How I Made My First Million Dollars Part 1 | Ask Mr. Wonderful Shark Tank's Kevin O'Leary

I have an email here for this week's episode of Ask Mr. Wonderful. Uh, rather interesting, I think it's going to take us on quite a journey from Yasmina.

"Yesmina, hi Mr. Wonderful. I'm a huge Shark Tank fan. I've been watching the show for eight years. I've just graduated, and I'm off to college, and I think my first term is going to be a virtual one from my parents' basement."

Well, Yesmina, that is the sign of the times, there's no question about it. She goes on to say, "My plan is to become an entrepreneur; don't know what yet or which business sector."

Yeah, I get that. Life is like a box of chocolates; you don't know when you're just going to school what's going to happen next, Yesmina. So I get that. Then she says, "I don't think you've ever said on Shark Tank how you made your first million dollars; can I be the one to ask you that? What can I learn from that experience? I understand if you don't want to answer, but I would really like to know."

Okay, Yesmina, you're right; I never have talked about that, and maybe there are some interesting lessons to be learned there. It's sort of like the journey you're starting now in some ways, and maybe I'll tell you about some of the mistakes I made, which would be in some ways more valuable than just talking about success because I wouldn't want you to make those again. I actually feel that way about any entrepreneur that's had success; they would pass forward a path of least resistance, so to speak. Maybe give you some ideas on what not to do.

Here it is; let's pick it up where you are. I'm off to college, so I tell my stepfather, "I really want to be a photographer or a rock star," and he says, "You're nuts; you'll starve to death doing that. It's very, very hard, and it's very competitive, and those are, you know, very binary outcomes because either you're a really, really good photographer, which I'm not sure you are, to stay competitive in the commercial world. And frankly, I've heard your guitar, and you got a long way to go." Well, at least he was telling me the truth at the time.

But the point is, college is where I went, and I decided even back then, I thought, "Well, maybe I should try being an engineer because those guys seem to get jobs." I don't know what I want to do, so I enrolled in engineering, Engineering 101, also some psych classes because I wanted to meet some girls, and at the time, a very new cohort called Environmental Studies. No one had ever heard of it at the time.

Anyways, I go to my first class of engineering. Whoa, was that tough! Whoa, whoa, whoa, whoa! And I wanted to party, and I mean, look, I'm just telling you the truth, so I didn't hang out in engineering too long. I spent my four years in psychology and in Environmental Studies. In third year, I meet this girl, and we, uh, you know, it's my first serious relationship, and we move in together. She was rather artsy, and she convinced me to go to night class in cinematography, advanced cinematography. You know, I was into photography, but I'd never worked with film before.

There was some complex technology; it's not what it is today, but it was tough, and I really got into it. We were in, we'd go three hours these night classes, and then we'd film, and then we'd edit, and we'd talk about making film, and I was falling in love, but I was also falling in love with cinematography and the potential of what it could be.

Being a filmmaker kind of went into that artistic bent, but boy, that is not a place to make money easily. Um, but here's what happens: as I get into the film community, I start meeting people that say, "Look, you know, we've seen some of your camera work. Can we hire you as a cameraman? We're doing an industrial shoot, or we're doing this, we're doing that, doing some sports filming, whatever. We just need camera guys."

I'm learning the tools of the trade; I'm learning how to be a cameraman, I'm learning how to buy film, I'm learning how to budget for a shoot—industrial, commercial, you name it. I'm a sound guy, I'm a lighting guy. I mean, when you're that small, you're doing everything, and I was just learning how to do it and really loving it and working a lot. You know, going to school all day and then shooting all night, editing on weekends. When you're really passionate about something, it's fantastic if you can merge that into your work because you don't mind working 25 hours a day, and believe me, I was!

It was incredible. Eventually, I had an eight plate Steamback, which is an editing machine, right where we lived, and I was cutting film and processing and mixing sound, and you name it, then finishing off my degree. So I graduated; I got great marks in psychology, environmental studies. I go home, and my dad says to me, "Well, how are you going to get a job with this? The environmental stuff hadn't even happened yet, and psychology, tough, you know, unless you want to get into research—you want to go do your PhD? Not so easy." He was right; he's always right.

And so he said, "Why don't you go get a business degree? I know you still want to be a filmmaker, and you want to be a musician, and all this stuff, and a photographer, but why don't you get some tools, some building blocks about business? Because really, even if you pursue any of those, you know, disciplines, you're still going to need some basic business so you can run your life."

