Mark Cuban and Other 'Sharks' on What Makes a Hot Business Idea

U.S. News spent two days gathering intel from the panelists on ABC’s reality show about what makes a hot business idea.

DALLAS, TX - DECEMBER 25: Owner Mark Cuban of the Dallas Mavericks stands with the NBA trophy before a game against the Miami Heat on opening day of the NBA season at American Airlines Center on December 25, 2011 in Dallas, Texas. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and/or using this Photograph, user is consenting to the terms and conditions of the Getty Images License Agreement.
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LOS ANGELES—Would you buy sunglasses made out of wood? Or a frozen "gumbo brick" you add your own chicken or sausage to? Or a bird feeder that zaps squirrels with an electric shock, to dissuade them from feasting on seed meant for birds?

These were some of the next big ideas pitched recently on the set of Shark Tank, the ABC reality show in which entrepreneurs seek funding from a panel of "shark" investors, including billionaire Mark Cuban, fashion magnate Daymond John, Canadian venture capitalist Kevin O'Leary, QVC diva Lori Greiner, tech multimillionaire Robert Herjavec, and former real-estate tycoon Barbara Corcoran, who alternates with Greiner.

The popularity of the show, which airs Fridays at 8 p.m. and is now in its fourth season, reflects a rise in entrepreneurship in recent years, due to the declining appeal—and availability—of corporate work. Entrepreneurship has also become sexy, thanks to rich celebrity innovators such as Steve Jobs, Mark Zuckerberg and, well, Cuban, who owns the Dallas Mavericks basketball franchise and has appeared on Dancing With the Stars, among other adventures.

[See The 10 Youngest Billionaires in the World.]

Everybody, it seems, has a great product that will become the next Snuggie, Razor scooter, Facebook, or Twitter. Two that got offers so far this season: a belt buckle that doubles as a beverage holder and a bedbug early warning indicator.

U.S. News sat in on two days of intensive taping earlier this fall as more than a dozen hopefuls made their case. (We were allowed to publish details of the pitches, which haven't all aired yet, provided we don't reveal whether they led to a deal or not.) Entrepreneurs who are already running a business typically ask the sharks for investments ranging from $10,000 to several hundred thousand dollars, in exchange for partial ownership of their companies. The sharks dissect the business plan, with some typically being supportive and others skeptical. Sometimes, the sharks attempt to trump each other's bids in order to get a piece of the action. Other times, everybody takes a pass. And occasionally, a gutsy entrepreneur will turn down a lowball offer or one that comes with too many strings attached.

Hanging out with entrepreneurs is a welcome antidote to the gloom that pervades much of the economy these days, since they tend to have an infectious optimism, no matter the unemployment rate or the direction of the stock market. But building a successful business can be crushingly difficult and far less glamorous than anything you'll ever see on TV. And making a pitch to investors—whether on-air or off—can be a test of any business owner's ego and grit.

A lot of people clearly buy into gauzy myths about entrepreneurship that true pros know are bunk. Some of the most common misperceptions: A great idea will automatically lead to a great business; as long as you're passionate, everything will fall into place; and more cash or better connections are all it will take to "get to the next level," a common cliché. "Most of us started with no cash and no connections," Cuban said after taping ended one day. "True entrepreneurs find a way. Those who aren't true entrepreneurs find excuses." Cuban should know. As a teenager, the Pittsburgh native earned extra cash by selling garbage bags, stamps, and coins, sharpening entrepreneurial skills that helped him launch several successful technology firms in the early days of the Internet. His latest ventures include HDNet and the Landmark theater chain.

Each shark seems to prefer investing in a particular type of enterprise. Greiner, for example, looks for businesses that have patents, so competitors can't simply steal their idea or copy their technology. O'Leary likes people who have analyzed the cost of acquiring customers and can keep it relatively low. John likes ideas that can be licensed to more established producers, which is sometimes a more plausible way to make money than trying to take market share away from entrenched companies. But all of them tend to look for innovators who can answer certain basic questions: