Kevin O’Leary: Ultimate Investing Advice from Mr. Wonderful

Mindy:
Welcome to the BiggerPockets Money Podcast, where we interview Mr. Wonderful, Kevin O’Leary, and we talk about whatever he wants.

Kevin:
What I’m really shaking the stick at and shaking the bushes, if you want to call it that, and shouting out is if you’ve got a small business, get your ERC money now. Get it now before they end that program. It’s your money. It’s cash. There’s no cost to it other than the hassle and the time, but boy, I can’t find a better source of financing for my companies.

Mindy:
Hello. Hello. Hello. My name is Mindy Jensen and with me as always is my also wonderful co-host, Scott Trench.

Scott:
With me, as always, is Mrs. Amazing, Mrs. Fantastic, Mrs. Wonderful, Mindy Jensen.

Mindy:
Aw, thanks Scott. Scott and I are here to make financial independence less scary, less just for somebody else to introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you are starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments and assets like real estate, start your own business or invest in private businesses like those seen on Shark Tank. We’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.

Mindy:
Scott, today we have Mr. Wonderful, and this is such a fun episode. We kind of go in several different directions and I’m so excited to talk to him today. I’m so excited to bring this episode to our listeners.

Scott:
Yeah, it’s a wonderful episode and we are very, very lucky and fortunate to be able to learn from Kevin and his incredible money story, learn from how he’s designing his portfolio today. I think there’s a lot of really good nuggets there. This is a brilliant businessman and it’s a privilege to learn from him. Mindy, I have a quick question before we get going here, if you were invited on Shark Tank, because, of course, Kevin O’Leary, Mr. Wonderful, our guest today is one of the Sharks on Shark Tank, what business would you present for investment?

Mindy:
Oh. Scott, I’m not sure. I would have to think about that. Do you have a business you would pitch?

Scott:
I think I would, I have this idea for a community of real estate investors that would help, it would have kind of educational content like podcasts and YouTube and books. It would have tools like calculators and property management software and deal finding solutions and all those different kinds of things at a marketplace of investor friendly real estate agents and lenders. I would probably bring an idea of that sort to the show and pitch it. I’d be sure to really know all of my numbers and be able to kind of pitch the overall value proposition in 90 seconds or less though.

Mindy:
That is very interesting. I like that idea, Scott. I hope that someday I can find something just like that, smart aleck. All right, we have a new segment here on the BiggerPockets Money podcast called The Money Moment where we share a hack, a tip, or a trick to help you on your financial journey.
Today’s Money moment is, do you love eating out, but you find that it’s killing your cash flow? Use apps for low-cost eating. This includes Groupon, BigDish and Hooked, and don’t underestimate the value of Happy Hour. If you have a money tip or trip for us, you can email it to [email protected]. Before we bring in, Kevin, let’s take a quick break.
We’re back. Kevin, I think you deserve more than one adjective. Mr. Amazing, Mr. Fantastic, Mr. Wonderful, Kevin O’Leary, welcome to the BiggerPockets Money podcast. I am so excited to talk to you today.

Kevin:
Thank you so much and listen, sucking up really helps. I just love that. That’s wonderful.

Mindy:
I’ve watched your show. I am very excited about that.

Kevin:
It’s great.

Scott:
Well, we’d love to learn about your money story, Kevin. How did you get started on your journey to becoming the business magnate that you are today?

