up to. Now I’m never intimidated by it and I never slow down, but how am I gonna crush them if I don’t know what they’re doing? How am I gonna crush them if I can’t stay ahead of them? And in order to stay ahead, I gotta keep on grinding to figure out, not only how I can do what I’m doing better, not only how I can make my customers happier, but also how to anticipate what the competitors are going to do. I remember after we had sold Broadcast.com to Yahoo, I remember making a presentation and going, “If we do this deal, we are going to crush these competitors and we’ll preempt them and they won’t have a shot.”
And Yahoo got all upset with that and said, “We don’t think that way.” And I said, “Well, I do.” And that’s one of the reasons we didn’t get along after we sold to them and I didn’t stay there, but I’m a big believer that yes, you’ve gotta know … You’ve got to be the smartest person in the room when it comes to your product, service, and industry. And part of that is knowing the competition, as much as you can, inside and out.
Nathan Chan: I see. When it comes to scaling companies is something that you’re quite good at, also as an investor and advisor … I’m curious, when it comes to scaling companies, it comes down to people do you agree?
Mark Cuban: Yeah, I mean it comes down to everything. You can have the best people in the world and that’s not enough if the product’s not good. You can have the best product or service in the world and that’s not enough if the people aren’t good. I really try to say, what are the things that are gonna make me successful? What are the things that are gonna make this business successful? What’s the culture of the company, so that the people I bring in … maybe they aren’t the very best person that I could hire, but I could train them, they’re adaptive, they want to learn, and so they fit in our culture. And maybe individually they’re not the best, in aggregate as a group, we are as a company the best. And so I really try to take a holistic approach. But yeah, all things being equal, you want the best possible person. And then I also try to hire people that complement my skills.
I don’t need more Mark Cubans, I need people who do everything that I don’t do and make me stronger. So the more complementary you to me, the better. I also look for people who are stress reducers rather than stress increasers. So often, particularly in startups, you get people that think there’s no way the company can live without them, and those people usually aren’t the one that reduce stress, but the ones that create stress. But on the flip side, if you work with somebody and things just get done, you don’t have to worry about them. And if you tell them to do A, B, and C, they do it and without telling you they’re already working on D, E, and F. Those are the type of people and that’s the type of organisation I want.
Nathan Chan: And can you give us an example, because we often hear about the founder, but can you give us an example of like one of the best hires you’ve ever made to help you grow one of your companies?
Mark Cuban: A lot of them. I mean sales people that have really figured out new ways to sell, technology people … there’s just … it’s never just one. There are so many things that have to get done in a startup and the founder, I always tried to lead by example and be supportive and then try to turn over responsibility as early as humanly possible. And if someone’s good, I give them as much autonomy as possible. I mean, literally, I’d have to go through a list and there’s hundreds of them, not just one, and that’s a good sign.
Nathan Chan: Yeah, gotcha. When it comes to when you’re in the early stages, how do you instill a good sense of teamwork in your culture?
Mark Cuban: I try to find out what’s important to everybody when I hire them. To some people, they just want a job and they want to get home by 5:00 to be with their family. And if the job I’m hiring them for, that’s okay, then I’m fine with that. Other people, they’re ambitious and they want to rise up the ladder as much as possible. Others like the thrill of being part of a startup. Others are there as a stepping stone to do their own deal. And so I try to understand what’s important to them … because if I can convey my vision to them, where I see things going, and then convey to them how they fit into there, and what I can do to help them reach their goals, then people tend to be happier at work. And then I also try to make it fun, what are the things we can do to make it so people like going to work rather than dread going to work?
Nathan Chan: And do you think that that’s a bad thing necessarily, hiring somebody that wanna use it as a stepping stone to then go off and wanna do their own thing? Do you think that’s a bad thing-
Mark Cuban: No.
Nathan Chan: Do you encourage it or …?
Mark Cuban: It just depends on … As long as up front. Sometimes you don’t want the person to leave because they contribute a lot but typically, I try to look at the longer term. If somebody doesn’t want to be there, for whatever reason, then that’s far worse. But if they go off and start their own and hopefully complement you rather than compete with you, then there’s a future business partner out there for you that understands your organisation, understands me, and I understand them and so there’s an opportunity to work together. It doesn’t work out every time but … but again, if you know what’s happening going in, then it usually can end up positive.
