You may not like "Shark Tank" star and billionaire Kevin O'Leary, but you can't deny he knows a good investment when he sees one. O'Leary discussed the three traits he looks for in a founder before investing in their startup during a recent interview with Fortune.
He wants all his entrepreneurs to have what he calls a "founder's mindset." O'Leary said people with a founder's mindset can stay focused on the task at hand without getting distracted by outside "noise." That noise could be everything from personal problems to sharp criticism from the public. Regardless of the source, the best entrepreneurs can block out enough noise to stay on task and be effective.
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"The ability to see all the noise coming at you and filter it out, and focus on the three to five things you're going to get done, that's a remarkable attribute," O'Leary said. "You find that in 30% of the people. Then you want to back those people because if they're not successful in their first mandate, they're going to figure it out. That attribute is very important."
O'Leary told Fortune he wants entrepreneurs who can differentiate between what he calls "the signal and the noise". For him, the signal is what needs to be done most urgently, while the noise is mainly a distraction that needs to be blocked out. O'Leary believes that an 80:20 ratio of listening to signal vs noise is ideal.
He was open about the fact that developing this mindset takes time, and he didn't realize its importance until working closely with Apple (NASDAQ: AAPL) co-founder Steve Jobs. "You have to decide every day, every 18 hours, what three to five things you have to get done," he said. "It's not the big vision. It's what you have to get done in the next 18 hours that matters."
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Although O'Leary places a high premium on having a founder's mindset, he made it clear to Fortune that it's not the only trait he prioritizes. O'Leary believes good entrepreneurs must also be good listeners. He also admitted this was another skill that took him some time to master, which is understandable. Most CEOs and entrepreneurs possess strong Type-A personalities and a high level of self-confidence.
Self-confidence is important, but it has a potential downside. O'Leary believes that reflexively dismissing divergent viewpoints can lead to missed opportunities. "Reverse the ratio of talking and listening. Most people love to hear themselves talk—I was guilty of that for years, and I've reversed it," he told Fortune. "I listen two-thirds of the time, and I talk one-third of the time. That's my new ratio, and it's much more powerful."
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The ability to execute is the final trait O'Leary looks for in budding entrepreneurs. He also stressed that failing in a particular venture or idea does not automatically mean that an entrepreneur can't turn their vision into a winner. O'Leary acknowledged there would always be setbacks, but people who can consistently bring ideas to full fruition will eventually hit a home run.
"Great ideas are dime a dozen—executional skills are impossible to find," O'Leary told Fortune. "I've invested in lots of teams over the years that screw up their first deal, they go to zero, and then I invest again, and I get a huge hit, because I know they're good." Although O'Leary didn't mention it directly, he seems to be implying that the courage to try and fail is a key element of success.
O'Leary's comments are very revealing about the mindset that successful investors have when considering whether to commit funds to a new project. Keeping these traits in mind can serve you well, even if you're not seeking a capital injection from "Mr. Wonderful."
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