Kevin:
I talked to a lot of entrepreneurs about that seminal moment, that unique moment that sort of pushes them down that path to entrepreneurship because if you think about life, two-thirds of the population doesn’t pursue this. It’s about a third and it’s not an easy life, but there’s always some moment. For me, it was very, very distinct. It was my first job. I was working at an ice cream parlor. I just got the job. It was after hours of high school and I only took it because the girl I was really interested in was working in the shoe store across the mall. She could see the ice cream store and I figured when I finished scooping, my job was I was hired as a scooper and then when we were done, we could hang out together. It was a big plan I had on my first day working.
The store was owned by a woman, great entrepreneur, obviously. She said to me after we’d finish the day, because when you scoop ice cream, people always ask for a taster, which you use a little wooden spoon and you take a little bit of the chocolate or whatever it is and they taste it, but they take their gum out first and throw it on the floor. I know this because I was a scooper.
At the end of the day, she said to me, “You got to get on your knees and scrape all the gum off the Mexican tile before tomorrow morning.” I said, I looked across the hall and there was that girl looking at me waiting for me to finish and I thought, “This is really bad for my brand if she sees me on my knees scraping the floor.” I said to her, “No. I can’t do that. You hired me as a scooper, not a scraper.” She said, “No. I hired you as an employee. I own the store. You do what I say.” I said, “Well, no can do. Scoopers have pride. We don’t scrape.” She said, “You’re fired.” Now, I didn’t even know what that meant, but I figured it out pretty quickly and I was very humiliated.
It was at that moment where I realized there’s two people in the world. One, the person the owns the store, and the other that scrapes the (beep) off the floor and you kind of have to decide which one you are. It doesn’t mean scraping the floor is a bad thing. It just means you have to know you’ll be happy doing that and I wasn’t. I never worked for anybody again in my life. I’m very fortunate to have met her.
Years later with a camera crew, I went back to try and find her, but the store and the mall had been torn down. I owe her my entire life. I mean, without her, I don’t know where I’d be, but she was the one that humiliated me into saying, “I’ll never work for someone again.” That is the most important moment in my life just in terms of how it all ended up.

Mindy:
You never worked for anybody else. What was your next job?

Kevin:
I worked summertime between semesters, but I never had a full-time job again. I worked as a brand manager for Miss Mew Pet Food by Nabisco Brands where I learned about making pet food for Casper that was for 90 days. I had to do something, but I just didn’t want to work for anybody anymore.
Then, as soon as I graduated out of college, I started a production company because I wanted to be a photographer and my dad said, “You’re not good enough to make a living doing that.” I always felt he was wrong, but I listened to him and I also wanted to be a rock star because I also played a lot of guitar and played at bands. He said, “You’ll starve to death.” He said, “You really should go back to business school and figure out what you’re going to do.”
While I was at school, I basically shot a documentary about the process of earning an MBA, a two-year program. That film actually went on to become one of the major sales drivers for that school. They gave me extraordinary marks when I graduated for it because no one ever done that before. Right after that, I started a production company. I started making films for the NHL, the Saturday intermissions, the Saturday afternoon games. We used to run around the original six, Detroit, New York, Boston shooting these things during the week.
I sold that company. I was a film editor on a Steam Deck, a soundman cameraman, you did everything in those days. I was earning a living doing what I really wanted to do. I think I did it trying to show my dad I could. I sold that company called Special Event Television for them, my first deal ever and started the learning company. That second company, we sold for 4.2 billion.
Life has a journey. It’s a serendipitous path. You don’t know what’s going to happen. You got to pursue your passions, but to this day, I still edit. Now, it’s obviously digitally Premiere Pro. Every weekend to keep my edit chops up, I joined my social media team and I cut something just to keep my chops because editing and storytelling are now part of the digital economy and you got to know what you’re doing. It’s come full circle for me.
I cut at 4:00 in the morning on a Saturday. It’s a creative process and I write my own music and I record it, so that we don’t have to pay royalties on it. I hate royalties unless I’m getting them. That way, it’s been an interesting ride.

Scott:
Kevin, I want to ask you about your spending habits in particular when you were starting the production company or when times were leading up to that. Were you very frugal or would you have classified yourself as very frugal in those days?

Kevin:
No, I wasn’t. I learned the hard way. It’s a really interesting lesson about spending because I now work with very many wealthy families and even they outspend themselves. The only way to test yourself on this is to look at your spending habits over a 3-month period, 90 days. You can’t tell it in a week. You can’t tell it in a month because generally that spans sometimes on a holiday or something or a change of season or whatever it is. You got to take everything you spend money on. I’m talking about every dime, including a cup of coffee and put it down. Just write it down on the sheet on the right. You don’t need fancy spreadsheets here. You just have to add it all up.
Then, every source of income you have after tax, every dime you make, side hustles too, everything and I swear to you, 90% of the time, you’ll be outspending yourself regardless of how much money you make. It’ll end up on credit card debt at 21 to 23% interest. That’s how people get in trouble. They just can’t keep within their means, even when they’re really wealthy.
I mean, the more you have, the more you spend. I keep telling people, test, test your actual assumptions. Most of the time, the majority of the time, you’re outspending yourself. That’s how so many people get in trouble. I do not let that happen. I curb my enthusiasm. If I want another watch, I have to work harder.

