If there’s one thing Kevin O’Leary has learned from more than three decades as an investor, it’s that not every bet pays off.
On ABC’s “Shark Tank,” O’Leary has invested more than $8.5 million in roughly 40 companies since the show debuted in 2009, according to an estimate from Sharkalytics. The longtime investor and chairman of O’Shares ETFs has some notable successes, like an investment in online meal kit service Plated that later sold for $300 million.
He’s also seen his fair share of disappointing deals. “What I’ve learned after doing this a long time [is] no matter how you feel, and how optimistic you are, in the moment of making an investment, pulling the trigger, you have no idea of the outcome,” O’Leary tells CNBC Make It. “You have zero probability.”
“Anybody that says they do is full of s—,” he adds.
O’Leary says he’s learned the hard way to trust his gut when it comes to making deals. While he declined to reveal the name of the company that represents his worst “Shark Tank” investment, citing ongoing litigation, he says it was a startup in the telecommunications industry — and that he ultimately lost $500,000 on the deal.
“You put $250,000 on a deal. And then the guy calls you up four months later saying, ‘Look, I burned through all the cash. But, I know what I did wrong. I need another [$250,000],'” O’Leary says, describing the fateful investment.
The quick loss of O’Leary’s initial investment set off alarm bells in his head, he says. But, the startup founder won the investor back by admitting his past mistakes and promising to fix his approach.
“In my stomach, I didn’t feel right about it,” O’Leary says. “My gut said ‘No.’ But because I knew the guy and I liked him, and he was a friend, and yada, yada, yada … I gave him another [$250,000].”
O’Leary says he quickly realized his mistake: The company immediately went back to its free-spending ways, burning through the second $250,000 investment within two months without anything to show for it.
“He went to zero 60 days later. So I lost half a million dollars,” O’Leary says.
Had O’Leary instead heeded his own uncertainty, he would have prevented the additional losses. “The lesson is: Listen to your gut, because that is your experience [talking],” he says. “You gain that over time. You can’t forecast it. You have to learn it.”
The investor says his money-losing deals typically have a common thread: startup founders who can’t “pivot.”
“They can’t get out of their own way,” he says. “They won’t listen to anybody else.”
O’Leary calls those entrepreneurs “stupid,” because their stubbornness prevents them from changing their bad habits and tactics: “They don’t understand [that] the world moves and you have to move with it.”
To an extent, it might be an unavoidable part of investing. O’Leary says he actually expects the majority of his investments to disappoint. “You make 10 investments, you get two to three huge hits. And it pays for the other seven [failed investments],” he says.
Still, his worst-ever “Shark Tank” investment bothers him to this day because he didn’t trust his gut.
“I ignored it, and it cost me half a million bucks,” O’Leary says. “That was really stupid. I’m pissed. And I don’t forget that.”
Disclosure: CNBC owns the exclusive off-network cable rights to “Shark Tank.”