The opening sequence of Shark Tank gives just a little information about each of the venture capitalists that stand between the show’s hopeful entrepreneurs and the big time. While all of the Sharks have great back stories that involve things like turning a $10,000 loan into a dynasty or starting as a waitress and ending up with a real estate empire, Mark Cuban remains a high-profile mystery. None of the Sharks has Mark Cuban’s fame, but all of them now have more well known rags-to-riches stories than he does. So, how did Mark Cuban become Mark Cuban? How did he make his fortune?
The answer is that Mark Cuban is a salesman, and what he’s best at selling is himself. He made his fortune by buying low, selling high, and keeping moving. He seems to be able to spot a promising venture, market and develop it like crazy, and then get out for top dollar. If you had to boil down his super power to one thing, you would have to say that he is the master of getting out when the getting’s good.
But, what did Cuban’s meteoric rise look like in concrete terms? Of course, Cuban has now made countless deals, but there are two transactions in particular that really launched him into the capitalist stratosphere. First, it was MicroSolutions. Then, it was Broadcast.com.
According to a 1999 story at CRN.com, Cuban started learning about computers in the 1980’s because he got a job at a computer company in Dallas, Your Business Software, right after he graduated from college. He wasn’t particularly interested in computers. According to him, he took one class in Fortran in college and had to cheat to pass that class. But he was driven to make money, so he learned everything he could about the software he was hired to sell and the computers that it worked on. As the story goes, Cuban clashed with his boss and got fired, but not before he had developed some computer skills and a rolodex full of contacts.
Cuban started MicroSolutions, a value-added retailer in computer hardware and software systems by working that rolodex and offering computer support to the businesses to whom he had previously sold software. What distinguished MicroSolutions from similar firms was not technological sophistication but rather Cuban’s networking and image cultivation. He knew sales, so he employed a much larger sales force than other firms. And rather than working out of someone’s basement, MicroSolutions occupied a prominent Dallas office space, even if Cuban did have to rely on some of his customers to help subsidize it. By 1990, MicroSolutions, which Cuban built from scratch, had $30 million in annual sales, and CompuServe bought the company for $6 million. $2 million from that deal went straight to Cuban.
So, what do you do with $2 million? Well, if you’re Mark Cuban, you turn it into billions.
In 1995, Cuban and his partner, Todd Wagner, started a dot-com company called AudioNet.com that would eventually be renamed Broadcast.com to better indicate the breadth of media services it offered. Before Netflix was a glimmer in Reed Hastings and Marc Randolf’s eyes, Broadcast.com provided streaming internet. It was a great idea, of course, but one that internet bandwidth at the time did not make very feasible. The details of the company’s rise and acquisition is a complicated romp through the dot.com boom of the 1990’s, but the punch line is: Broadcast.com never turned a profit, and Yahoo bought it from Cuban and Wagner for $5.7 billion. At the time of the deal, Broadcast.com stock was trading at $30/share, and the purchase price reflected a valuation of $130/share. How did Cuban pull this off? Well, he’s Mark Cuban, silly. And, a billionaire was born.
What makes Cuban’s story particularly interesting to me, as a fan of Shark Tank, is that he has displayed in his career exactly the instincts and skills best suited to make Shark Tank deals. He looks the entrepreneurs in the eye, listens to their pitches, and flashes forward to how much he’s going to make when he sells. It almost seems like the show was made just for him. Oh wait, maybe it was.