Mark Cuban isn’t impressed that you’ve raised money.
“If you think the accomplishment is raising money first, we’re probably not gonna get along,” said Cuban in an Extra Crunch Live interview. “If your orientation is ‘I got to raise the money first,’ you don’t really have a company yet, and you really haven’t accomplished anything yet. […] Sweat equity is the best equity.”
We also got his take on today’s economy, the nation’s direction and his notes on what startups should do to survive in the new world. Happily, as we had an hour to chat, we managed to cover a lot of ground. The full conversation (YouTube) is after the jump, and we’ve excerpted a number of quotes for your perusal.
But up top we wanted to share Cuban’s notes regarding which companies should accept Paycheck Protection Program (PPP) funds from the Small Business Administration. The matter became a hot-button issue in and around Silicon Valley, where initial debate centered around which startups could access the money. After it became clear the first installment of PPP funds wasn’t going to last, whether startups should access to the capital at all became a question. Some venture-backed companies even decided to return their PPP check.
According to Cuban, when PPP was first put together, the market’s “perspective was that there’d be plenty of money for everybody. You know, people didn’t really want to do the math.” Cuban said that if there was $350 billion in the pot and one million small businesses, the fund would have worked out to $350,000 apiece. “Well guess what,” he said, “there are 30 million companies, [and] like 20 of them are independent contractors.”
Once you did the calculations again with that many companies eligible for PPP funds, you could tell that the money wasn’t going to last. So Cuban told firms that he’s invested in where he has sway to “either not apply or just pay it back immediately.” Why? “For the betterment of the country and the economy,” he said, adding that “if you do have access to capital” or “your business isn’t dramatically impacted [then] let’s leave [the PPP money] for the people who need it the most.”
As noted, the full video is below (you can join Extra Crunch here!), along with Cuban’s notes on startup advice during the pandemic, American 2.0 (and Marc Andreessen’s essay), AI, pre-seed companies, his future in politics and how to pitch him.
Mark Cuban on the record
How he’s advising portfolio companies during the pandemic:
So first and foremost, communicate. Second is be honest. Third is be transparent. And fourth is be authentic. Because everybody is nervous. Everybody is terrified at a certain level. So you just have to recognize that. People are going to need that honesty from you and people are going to want communications from you. That’s been the primary thing around what these companies should do.
Regarding cutting costs: Every business is different. On the smallest ones, they’re already grinding, and it’s typically dependent on the founder. I’ve really tried to encourage people to keep all their employees on if at all possible. That there’s gonna be a lot of change and that’s going to create a lot of opportunity. So, if you can hold on to your employees and push forward in any way, shape, or form, you may have an opportunity.
The second part of all that is, as part of this complete reset, I think there’s going to be an ‘America 2.0’ where everything’s completely different. We like to think as entrepreneurs that the best ideas come from us. But in reality, because there’s going to be so much change, the best ideas might come from the people who work for you. They’re the closest to your customers and your prospects. Talking to them and getting feedback and ideas and vision from them may be the gateway to really change your business in a way that you never even envisioned.
Conserving/using runway:
You want to try to conserve runway as long as possible, not just to have it for a longer term for uncertainty, but also to invest if that moment comes when your competitors go out of business or something changes to your benefit. You want to accelerate things. You want to have capital to be able to do that.
America 2.0:
The one thing we know for certain is that we’re going through a complete reset. The way we did business two months ago is not going to be the way we do business three months from now, or six months from now. I think we’ve learned that people can be, in a lot of cases, more productive from home, less expensive from home, and more efficient at home. At the Mavs, as an example, we’re already redesigning our office and we’re going to tell some people not to come back to the office to do work.
The more important part is that there’s complete uncertainty on what America 2.0 is going to look like, and that means there’s complete opportunity. I think, in 10 years, we’ll look back and there will be a good 25 to 50 world class companies that are created out of the pandemic of 2020. So, in terms of what I’m investing in, I don’t know what those great visions are going to be. I don’t even know where they’re going to come from. It could be a 16-year-old, it could be a 60-year-old who has a vision and says, “look, we’re redoing everything. This is the way we should do it.”
The way I take my own temperature for this is if somebody comes in and I look at it and I say, “why didn’t I think of that?” That’s always my indicator that I need to pursue this and try to dig in deeper to see if they’re real. There are a lot of opportunities there. And the best part about it is I don’t know what the best companies are going to look like.
How AI fits into America 2.0:
We’re really evolving into an era of AI haves and have nots, where you’ve got the FAANG companies and a few other companies that are able to invest billions in artificial intelligence, hire the top data scientists and work through data sets and create labelled data sets and try different forms of neural networks to see what works best and what doesn’t workâand afford to make mistakes. You can’t do that as a mid-sized company. When I say mid-sized, it could be a billion dollars in sales. Mid-sized companies like that don’t have the resources, particularly now, to invest in AI like that. And small companies don’t even have a chance. So, when we get to the other side of this, it’s going to be those companies that can harness data and AI that may be able to do things more quickly than even mid-sized companies.
On pre-seed companies, dependent on the economy re-opening to launch, looking to raise money:
Look, I’m not a big fan. Raising money is not an accomplishment; it’s an obligation. You no longer own the company yourself once you raise money. If you’ve got a software project, and this is what I’ve done historically, either teach yourself, write it yourself, or find somebody who can write it for you to get to that MVP. Partner with somebody who can do it, and who’s willing to work for equity. That’s the best way to do it. If your orientation is “I got to raise the money first,” you don’t really have a company yet. You really haven’t accomplished anything yet. So, you got to find a way. That’s what entrepreneurs do. And I got to tell you some of the best companies outside of Silicon Valley have done it with sweat equity. They started with next to nothing. Sweat equity is the best equity, and you’ve got to be an entrepreneur figure it out. If you think the accomplishment is raising money first, we’re probably not gonna get along.
If/when he’s running for president:
My family’s pretty much shooting it down. I’ve kept the door open because that’s what entrepreneurs do. You always keep the door open, just in case, particularly when things are so crazy. It’s a long, long, long shot, but I’ll keep the door open because you just never know. But it’s highly unlikely. It’s just too late. If my family would have said yes, I would have run earlier. I don’t see it happening, but I’m never going to say never because crazier things have happened recently.
How to pitch Mark:
If you can find my email, you know how to reach me. I’ll tell you exactly what I do. I read the first paragraph, and if there’s something that catches my attention… If it’s a wild one, and I think ‘why didn’t I think of that?’ or there’s something where I think you have a unique edge, then I’ll keep on reading. If it’s, “I have this great idea, call me. I only need five minutes of your time.” Delete. If it’s, “we’re going to do a better job than Uber.” Delete. If you’re trying to do better than somebody else, you’re probably a feature and not a product. You’ve got to really make it clear to me why you’re a product. If you just try to tell me the resumes of the people that are on your board or advisory, then I’m going to tell you, if I have the time to respond, that you can get them to invest if they believe so strongly and they have this background. They must have some disposable income to invest. Why aren’t they funding it? Why are you coming to me? And so those are kind of the parameters I guide myself by.