Nathan Chan: I see. And how … what are your thoughts on equity, how protective should founders be-
Mark Cuban: I always give equity. I always, always, always give equity that has to be vested. So I won’t just give it and say, “Hey, welcome to the company, here’s 100 shares and if you leave tomorrow you get to keep them.” Won’t ever do that, so depending on the position and where the company is in its lifecycle, it might vest over two years, it might vest over four years, but yeah, I want every single person to be a part owner of the company. When we sold Broadcast.com to Yahoo, out of the 339 employees, 300 at least on paper, were millionaires. And that’s a great feeling. When I sold my first company, we took a million dollars that we didn’t have to and allocated it to the equity of all the employees, because I don’t have success without their success. And so I really think it’s important to share equity.
Nathan Chan: I see. And when it comes to making decisions, like how do you make decisions? Do you still have mentors now? I’m really curious around that as well.
Mark Cuban: No, I never was a big mentor guy. I mean I was kind of on the job training, learn it yourself, do whatever I have to do to figure it out type person, and so I haven’t been big on mentors. And I get a lot of requests to be a mentor, but I’ll help people where I can, but I really try to encourage people to go through the process of learning on their own. Maybe it takes them a little longer, but it gets them in the habit of how to figure out problems. And that’s what I do, when there’s a problem, when there’s an issue, it’s my job to try to figure out how to solve it. And that’s how I try to do things.
Nathan Chan: I see, that’s really interesting. So throughout your career as an entrepreneur, there hasn’t been … but of course, a board of advisors, that you learn from in that aspect though? Advisors? Yeah?
Mark Cuban: Oh, absolutely. Yeah, I mean I’ll be an advisor. Particularly if I invest money in a company, I’m gonna be there to help. Mentoring to me is someone who’s always there, all the time. When I invest in the company my approach is, I want weekly or bi-weekly reports, bad news first. Because if I’ve invested in you, I expect good news, I expect you to be successful, but every company runs into problems and the best use of my time is to be available to be able to help solve your problems.
Nathan Chan: So what stages do you think founders should set up an advisory board?
Mark Cuban: It just depends on the company. Some companies think that they should do it right away … I also think it depends on how much money you raise. The more money … if it’s just your money, I would just have a general network of people, that if you feel comfortable calling them, call them. I wouldn’t necessarily set up an advisory board. Honestly, I’ve never, in any of my companies at the beginning, set up an advisory board. And even towards the end, it wasn’t until we went public that we had to set up a board. So I tend to try to keep it open-ended in general, but I also never went out there and raised 20, 30, 40 million dollars. And so if you’ve raised a lot of money, chances are the people who’ve given you the money are going to want to be in an advisory position, just to keep an eye on and to help you. So I’m not … and I think I’m the exception rather than the rule. So each entrepreneur’s got to figure it out themselves.
Nathan Chan: And what are your thoughts on your bootstrapping … being bootstrapped forever versus raising capital? Do you think you always have to raise capital or do you-
Mark Cuban: No, the exact opposite. Sweat equity is the best equity. You got to do everything possible not to raise capital, ’cause the minute you take someone else’s money, then all of a sudden, instead of just your obligation being to the success of the company, or your customers, or your employees, you add another perspective where, okay how am I going to make the bank, or how am I going to make my investors happy? And if their perspective differs from yours, you may have other problems that you didn’t bargain for. So wherever possible I always, always, always recommend that you bootstrap.
Nathan Chan: So if you’ve got a growing company that’s growing reasonably fast, you’ve been running it for, let’s say three or four years, you’re quite profitable, got great net profits, you can see it growing month, on month, do you … would you advise for that founder to raise capital or just keep doing what you’re doing?
Mark Cuban: No. If the business is that predictable, then you can borrow money. Which, if you’re profitable, you can pay it back. And so if you need equipment or you need to enter a new market, again as long as it’s predictable and you’re very confident, then just go to the bank. And with the track record, you should be able to borrow. I think people make … I think entrepreneurs make the mistake of thinking that raising money is a win. Raising money is not an accomplishment. Right? It’s actually a negative in a lot of respects, and people get excited, “Oh, I just raised money, I got investors, I got these people that are giving me money.” Well, now that’s when the work starts. And that’s when your obligation extends, and there’s enough work, enough obligation in running a startup or a young company, that investors just complicate. So whenever possible, even if it means you’re not growing quite as quickly as you possibly can, or maybe you’re not quite as profitable as you might be with more money, having that control and owning 100% of the stock, that has incredible value.