So I applied; I got in. This is where the serendipitous nature of life, the box of chocolates, starts to happen. I'm sitting down with the dean after I get accepted to the business school, and I say to him, "Dean, listen, I'm going to spend 24 months here getting this degree, and I bet you you have an ongoing need to recruit people from all around the world. Why don't you let me make a film about this experience? I'm a filmmaker. I want to pursue a business degree, but I know how to make films, and I could hire a crew. I could document this whole experience from the day everybody meets each other right through the learning in the class, what they're experiencing as time goes on, and get you the inside story of what it's like to pursue a business degree in such an intense program because MBAs are tough. Like, you burn a lot of hours; you work every day of the week."

And he said, "Let me take it up with a few of the faculty, see if I can get, you know, people to... I'll raise the flag, see if anybody's interested." And I said one other thing: "It's going to cost about 50 grand, and so I have to hire people too. I have to get lights, I gotta get camera guys, sound guys, I gotta edit the thing, I gotta rent equipment."

He said, "Let's wait on the budget; let me just find out if anybody's interested." Two days later, and when I'm just starting the program, he says, "There's a lot of interest, but you're gonna do it for thirty thousand." I said, "Done!" One of those deals, and that was the beginning of a really remarkable experience because I also said to him, "Dean, I can't do the full program and shoot a film for two years. You got to cut me some slack, give me a couple of credits on this and mark the film based on its merits and what others say about it and how it is for you as a tool to recruit. So if it's really a crappy tool, then I should get a very low mark, and if it's a really good film, you should score it highly, just like any other class in my participation."

We did that deal, and I went to work, and I shot that film, and it was a crazy experience, but when it was over, 24 months later, the film was a unique insight into what the program was about in a way no other person could have done it. It's tough; anything worthwhile is tough. I think that if it wasn't tough, our students and our alumni wouldn't be very happy because it would have been a wasted couple of years.

The big thing that you acquire as the year progresses is the ability to determine what the key issues are and what's extraneous to the problem. It was a fantastic tool for recruiting. They showed it to everybody that's going to come to that school and sent it all around the world. I got a huge score in it and I graduated like top of my class, or right up there. I can't remember what the deal was, but I did well.

Now, having shot that film, I hired a crew and I said, "Guys, why don't we form a company together? We're really good at this; let's form a company." And there was a guy named Dave Thomas, who's an incredible writer, went on to do stuff in sports television, works with Neil Young now— all kinds of interesting stuff. He's a great documentary maker and producer and just thinks in a different way.

And another guy named Scott McKenzie, who was, you know, more focused on the actual production, and I was into the, you know, I wanted to use my business tools, and I wanted to budget and I wanted to do stuff and be a cameraman. And then we were really good at it. It was called Special Events Television.

And the way we created value in television— to create value, you have to create a unique format. Like Friends, the show you've heard of, that's a format. Somebody owns that format; nobody else can make Friends because they own the format. We went into sports television; we created sports formats. Bobby Orr and the Hockey Legends was one of them. We had a huge sponsor, one of the food companies.

We did a show called The Original Six, where we got retired hockey stars from the original six teams— Detroit, Boston, you know, etc., New York— they played each other, and it was wildly successful. We made television out of it! And then we had a gold mine hit: Don Cherry's Grapevine. Remember Don Cherry, that eclectic coach with Bobby Orr in Boston? He was fantastic on television. He had a dog that he brought on; he was a great interviewer. The format caught on fire; the company took off. We were selling the shows each week; we were broadcasting them everywhere.

And I looked at my partners and I said, "Wow, look at this!" No longer, I think it was only two years later, we got bought out. It was my first transaction, and I went, "This is good! This was an incredible experience! We started with nothing, and we created this company; it was worth hundreds of thousands of dollars."

Each towards the end, I had enrolled in a night class with a computer called an Osborne computer. It was the first portable computer ever made; it was a CPM operating system. And I met this guy named John Freeman. John had designed a program that drove Hewlett-Packard plotters.

Now, when you're in television, you're always making all these graphics; it's very expensive, very time-consuming, titles— we'd have to get them printed, and there wasn't any, you know, digitized technology at that point. But John learned how to take a multi-pin Hewlett-Packard plotter, which was an X-Y axis pen driven by a computer, and do graphics for a giant oil company he worked with. He was an executive there, and he showed it to me at the, you know, and this is right after we'd sold Special Events Television.

And I looked at it and said, "John, every guy that buys a plotter from Hewlett-Packard is going to want one of these software packages. Let's form a partnership, and I'll market this stuff and you'll write the code, and I will fly all around the world and convince the plotter companies to bundle that software with their plotters." He said, "Well, but I can't give up my job; I got a family; I got kids." I said, "Look, you write code all night and weekends. I don't have a job; I just sold my company."

I remember sitting on the red chair in my living room; we were trying to name the company, and we called it Soft Key. S-O-F-T-K-E-Y— Soft Key Software Products. John and I, that was the beginning of a journey. John writes the code; we packaged it up. Our first product was called Key Chart. Every product we made had the key in front of it because we really grew the business.

