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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Would your enemies buy it?

One common mistake entrepreneurs make is falling in love with their own idea or testing it out only within the comfort zone of family and friends. "Entrepreneurs constantly tell me, 'My friends love it,' " said Corcoran. "I can't think of a worse test. Instead, pitch your ideas to enemies. Take it to your mother-in-law. Falling in love with your own concept is poison."

While seeking funding for his "Gobie H2O" water bottle with a built-in filter, entrepreneur Rusty Allen of San Diego did a demonstration for the sharks in which he filled one of his bottles with dirt, poured in water, attached the filter, and then drank the crystal-clear water that came out. It must have wowed his friends, but the sharks raised a few tough questions. "You're drowning in perceived opportunities," Herjavec told him, pointing out that other companies—including big ones like Brita—sell similar products. "Tell me one unique thing about your product. When you're small, you've got to know what's the one thing that makes you different." Allen countered that his bottle is good for the environment and also saves money, since it eliminates the need to buy disposable plastic bottles of water.

Michael DeSanti of Honesdale, Pa., tried to convince the sharks that there were millions of potential buyers for his "Squirrel Boss" bird feeder, which comes with a remote control the owner can use to send a nonlethal electric current through the feeder when a squirrel starts gobbling up the seed. The sharks found it to be an entertaining idea—but wondered whether millions of people would be willing to shock squirrels. "It's a quirky product," Herjavec told him. "We're just not seeing the business." DeSanti buffered his case by explaining how he might be able to lower the price and add features that would appeal to more people.

Does it target the right niche?

Entrepreneurs can also become so attached to their original idea that they lose sight of broader opportunities. Robert Gifford of Everett, Wash., pitched a line of modular, multifunctional furniture, which he called "Geek Chic" because of his own predilection for slide rules and protractors. The sharks liked the product, but challenged the positioning. "We have to take the geek out of it," Greiner insisted. "I don't know how that helps your marketing." The sharks suggested that he try to broaden the appeal, and make sure potential female buyers didn't get turned off. Gifford staunchly defended his geek label, confident he had identified an underserved niche.

Have you tested the market?

Any investor willing to fund a business is likely to ask for evidence of thorough testing in the marketplace. Dallas entrepreneurs Aimee Miller and Megan Carreker, who sought backing from the sharks for their upscale line of "Hip Chixs" jeans, got an earful on the importance of rolling out their products in more than just a few boutiques before asking for money. The Dame brothers of Boise, Idaho—Brooks, Tanner, and Taylor—earned some quick credibility with the panelists by explaining how their company, Proof Eyewear, already has a contract with retailer PacSun to sell thousands of pairs of its trendy wooden sunglass frames at prices starting at $90. "The good news is, in a down economy, you're getting interest in your product," John told them. "It's also good that you're in the only thing that's selling right now, and that's accessories."

[Read: How to Build a Creative Business.]

Is it scalable?

One of the trickiest moves for any startup is scaling the business from a small company with modest sales and a few employees up to an operation that can fulfill large orders, finance lots of inventory, and absorb the shock when something goes wrong. Getting over this hump is a main reason entrepreneurs seek outside financing, along with the kind of expertise the sharks and other investors might be able to offer. But many businesses aren't as scalable as their founders think. Established competitors can be powerful and ruthless. And a product that's popular among a small band of enthusiasts won't necessarily be a mass-market hit.