Scott:
Awesome. How did you finance that first production company? Was that something you started, you just kind of hustled in yourself while at school or how did that get going?

Kevin:
I begged my mother for $10,000 and swore to her that if she lent it to me, I’d give her equity in all my projects and I’d pay her money back. She said, “I just want you to pay it back.” Had she taken equity in the learning company, oh my goodness, I said to her, “Mom, why didn’t you take the equity?” She said, “I don’t need it. I just wanted back the money I lent you and you paid me back with interest. Thank you.”
I mean, she was very pragmatic, but she was the one that taught me everything about finance. She was very disciplined about spending, very disciplined on what she bought, how she lived her life. She was sort of the breadwinner for the entire family. All the lessons I’ve learned about portfolio management, she wasn’t a stock picker or a portfolio manager or a fiduciary, but she did better than most of the ones I know because she just believed in diversification. She had a portfolio.
Listen to this story, it’s just crazy. When she died, when she passed away, I was the older brother and the lawyers called me down to the office and said, “Look, your mother has a will and because you’re the older brother and we’re the fiduciary, we’re going to read you this will and it’s for you to distribute.” I said, “Well, I know we’re middle class family. I’m not expecting much here.” He said, “No. No. You’ve got to come down here.”
What my mother had done from her late 20s is kept a secret account even though she was married twice, she kept this secret from both of her husbands, you could do this back in the late ’50s. As she had put it into a portfolio of telco bonds, 50%, back then they were yielding 7% because she reasons that nobody would ever turn off their phone. They turn their heat off first cause they loved to talk so much and a whole portfolio of S&P 500 companies that paid dividends. She had that portfolio for 50 years and she only lived off the interest and the dividends.
The amount of capital appreciation during that period left her a very, very, very, very wealthy woman. I was just stunned. I called my brother up and said, “You’re not going to believe this. I mean, just,” and I looked at her portfolio, no sector, 11 sectors in the S&P, back then there were only 10, she only had 20% max at any sector like energy and no more than 5% at anyone’s stock. I mean, that’s genius. That way you never get blown up. She only spent what she was earning.
She put both my brother and I through college. She bought me my first car. She paid for everything for me until the last day of college. Then, she cut me off. Then, I begged her for that 10,000 after that, but that was the last she ever gave me. She didn’t need to give me any more. The lesson she gave me was more important, and I distribute that capital around the family that she left. I mean, my goodness, what a lesson.

Scott:
Yeah, that’s fantastic. Long-term investing, great portfolio, it was just missing one piece in the learning company, I think, to put it into the 1 billion mark, right?

Kevin:
Well, listen, listen, everybody has their big one and I’ve had lots of failures since then and lots of successes, but nothing like the learning company. I mean, that was the one that set me free. I always say that, that’s the motto we have on Shark Tank, one idea can set you free forever. That’s what you need. You need a good idea and you need to stick to it. That’s the whole idea. Then, it sets you free.
I mean, entrepreneurship is not about the pursuit of greed. It’s not about money. It’s about the pursuit of freedom. That’s why the passion is there. The team, the learning company started with just nine people and we woke up one day after that sale and whoa, I mean, we’re rich. What do we do? We all went right back to work. I work harder today than ever, and I like what I do and I pursue many things, but it’s the things I want to do. I have the freedom to do that. Nobody, I don’t have to take a phone call if I don’t want to. I go wherever I would like, but I enjoy what I do and that freedom is something I deserve because I earned it.

Mindy:
Kevin, you see a ton of entrepreneurs on Shark Tank. What do you think makes a good investment and an investor worth investing in?