But I flew down to San Diego where a woman named Mary Zoller was running the plotter division, and I put on a show. I said, "Mary, you've got to bundle this. I'll do it for $12 a unit." She just laughed at me; at least she was honest. She said, "Kevin, I'm the number one plotter on Earth; everybody writes code for me. What do I need you for? Maybe you should talk to some of my competitors."

And it was one of those, you know how your phone makes that bing when a message comes in, and that's exactly what I did. All the Japanese, all the German, everybody else that was trying to compete with Hewlett-Packard, the number one plotter, I said, "What if you bundled my software with it and you got free software? Maybe that's a competitive edge." And boy, did that work! We sold millions of copies of Key Chart— millions!— bundled with all these different plotters that were on the market. And in the end, I think we were only getting 12 cents a copy, but we were making a ton of money, and we just kept going and going and going.

Now, here's, I think, when my first million comes in. I started getting calls from everybody because it was the beginning of the dot-com era, and they wanted to invest in my company, and I called up John and said, "John, what do you want to do, buddy?" And he said, "Look, I'm just happy with graphics, you know? You want to make this thing huge; why don't you buy me out, and you go on your journey?" I said, "I'm cool with it, John." I think John's a pretty happy guy because he took some cash, he took some stock, and I'm cool with that too; he was a founder of Soft Key Software Products.

And we just kept going; we did dozens of products. We went to a trade show called Comdex, and we just got bigger and bigger. A bunch of private equity guys invested in it, and then one day, a banker came to me and said, "Why don't we take Soft Key Software Products public?" I said, "Why? Work with the finance guys, put a deal together, and I'm happy to take it public."

Now, I'll never forget the morning we went to the exchange. I woke up in the morning, and I looked at myself in the mirror, and I saw the stock was trading from the night before, and I looked at the stock price, the number of shares I had, and I went, "[ __ ]! I'm [ __ ] rich!" It never hit me until then.

And when I talked to entrepreneurs today, it's always the same. They always say the same thing: "I didn't think about the money." My point is it was never about the money. When I talked to entrepreneurs today that had the same experience, from like their basement to that huge liquidity event, they don't even think about it. It's the journey; it's the passion for the business that's what got them going. That's what got me going. That was my first million dollars; it was way more than a million.

But the whole point, it was binary; it was like zero and then a lot. This whole entrepreneurial journey— most people I talk to, they have this unique moment in their lives when this happens. And for me, it was when I was in grade 11 in high school, and I got my first job. And when I teach these days, I always tell this story, but I'll tell it to you now.

I wanted that job because the girl I was interested in in high school was working at the shoe store across the mall, and this was an ice cream store, and they were looking for a scooper. So I took the job, and the first day I was there, the owner, who was a woman, said to me, "You know when you give the little samples out of ice cream on little sticks? People take their gum out and they throw it on the floor." And this store had Mexican tiles; beautiful tiles. And the gum was, you know, got stuck on them and it turned dark; it looked ugly.

The day was over; you know, I shut all the ice cream bins down, and I was ready to get back on my bike and go home, and she said to me, "Um, scrape the gum off the floor. You can't leave before you scrape the gum off the floor." And I said, "Well..." and I knew that this girl was watching me from across the mall because if we're going to check out and, you know, go get a soda or something together, I was really looking forward to it.

And I said to the owner, "I can't; he hired me as a scooper. I'm not a scraper. I'm not going to get down on my knees," because I didn't want a girl across the hall to see me on my knees scraping gum. And she said, "No, you're an employee; you're going to do exactly what I say. This is Magoo's Ice Cream Parlor." This was Magoo's Ice Cream Parlor— it was right here; the counter was right here. And she said, "You're fired! Get out of my ice cream store!"

But within minutes, I was on my bicycle on my way home in utter shame, in shock that she had that kind of control over my life. Changed my life forever. I have never ever in my life worked for someone again. Ever! No one has ever had control over me. Ever. And never will.

And that's when that's another one of those moments where the lights go off. And I realized in life there's two types of people: there's the people that own the store, and there's the people that scrape the [ __ ] off the floor. And you kind of have to decide which one do you want to be? And I'm not dissing being an employee; there's nothing wrong with that. That's a different life. If you want that security, that's cool and you can be a great employee, and I've talked about that before. But I didn't want to be an employee. I didn't want someone to have that kind of power over me; I never wanted that ever again.

And she was the reason; I owe her so much that she twisted me that day to—and I never had a job; I never had a full-time job again in my life. I only worked for myself from that day on. That was the beginning of my entrepreneurial journey.

So, Yasmina, if you have found that, you know, I'm answering your question, you have to have that catharsis. You have to make that decision; you're going to take that path from entrepreneurship. And it's not for everybody, but if it's in you, you'll know.

