A Shark Tank investor who used to scrape gum at McDonald's shares exactly what he looks for in deal - and why dropping out of high school was 'the single most important decision' he's made
- Matt Higgins, Shark Tank investor and vice chairman of the Miami Dolphins, leveraged his entrepreneurial spirit to overcome the financial challenges he experienced early on in life.
- Now he pays it forward bestowing life-changing investments on entrepreneurs who demonstrate that same passion.
- He dropped out of high school knowing that a high score on his GED would allow him to expedite his entrance into college.
- Higgins shares the three specific criteria he looks for when making a deal.
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Matt Higgins, Shark Tank investor and vice chairman of the Miami Dolphins, started at square one.
"I grew up dirt poor - no other way to describe it," he said during a recent appearance on the "Millennial Investing podcast. "I was born to a single mom in Queens, NY, and we just struggled a lot."
But a lack of resources wasn't enough to deter Higgins - and his entrepreneurial instincts started to kick in.
He started selling anything he could get his hands on in New York City's streets. Flowers and handbags were commonly churned as an adolescent.
Still, Higgins' dire situation wasn't getting much better. His mother's health was deteriorating and his job at McDonald's scrapping gum off the underside of chairs wasn't bringing in enough income to make ends meet. He knew he had to act fast.
Higgins figured out that if he could earn a high enough score on his GED, he would be able to get into college - a path to a higher income - a full 2 years before he was scheduled to graduate. So, at 16 years old, he made the decision to drop out.
"It was the first time I took a I took a very unconventional path that everybody told me was crazy," he said. "Dropping out of high school was probably the single most important decision I made to send my career on its trajectory."
By no means is Higgins advocating for students to start dropping out of high school. Given his pressing circumstances, it was a gamble he viewed as worth taking - and it paid off. He was able to enter college shortly thereafter and received the education that would change his life forever.
Today, Higgins boasts an estimated net worth of $150 million.
Higgins' deal-making criteria
Higgins managed to hustle his way through life in a scrappy and unconventional manner until he eventually made it work. Unrelenting grit and determination were paramount throughout his journey - and he looks for many of the same attributes when he sizes up an entrepreneur on ABC's Shark Tank.
For the uninitiated, Shark Tank features an array of entrepreneurs who make business pitches to a panel of five investors - or sharks - who decide whether or not to invest in their company.
To Higgins, the decision whether to invest in a business comes down to three criteria.
1. Scalability
"Number one: Is it a big enough business?" he said. "Is it scalable? How large is the total addressable market?"
Higgins' first deal making criteria echos an integral portion of a competitive-advantage calculation touted by Columbia Business School professor Bruce Greenwald. Without an ability to scale, a company has a low likelihood of garnering a foothold in a competitive landscape.
"I ask myself when deciding whether I want to back a deal: Is this really worth my time?" he said. "Because small ideas and big ideas take almost the same amount of energy."
The opportunity cost of Higgins' time is something that he pays close attention to. If he chooses to invest, he wants to make sure that he's not sacrificing his time for an idea that can't grow.
2. Early traction
"Are there signs or indications of early traction - whether the business or if it's pre-revenue or hasn't launched - of the fundamental behavior you're trying to tap into?" he asked. "Demonstrate that there's traction."
Higgins provides an example of an entrepreneur that made a compelling case for a drone-racing league (where drone operators competitively race unpiloted aircrafts around a series of obstacles). The entrepreneur came prepared with a series of PowerPoint slides that demonstrated how drone-racing was materially expanding throughout the world. It showcased exactly the type of traction that Higgins was looking for.
"I want to see the ramp up," he said. "I want to see - however you define "traction" - mind share, or in revenue, or viewers."
3. Voracious tenacity
"I prefer to back people who God put them on this earth to make this company," he said. "You were born to do this. You were destine to do this - and only you could do it."
Higgins is looking for entrepreneurs with an undying passion for their craft or company, but he also needs them to be self-aware.
"Then I'm assessing whether or not the entrepreneur has the unique blend of confidence and humility to go the distance," he said. "Are they confident enough to recognize that they're heading in the wrong direction and the humility to do something about it?"
If you can demonstrate those three things, Higgins says, "then I'm interested."