Kevin:
You need an alchemy of things to come together to be successful. If you think about venture investing since the 1950s when they started recording this in the Boston, Massachusetts area around MIT, about 8 out of 10 deals fail within three years and two make a thousand times on the money. It’s 80% failure rate.
The reason that happens is a wide range, but it’s never changed in terms of the percentage. When you make a bet, you’re going to be wrong 8 out of 10 times. The whole idea is trying to mitigate that risk in figuring out a few basic elements. Number one, can this entrepreneur pivot? Because whatever assumptions they’re making, particularly in NEIS’s startups, they’re wrong. Something’s going to come from market or from lack of executional skills or just black swan event, whatever it is, but can they pivot? That’s number one.
Number two, is the market they’re in disruptable? If you tell me I’m going to enter the peanut butter market, which has been around for a hundred years, and basically nobody gets a new share in that because the shelves are owned by retailers or by giant consumer goods companies, that’s not exciting for me. That’s why I don’t do hot sauce deals. I mean, as far as I’m concerned, who cares if the world has another hot sauce? Just doesn’t matter. That’s not a good place to go.
Lastly, this is something that I’ve learned as kind of a crazy statement, but so true, are they lucky? Is this a lucky entrepreneur? Someone once asked Napoleon, “What kind of generals do you want?” He said, “I want lucky generals.” I’m looking for lucky entrepreneurs and they have a certain aura about them. I can’t explain it, but I’ve been doing this for so long. I’m a pretty good judge of that. If you get all of that right, you got a winner. You just don’t know when or how. You need diversification. You got to do at least 10 deals to get to right.

Mindy:
That’s really interesting. I like that you said that you look for a company that, or you look for somebody who can pivot. I’ve seen your show and I’ve seen people who are so rigid and you guys ask questions, they’ll be like, “Well, no, it’s like this,” then that’s super interesting that you said that. Warren Buffet says he looks for companies with big moats. He invests in these companies that aren’t going to be disruptable for a very long time. I think that’s very important too. Deadpool too had that girl whose superpower was lucky.

Kevin:
That’s it. It’s sort of, another attribute, and I’ve got all this data for 15 years, is that 90% of my returns have come from companies run by women. In NEIS’ startups turns out mitigation of risk really matters. Return of capital is more important than return on capital. Women are very good at mitigating risk. That old adage will have something done, give it to a busy mother. Well, that’s certainly proven out in my portfolio. The big hits have always been run by women.
I’m a little biased. I back a lot of women entrepreneurs because I’ve had great outcomes. I always say this, look, I don’t want to start gender warfare, but I’d give money to a goat if I could get a return, but after a long period of seeing these outcomes, makes a lot of sense to back women entrepreneurs. I don’t think we do enough of that, but the outcomes are there. The data’s there.

Scott:
Kevin, one third of the people on BiggerPockets and listening to this podcast are accredited investors and are financially capable of making investments similar to the ones that you and other sharks make on Shark Tank. One part of it is analyzing the deals, but another part, I think, for a lot of these newly minted accredited investors, newly minted millionaires, is finding these kinds of private investment opportunities. How would someone who’s not a shark on Shark Tank even begin getting access to get pitched investment opportunities or to go find them?

Kevin:
The Y Combinators, all of the NEIS’ startup forums online are good places to go. The other area that’s really exploded lately, and I’ve become not only a paid spokesperson, but a shareholder at StartEngine. I mean, it’s the largest equity crowdfunding platform in America where there’s quarter of a million in investors and you don’t have to put up a fortune.
You can be average investments by $250, but if you go there, you’ll see hundreds of companies that are startups that are basically selling their equity in an equity crowdfunding format. I always tell people, “Don’t buy one, buy a portfolio of 10 because you don’t know what’s going to happen, what’s going to work,” but the Jobs Act allowed for this format of democratizing venture investing. It used to be the purvey of the venture capital firms and now they have this incredible competition because equity crowdfunding lets customers become shareholders.
There’s lots of ways to invest, but I can’t stress enough about the portfolio approach. I mean, it’s really, really important not to just bet the farm on one deal. I certainly don’t, but you’ve got to have at least seven minimum and then just maintain that portfolio and you’ll fight over time. You’ll get liquidity. You’ll have some winners. You’ll have some losers. You just don’t know when that’s going to happen but the portfolio approach works.
Every time I do a season of Shark Tank, I always say, “Well, those four deals, those are the great ones out of the 10 or 11 I’m doing or whatever it is I’m doing.” It’s never that way. It’s never, ever, ever that way. It’s always the one that I thought was just a joke. It ends up selling for a hundred million dollars five years later. It’s just you don’t know. That’s the whole point.