So I say to every entrepreneur that's starting their journey or contemplating it—do not go after entrepreneurship out of the greed of money. You will never find it. It's a passion for personal freedom, and the only way you're going to make your first million dollars—and this is a material challenge—is you have to solve a problem for somebody. And if you solve that problem for one person and it's a similar problem that millions of other people have, that's the core of what a business is. Entrepreneurs see problems, find solutions, and that's how they create a business. Businesses are always solving problems for people.

So your first job, if you're pursuing your first million, and I've said this many times: It's not easy to make a million dollars. I've said it's virtually, you know, the most difficult task on earth because you're basically starting a business, and it doesn't happen overnight. And then the first five million is next to impossible.

And the strange thing—which maybe, you know, intuitively makes sense—is building wealth past that is about investing. It's about, you know, you make your first million as an operator, and then you become an investor. Now today, I am an investor, and I must say that I've learned a lot on the road. You know, just the journey I've had. I've had a chance to be pitched ideas from thousands of people, thousands.

And I have learned something to be true: there are three elements that are involved in every single presentation that's successful in getting finance. And if you're an entrepreneur, you're trying to make your first million, usually you need to raise capital somewhere, even if it's some friends and family.

So I want you to listen to this advice because these attributes aren't found some of the time; they're found all the time. And it's really about communications; that's what it is. It's about communicating the opportunity and making people understand it because if you can't explain where you want to go, no one will follow you.

So I recently had the opportunity to talk to the students at Mendoza at Notre Dame about this, and I want you to listen to what I said because I think it kind of summarizes a very important step. And remember, it doesn't determine the outcome of the business; this is just trying to raise capital to get started, which sometimes is the hardest part. I have a thesis; I'll tell you what it is.

What are you watching when you watch Shark Tank? You're watching the pursuit of freedom! Is there anything more noble than creating your own wealth and setting yourself free? No! That's what Shark Tank's about. It's the essence of personal freedom; it's not about getting rich. It's about achieving something for yourself that is unique to our society and capitalism— personal freedom! And that's why I'm here today; I want to talk to you about that.

That's what matters; that's what creates everything that's great in America is the ability to start a business from scratch in your basement, whether it's a cupcake or a groove book or thousands of other ideas. Create a business worth millions of dollars, employ hundreds of people, provide for your family, yourself, their families, and all the good things we enjoy from capitalism, which is freedom.

Now, there's a lot of sacrifice involved. I'm speaking to those of you in this room that want to become entrepreneurs. So let's try and learn something from the Shark Tank experience. I want to share with you, other than funny pictures like this, three common attributes to all of the deals that got funded on Shark Tank versus all the ones that didn't.

This does not speak to the outcome of the businesses; it speaks to those entrepreneurs that are able to sit in front of investors or stand there and actually get their money. And I want you to realize that there's a huge opportunity to understand something unique here. Because in each of these three cases, they were present in one hundred percent of the deals that got funded over thousands of presentations.

But in every case, these three attributes were there, and why I'm bringing it up now is I know some people are going to be up in front of me in just a few minutes, and I want them to hear what I'm saying here because maybe they want to modify their presentations a little bit.

All right, number one: in one hundred percent of the cases, the deals that got funded, the entrepreneur was able to articulate the vision in 90 seconds or less. The idea was so blindingly simple that you could understand it in a minute.

"This is a cupcake; we put it in a jar; we ship it to people for $6.95." I get it! "This is a groove book; I carved a groove in it so I can ship it at the price of a magazine." I get it! See what I'm saying? All right, 100% of the cases— 90 seconds or less.

Number two: in every case, the entrepreneur, usually a team or 80% of the time, was able to articulate why they were the right people to execute the business plan— what credentials, what confidence, what experience? Why were they able to take an idea and turn it into a business? Very important— present in 100% of the deals that got financed.

Now, this is far more sinister, this last point, because in front of me multiple times, I have seen deals that are now like an isotope sizzling. The first two are present, sharks are fighting, everybody wants in, and then this happens.

In one hundred percent of the time, the people that got financed were able to answer every single question about their business model and their numbers with perfection. When you're sitting, listening to an entrepreneur, and you start to ask them, "How much market share do you need to break even? What's your margins? How large is the market? How fast is it growing? Who's your number one competition? How much free cash flow do you think you'll make in the first three years?"

If you can't answer those questions, or you make a mistake, or you seem lost, you're screwed. This is really important; this last one's a killer, and I want you to remember that. Because I tell entrepreneurs today, if you're not good with numbers, bring someone who is; it's incredibly important.

If anybody ever asks me about Mendoza, I'm going to say the wine is excellent!

Anyways, thank you! I had a great time, and go Irish!