Ask the Legends: Kevin O'Leary

By Ian Portsmouth, September 10, 2010

Kevin O'Leary, 56
Career highlights
Lives much of his childhood in developing nations due to his stepfather’s job with the U.N.’s International Labour Organization.

Earns a degree in environmental studies and psychology in 1977, and an MBA in 1980.

In 1983, he and partner Michael Perik launch SoftKey Software, which PROFIT names Canada’s Fastest-Growing Company in 1992. Subsequently acquires several educational software companies, including The Learning Co. (TLC), which becomes the company’s name.

In 1999, Mattel Toy Co. acquires TLC in an all-stock deal worth US$3.8 billion. O’Leary and Perik are soon let go after TLC proves not to be the cash cow Mattel had hoped for.

The experience sparks a new interest in investing. O’Leary becomes an outspoken critic of poor investment-management practices, earning a regular spot on TV’s Business News Network in 2003.

Joins the cast of CBC-TV’s Dragons’ Den in 2006 and Shark Tank on
ABC-TV in 2009.

Launches O’Leary Funds Management in 2009, which now boasts more than $1 billion under management.

How did growing up in several developing nations benefit you?
I wouldn’t have known it then, but it certainly has become a powerful motivation for what O’Leary Funds has become. It was very easy for a long time simply to buy Canadian assets and hope you could garner a good yield from that. Today, it’s far more challenging. We are going to have a slower GDP growth than the rest of the world because we are an aging population.

When I go to Brazil, India, China, South Korea, Thailand, Cambodia—Tunisia, even—these economies are on fire. A massive middle class is emerging. The fact that I know where Phnom Penh is and can actually get around town because I lived there, the fact that I know Cyprus, which is the headquarters of all the shipping licences in the world, makes me very comfortable as an investor in these places.

You’ve been described as someone who, even as a kid, has always had an “angle.” What made you so enterprising at a young age?
If you know you want something, why not ask for it? What’s the downside? All they can say is “No.” I learned early on, if there’s something I want, I’m prepared to ask again and again, and try to find the path to getting it. That’s also, I think, what defines an entrepreneur. You set a goal, you may not succeed the first time, but you keep trying.

Which of your fellow Dragons’ Den co-stars would best complement you in business?
The guy that I’m most in sync with is Jim Treliving [chairman and owner of Boston Pizza International Inc.]. My theme of investing now is far more conservative; I’m a value-yield investor. How much money do you have to tie up for how long before it becomes liquid again is the No. 1 question. I think, out of all the other Dragons, Jim’s the one who focuses on that the most.

Which Dragon would you pick if you were an operator rather than an investor?
I’d pick me, every time. I’ve had a fair amount of success, but I’ve also had a fair amount of failure. People don’t tend to focus on failures, but they are what make me a better investor and a better partner.

I think people spend too much time focusing on success and not enough on failure. I’d much prefer to invest in an entrepreneur who has failed three times than one who thinks he’s going to get it right the first time. The calluses you get, the experience of failure, are powerful things. I see too much vim and vigour in young entrepreneurs who don’t understand how hard it’s going to be.

What has your role in Dragons’ Den in Canada and Shark Tank in the U.S. told you about the difference between the two countries?
What I’ve learned about the U.S. market is that no matter how proprietary you think a deal is, when you get into the due-diligence phase, you’re going to find five other guys doing the same thing. That market is so competitive, so large and has so much potential, if you end up being the winner you often find a very similar business plan to any idea. That puts a lot more pressure on the due diligence in deals on Shark Tank that we don’t have in Canada. In Canada, you’re dealing with an economy that’s a tenth of the size. It’s easier to get stuff done here, particularly if you have an idea that’s groundbreaking. You can lift it off in the Canadian market and know you won’t have a lot of competition for the first two years.

What would you tell an aspiring entrepreneur about investor due diligence, which can be traumatizing?
Dragons’ Den works because it highlights the good, the bad and the ugly of the fundraising process. First, you have to present your idea; second, you have to convince the Dragons that you’re the right person to execute it, which is another huge challenge; third, everything you say—everything—has to check out, 100%. Just think about how often the tendency is for an entrepreneur to embellish a statement, or perhaps add an element of optimism that shouldn’t be there. Think of how much that frustrates an investor later, when they send in their lawyers and auditors. I mean, I’ll tear you apart six times. If one thing falls apart, that’s a huge problem for me.

Others on the panel care about the emotional aspect of this; they don’t want to hurt anyone’s feelings. I don’t care. It doesn’t matter. This is business. It’s war, it’s competitive, it’s hard. And if you can’t take the heat, don’t come in.

What makes for a great leader?
To me, great leadership is being able to stand up in a room full of your employees and say, “This is the goal. It’s the only thing that matters.”

If leaders can’t articulate the short-term, medium-term and long-term goals of their company and stay on message, they’re going to fail.

Even if you have your own personal doubts, they can’t show. Everybody in that room has to say, “He knows what he’s doing, he knows how he’s going to get there and I believe that by following them, I’ll get there, too.” You’re going to have that moment of self-doubt, but that moment is what defines you as a great leader or a weak one. You can’t show your weakness; you can only show your strengths, and modify your goals based on the reality and feedback of what the markets and business do.

When you refused to scrape gum off the floor of an ice-cream parlour you worked in as a teenager, you were promptly fired. What did that teach you?
I considered it a demeaning role I hadn’t signed up for. When I got terminated, I had no say in the matter. That is what affected me. I have to be in control of my environment—and you can’t be in control when you’re an employee. And I think that is the motivational drive of most entrepreneurs.