Scott:
Flipping the script to the entrepreneur side of things, what should an entrepreneur be doing to make themselves attractive to potential investors like yourself? What advice would you give them to show off, to make that investment more promising?

Kevin:
There’s three attributes you have to have, and if you don’t have them, you will fail for sure. These are found in every successful Shark Tank pitch. It doesn’t determine the outcome of the company, but it determines where they get a check.
Number one, you have to be able to articulate the opportunity in 90 seconds or less because if you don’t know where you’re going, no one’s going to follow you. If you can’t articulate it in 90 seconds, that’s way too much time. You should do it in 30.
Number two, what is it about you or your team that can execute on this great idea because great ideas are a dime a dozen. Executional skills are really hard to find. You have to prove to the investment community that you have executional skills or a history of executing or enough knowledge. Have you worked on this sector? Is it in the family business? Have you failed three times? You know what you did wrong? I have no problem investing in entrepreneurs that have failed before because they learn from that.
My attitude is those two are very important. If you get those right, you can start to see the path of less resistance to success, great idea, great executional skills, but the last one, and this is the killer, you got to know your numbers. How big is the market? How fast is it growing? What are the break even analysis? What’s the gross margin at each volume cycle? How many competitors are there? If you don’t know that, frankly, you get the first two right and you don’t know your numbers, you deserve to burden (beep) perpetuity.
I make sure on the context of Shark Tank that I put you there right away. I mean, you have to know your numbers. You get those three, you have a high probability of getting funded.

Mindy:
Kevin, is there anything that you would never invest in?

Kevin:
I used to say there were categories, but I invested a few years ago in Cat DNA testing kits. I mean, I thought it was a joke. The test is 29 bucks. You can buy a new cat for five, but I didn’t realize how, there’s 110 million cats in America and people really love their cats and these tests can extend their lives by 20% by telling you what to feed them based on their DNA. That was a wildly successful company.
For me, that’s not second guessing the market. Just Anna, the name of that entrepreneur, yeah, another woman, she had a great track record of great executional skills. I invested in her and that thing ended up being a monster hit for me.

Mindy:
You’ve said I invested in her several times. Do you invest in the person as much as the idea and the company or do you invest more in the idea and the company?

Kevin:
I have to love the idea. I have to love the product. I have to love the sector because very often, 8 out of 10 times, it doesn’t work out for that person that was running it and I have to make changes in management, but of course, I look at the entrepreneur. I want someone who I think has great executional skills that can pivot. I mean, that’s probably 50% of the battle.
Half is the product and the sector, half is the entrepreneur. If you don’t like the entrepreneur and I’ve seen plenty of great products run by really bad entrepreneurs that I would not invest in because I could just go find someone else that’s doing the same thing that’s a much better entrepreneur and have a much higher probability of success. That’s the way I look at it.

Scott:
Love it. If you are in a kitten, a cat DNA company, would that preclude you or would you want to stay away from other companies in that sector or do you prefer to concentrate? How do you think about diversification in the context of this type of investing?

Kevin:
Generally speaking, if I have a horse in a race, a particular race, I stick with that horse. I don’t put two horses against each other. There are a few occasions where maybe that’s different, biotech, for example, different molecules I invest in, but if I’ve got someone in food services making cupcakes, which I did Wicked Good Cupcakes, everybody called me about their cupcake company after that company because it was so successful as Shark Tank, but I’d already gone through that experience with them. We sold to Hickory Farms. I know too much about the cupcake business.
It’s sort of, I’m going to take a breather from that sector right now because I know how hard it is to establish share in that, but I’m pretty diverse. I look at a lot of ideas and it’s about time and energy and money and where does it fit in the portfolio and does my team want to work with them? I mean, I get shown so much stuff, so many deals, it just, it’s a waterfall of opportunities and we have to pick our fights and we’ve got 50 plus portfolio companies right now, 50, that’s a lot of companies.

