"Who can't get 1%"—Shark Tank investor Mark Cuban opens up about his deal-breaker

Mark Cuban, an investor on ABC’s Shark Tank and a billionaire entrepreneur, has revealed one of his key deal-breakers when evaluating pitches. He explained that entrepreneurs who rely on capturing a small percentage of a large market, such as “1%,” often fail to demonstrate a realistic business strategy. In a YouTube Short posted by MasterClass in February 27, 2024, Cuban stated:

“Because everybody's going to say, if I only get this small percentage and it seems so easy to get 1%, right? Who can't get 1%, but you can't?”

The Shark Tank investor highlighted his approach to identifying pitches that are grounded in feasibility rather than hypothetical projections.

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Shark Tank investor Mark Cuban explains why the “1% Market Share” argument fails

Mark Cuban described the common scenario in which entrepreneurs use market size projections to create an illusion of simplicity and success. He highlighted that a typical pitch might include statements such as:

“If you walk in and stand on that carpet and you say to us. This is a $7.3 billion market, and if I only get 1% of that market, I'll have $73 million in sales or profits. It's an immediate 'I'm out'.”

Cuban emphasized that this approach is flawed because it oversimplifies the process of establishing a foothold in a competitive market. He explained that gaining even a small percentage of a large market requires significant effort, including managing operational challenges, and investing in customer acquisition.

Mark Cuban underscored that pitches focused on market size without addressing these factors demonstrate a lack of preparedness and strategic insight. He added that investors, including himself, are quick to dismiss such claims as they reflect a superficial understanding of business operations.

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The importance of detailed business plans

Cuban stressed that investors are more interested in actionable strategies than in speculative claims about market share. He explained that entrepreneurs should focus on how they will effectively capture and serve their target audience, ensuring that their approach is grounded in data and realistic projections.

Cuban said that the crucial elements of a great pitch include plans for customer attraction, and competitive differentiation. He also said entrepreneurs need to demonstrate deep market and competitor knowledge.

According to Cuban, presenting a unique value proposition and clearly outlining the way to profitability is what creates investor confidence. He added that any pitch without these elements will likely fail since it lacks evidence to support the penetration of markets.

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Cuban’s broader investment philosophy

Cuban’s rejection of the “1% market share” argument is consistent with his broader investment approach, which focuses on businesses that offer innovative solutions and possess strong execution capabilities. As reported by Forbes, Cuban has invested more than $22 million in startups while appearing on Shark Tank for over 13 seasons.

Cuban underscored his preference for businesses that have potential for scalable growth. For instance, he co-founded Cost Plus Drugs in 2022 to lower prescription drug prices through a transparent pricing model. Cuban explained that this venture reflected his belief in addressing systemic challenges with clear strategies, which aligns with the types of pitches he seeks on Shark Tank.

He also emphasized that businesses need to articulate what sets them apart from others in the market. Cuban explained that this clarity, combined with evidence of market validation and operational readiness, strengthens a pitch and increases the likelihood of securing investment.

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Catch all the unique pitches and ideas in the new episodes of Shark Tank Friday at 8 PM ET on ABC. The episodes are also available to stream on Hulu.