Nathan Chan: But what about speed?
Mark Cuban: Yeah but speed … to do what though? Speed for the sake of speed doesn’t really accomplish anything. Like when you think about what comes with speed, there’s uncertainty, there’s growing pains, there’s running into situations you’ve never run into before, there’s getting competitors … visibility with competitors, so trying to go too fast, unless you’re opening up a marketplace, you basically have a monopoly on that market, or just some critical advantage, speed isn’t necessarily an advantage. Just going fast to go fast usually gets companies out of business rather than makes them … gets them to a new level profitability.
Nathan Chan: So I don’t know if you can comment on this, but I’d love to hear your take if you can-
Mark Cuban: Sure.
Nathan Chan: … on your thoughts on how Uber is … how far, how aggressive Uber is on growth. They don’t make money but they’re so extremely bullish.
Mark Cuban: Right. I mean I know Travis, I actually funded his previous company. And the beauty of Travis is that he’ll run through a wall to be successful. The problem with Travis is that he’ll run through a wall to be successful. Travis didn’t know when to slow down. He wants to own the world and because they’ve got a such a world changing concept, or they did have a world changing concept seven years ago, it’s been easy for him to raise money and he’s used that to try to take over the world. Well to my point, where the growth was somewhat organic in the United States and some other places, he’s been very successful. When he’s tried to grow just for the sake of growth, just to dominate the world, he’s had problems. And trying to grow so quickly has led to all the PR nightmares he’s had recently. The culture of his company, the issues that he’s had with local governments or national governments. All those things are things he could have avoided if he’d slowed down.
He might think that Lyft and Didi and others may come after him if he didn’t go and that’s a different discussion, but Uber is the perfect example where you have a world changing concept that’s amazing, and rather than trying to be the best company you possibly can be and treating your customers and employees the best you possibly can, he’s dug a hole for himself and he’s got to dig out right now. Now I think he’ll figure it out, but I would have done it completely differently.
Nathan Chan: Interesting. Look, I’m super mindful of your time, we have to work towards wrapping up, this has been a great conversation, just would love to hear a couple of things … What’s exciting you right now? And can you tell us more about Cyber Dust and some other things that you’re working on that excite you?
Mark Cuban: Sure. Right now, I’m mean I’m … literally, no lie, reading a book, Machine Learning for Dummies. And here, machine learning, deep learning, neural networks, there’s so much that … they’re going to change the nature of work, it’s kind of the new internet for me. You know, in the past we would use technology to be descriptive, and then we started using technology to be predictive. Used algorithms, and if this then that, if this do that. Now with deep learning, AI, and team learning, et cetera, it’s becoming prescriptive, meaning you can feed information in and the machines now are starting to think and will give you not only suggestions, but strong recommendations on what to do. That’s earth shattering, that’s gonna change everything.
So if you don’t understand machine learning, deep learning, now’s the time to get into it, dig into it, and get ahead before everybody else does. As far as other things, we changed the name of Cyber Dust to Dust Messaging. I think privacy is critically important. If you download the app … and you can add me at mcbn, M-C-B-N, and hit me with a question and I’ll do my best to answer or try to answer it. But I think in this day and age you’ve got to shrink your digital footprint. And Dust Messaging is like … it takes messaging and makes it like a face to face conversation. There’s absolutely no record of it, nobody can get the information, and to me, that’s important in business.
Nathan Chan: Awesome. Well look, Mark, thank you so much for your time, I really appreciate it, it was a great conversation, and-
Mark Cuban: Yeah, I enjoyed it.
Nathan Chan: … I’ll speak to you soon.
Mark Cuban: You got it. Thanks so much, it was fun.
Key Resources From Our Interview With Mark Cuban
- Connect with Mark Cuban on his new app Dust Messaging. (iOS/Andriod)
- Follow Mark Cuban on Twitter @mcuban
- Learn more about Foundr Club