Scott:
Well, one last question I’d like to ask is about how you think about the holistic portfolio overall. For example, when I have excess cash, I put it into an index fund or whatever. I’m wondering what does Kevin O’Leary do with excess cash? Do you set it aside for these types of investments? Do you stick it into bonds or index funds? What are your thoughts on investing for your personal portfolio?

Kevin:
It’s a great question because the Fed has been raising rates faster than they ever have since the 1960s, the cost of capital for investors and for small businesses has soared so dramatically because people say, “I can get 4.2% in money market account now, and that’s good, but inflation’s still north of six,” but that’s not the truth about access to capitals for small investors or small businesses. Their costs are high as 30% now.
I want to make a point to people that are listening that I have just learned of a few weeks ago, and we’ve now done this for all of our companies, our entire portfolio, I was made, one of the mandates that O’Leary Ventures runs is a portfolio, a venture portfolio for the legislature of North Dakota. One of our deals, our most successful shark tank companies was a company called PRx Performance.
I became knowledgeable of the merits of North Dakota and investing there and the stable tax policy, inexpensive energy and a lot of different things that make that a really good investible state, but in dealing with treasury who funded that mandate, I learned something that I didn’t know about, and I think everybody listening should listen to this, there was a program instituted at the same time in 2020 that PPP was brought into the market and everybody remembers PPP. We applied for it successfully for many of our companies to the Bank of America and all the banks administered PPP, and it was either a loan or a grant to whatever combination thereof for you.
At the same time, there was a program launched called the Employment Retention Credit. Basically, what it said was, at that time, and this is why it’s so important to understand this now, if you took PPP, you couldn’t apply for the employment retention credit and that program was 170 pages. Virtually, nobody tried to apply for it. It was too complicated, but then in the beginning of 2021, and this is where the story meanders and gets really interesting and what a wake-up call for me this is, they changed the law. The pandemic was so bad. They said, “Okay, we don’t care if you took PPP, you can still apply for the employment retention credit,” but nobody knew that.
Recently, and this is, the money’s already been spent over $250 billion, been through the budget, it’s gone. It went through treasury to the IRS. It’s sitting at the IRS. If you had a small business with W2’s in 2020 or 2021, that’s your money. You just have to go get it.
First of all, I didn’t believe it because I’d never heard of it. Frankly, if there was a program like that with the amount of companies I have, I would’ve heard about it, but I didn’t. The first thing I did was call some of the senators and governors I worked with and worked for. They’d never heard of it either. Nobody’s heard of this. This program is like a ghost and it’s real. It’s real.
The first thing I did is called up all of my CEOs have said, “Everybody, let’s go get these credits because the cost of capital for us right now is 17, 18, 19, 20, 21% credit card debt or even higher for short-term payroll loans up to 30%. This is money that’s not a loan, it’s cash that we can put right on our balance sheet. That’s when I learn how hard it is to get it. I mean, you need an expert.
What I did is I formed what’s called the Wonder Trust, and I’m shouting it out right now, I’ve got a whole team of experts that can book an appointment with you and tell you in a few minutes if you can apply or not. Then, if you can, we’ll do the entire application for you and track it through the IRS. We have enough infrastructure now. Since I started talking about this two weeks ago, we’ve had thousands of requests and I’ve become a paid spokesperson for the program, and I’m going to be for the next 25 months because it’s only around for 25 months, I’m shouting out to America, go get your ERP, your employment, sorry, your ERC, your employment retention credit. You have to get this.
Either you try and fill it out yourself or go to Wonder Trust, but if you don’t get this money, it’s yours. It’s yours. It’s already been spent. It’s already in the deficit, already gone. For me, this thing, the CRC thing is like, I’m on a mission here. I am just, every one of my companies has applied. Generally speaking, if you have 50 employees, you’ll make about 450,000 cash it’ll take you four months, but some of our companies have over a hundred and they’re getting 1.1 million cash.
This is our number one mandate in cash management now, number one, only for 25 months. Shout it out to your, tell everybody, go get this money, including you guys. If you had employees back in 2020, 2021, this is the most incredible opportunity I’ve ever seen. If you applied today, you’ll get your check in about four and a half months. It takes a long time. It’s complicated. You must have your W2 records, but we’ve done it hundreds of times now. We’ve got this thing nailed down. I’ve built a whole infrastructure for it.
It’s a really, I mean, nobody even believes it. I didn’t believe it. I didn’t believe it. It’s non-dilutive. You don’t give up equity. It’s not a loan. It’s your money that the government gave you to stay in business in 2020 and 2021. You forgot to go pick it up. It’s like you parked your car in a parking lot and you forgot about it. That’s the way to look at it.
We’re scrambling. We’re just scrambling because while we’re raising money, giving up equity or borrowing and usury rates or using credit card to fund our companies, this is the best source of capital there is. Most of my companies have more than five employees. You need 5 to 500. That’s what you have to have and then the rules are set in how you get it, but basically you get $26,000 per employee.

