Kevin O'Leary: 'I'm So Glad I'm An Investor In America 2.0'

Entrepreneur Kevin O'Leary is a man of many talents, and his experience in investing in small businesses and helping them grow made him the ideal person to kick off day two of Benzinga's Global Smgrall Cap Conference.

O'Leary On The State Of Small Business: The "Shark Tank" judge said he is invested in more than 50 private companies across nearly every sector.

These companies are run by entrepreneurs who have an idea of how their business can solve people's problems.

Prior to the start of the COVID-19 pandemic, a general sales breakdown would consist of the following, he said: 50% of sales from the retail channel, 40% from Amazon.com, Inc. AMZN and 10% from a direct-to-consumer website. 

Before the start of April, "every single company" O'Leary invested in had become cash-flow negative and was losing money, he said. These companies were undergoing "unbelievable chaos," as the retail category was mostly shut down.

Fast forward to today, and O'Leary said 80% of companies in which he's invested are "on fire" and on track for better-than-expected free cash flow in the fourth quarter.

"I would have never guessed that outcome," he said.

O'Leary On The 'Great Digital Pivot': Companies had to adapt to the sudden reality in late March that retail was shut down with no timeline for reopening.

This ushered in the "great digital pivot" where companies that aren't traditionally associated with digital sales moved online and saw success, he said. 

One example is Lovepop, a maker of 3-D printed greeting cards, O'Leary said.

The Boston-based company has a retail presence in New York's Hudson Yards — among the most expensive real estate in the world.

Lovepop had a great idea of creating a 3-D basket of roses that "sold by the millions" through its online channel, O'Leary said.

This was one of the many small businesses that "figured out how to survive" by embracing the direct-to-customer channel.

O'Leary On Good Expense News: Anecdotally, nearly 60% of O'Leary's staff and contacts have "no interest" in returning to the office once it is fully safe to do so, he said.

From a business standpoint, this means O'Leary can slash a lot of expenses associated with maintaining an office, he said.

Businesses will also save tens of thousands of dollars by eliminating travel. Instead of paying for a whole team of executives to travel for a sales presentation, it can just as well take place through a Zoom Video Communications Inc ZM call, O'Leary said. 

These savings will certainly add up and quickly become apparent quickly for smaller companies, he said. 

"I don't know what percentage we are going to permanently eradicate from business travel, but it's going to be a lot." 

O'Leary's Advice To Business Owners: Businesses looking for outside investments need to understand a focus on generating sales through the retail channel has now become a "dinosaur," the "Shark Tank" judge said. 

"That's something you should think about when launching your deal," O'Leary said. "You should have some significant portion of [sales] direct-to-consumer if you can because that's what investors like me want."

When the pandemic is over, "America 2.0" will be highlighted by a much more efficient economy that is more direct to consumers, with companies generating higher cash flow and superior productivity, he said. 

"I'm so glad I'm an investor in it." 

Benzinga file photo by Dustin Blitchok.