Scott:
Well, that’s a fantastic tip. The CRC and what’s the name of the company that you’re working with that will help you apply?

Kevin:
Just go to wondertrust.com. That’s all you have to do.

Scott:
Well, since you mentioned a really important point here, which is that the cost of capital has gone up dramatically because of rising interest rates. How would you think investors should think about that in the context of their overall portfolios with this? Is there an allocation away from these startups and venture backed, venture capital type investments towards debt, for example? What are you seeing or thinking about?

Kevin:
Well, that would make intuitive sense. If you think it’s much harder to start a business than it is, but the truth is, if you go back in history, the most incredible outcomes have been companies that were started in times of supreme economic stress, the financial meltdown. You should always have between 5 and 10% of your portfolio in venture, but not more.
Five to 10 is enough because that’s where your most extraordinary returns are going to come from, but with rates at 4.2% on cash right now, I’m now 30% in just fixed income products or duration less than five years, but I’m still 70% equities because I’m still finding that, my thinking is that we’re probably 80% through the Fed hikes and that we’re probably going to end up in a soft landing scenario.
Nobody had thought that was possible, but it’s very likely because how can we possibly have full employment. Unemployment under 4%? There’s never been a recession with unemployment under 4%. I don’t think we’re in a recession. We’re in some kind of funky chicken different zone because we put $4 trillion of free cash in the market over the last 36 months. And
That money hasn’t gone through it yet, and that’s why we’re in this holding pattern while the Fed decides where they’re going to go. Inflation’s still a serious problem. Core inflation energy and food is still a problem, but I’m always optimistic for America and equity in companies that do great job solving problems. I tend to be a little more biased towards equity, but my equity portfolio is very large captive in paying stocks. I take my risk, obviously, on venture startups. I have many of them, but I also love dividends and that’s how I pay the rent, speaking that way.

Scott:
Is that 30% allocation to debt a recent change in the last year or two or was that always the case or have you rebalanced as a result of the rising rates?

Kevin:
No, I rebalanced seven years ago. I used to be 50/50. I’m so glad I did. I’m down. I reduced my exposure to bonds. Bonds had a great run. I mean, they had a 20-year run, but I don’t think they’re that attractive right now. Even 10-year bond doesn’t even be an inflation. That’s not a good outcome for you. It’s a safe place to preserve capital while you’re looking for a home for it, but it’s not a great return under any scenario. You have to decide how much liquidity you want.
I agree, you should have some liquidity, but there’s other eclectic alternative assets. I buy watches that’s beat the S&P by 11% over the last four years. My watch collection is a great alternative asset. Some people buy modern art. I like watches. I own some Bitcoin. That’s actually been one of my better performers this year. Everybody knows the funk that cryptocurrencies are in, but the granddaddy assets Bitcoin, I have some of that. I have some gold, 5% weighting in gold, but my portfolio is pretty conservative.
The number one issue and this is what my mother taught me, by what she did was diversification. Never more than 20% in anyone’s sector, never more than 5% in anyone’s stock ever. That’s how you protect yourself in good and bad times.

Scott:
Kevin, this has been a fascinating discussion. We really appreciate your time and your insight here today. Thank you so much. Where can people find out more about you? Where should they follow you on this social media channel?

Kevin:
Well, if they have deals and we can invest in, if they have ideas in North Dakota, go to wonderfund.com or go to olearyventures.com, upload your deck. I’ve got a whole team of analysts looking at them. We are open for business. We’re announcing two new fundings next week. We are doing deals like crazy in North Dakota right now. You can certainly go to wondertrust.com if you think you can apply for an ERC loan. That’s something worth doing. If you have a small business, if you haven’t got your ERC loan, don’t wait. I mean, do not wait. It’s a remarkable opportunity. That’s at wondertrust.com.

Scott:
Awesome. I think BiggerPockets will follow up and look into that for our business. Just on quick question on your fund, are they open to both investors who wish to participate as investors? Are they 506(c) and two businesses that are looking to invest or are you just looking for businesses?

Kevin:
Well, we’re doing both. We have a lot of money to put to work. We’re trying to find companies we can invest in, but we also have, in this next deal, we’re going to announce, we brought in a co-investor that approached us and we’re being approached by a lot of co-investor saying, “What’s up in North Dakota? We are hearing a lot of good things about it. What’s up in Montana? What’s up in Florida? What’s up in Tennessee, in Texas?”
We form these groups. I mean, everything’s just go to olearyventures.com. You’ll find, you’ll see everything there, but I’m really shaking the stick at and shaking the bushes, if you want to call it that, and shouting out is, if you’ve got a small business, get your ERC money now. Get it now before they end that program. It’s your money. It’s cash. There’s no cost to it other than the hassle and the time, but boy, I can’t find a better source of financing for my companies.

Scott:
Wonderful. We appreciate that, and I will definitely check that out personally and encourage other folks with businesses to look into it as well. Thank you so much, Kevin. We really appreciate it.

Kevin:
Take care. Thanks. Bye-bye.

Mindy:
Thank you, Kevin. All right, Scott, that was Mr. Fantabulous, Mr. Wonderful, Mr. Amazing. I could go on forever, Kevin O’Leary. That was kind of a quick masterclass in investing and just being awesome.

Scott:
Yeah, I learned a lot from him. I think that, I love how he said the term when he invests in a deal like those seen on Shark Tank, he’s looking for an alchemy that involves multiple ingredients, including entrepreneur, a little bit of luck, knowing their numbers, being able to describe what they’re doing in 90 seconds or less, but also, he’s open to a number of different ideas and knows that $100 million return can come from your cat DNA company. We love our cat.
I suppose that after this show, I’m going to tell Virginia about this company, and I’m sure if little Freddy can get a couple more years of life, that we’re going to be taking into consideration, figuring out what kind of food or whatever. I had no idea that was a thing. Yeah, I’m trying to imagine having the conversation with Virginia about just getting a new cat for $5. It’s investing in and saving Fred. I don’t think it’s a financial decision there.

Mindy:
No. That’s the thing. It’s not a financial decision. It’s an emotional decision. That’s something that should have popped up within this conversation when you can make a product or invest in a company that is pulling on the heartstrings of people, people are making, people are buying this product or service based on emotion instead of rationality, people don’t make rational decisions, they make emotional decisions. A rational decision does not buy a $30 cat DNA test so that you can then buy more expensive food for your cat. A rational decision-

Scott:
Yeah. Fred ate something he wasn’t supposed to a couple months back and we spent three days in the kitty ER for $3,000. This is not a investment decision. This is a part of our family that we were more, we have completely avoided any type of purchase for food or plants or anything of that sort that could possibly be like that, 100% agree.

Mindy:
Yeah. It’s an absolutely emotional decision. You know what? Kevin, if you’re listening, that’s what makes a good investment when people buy based on emotions. All right, Scott, should we get out of here?

Scott:
Let’s do it.

Mindy:
Okay. That wraps up this wonderful episode of The BiggerPockets Money podcast. Huge thanks to our producer, Kailyn Bennett, for connecting with Kevin and his team to make this episode happen. Rounding out this epic episode of the BiggerPockets Money podcast, he is Scott Trench and I am Mindy Jensen saying, stay wonderful.

Scott:
If you enjoyed today’s episode, please give us a five star review on Spotify or Apple. If you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpocketsmoney.

Mindy:
BiggerPockets Money was created by Mindy Jensen and Scott Trench, produced by Kailyn Bennett, editing by Exodus Media, Copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.