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Kevin O'Leary's worst 'Shark Tank' deal left a $500,000 hole in his pocket: "My gut said..."

O'Leary has invested more than $8.5 million in roughly 40 companies since the show debuted in 2009. But his one deal resulted in a massive loss.

ABC's 'Shark Tank' is one place where ideas are turned into potential multimillion-dollar ventures. However, not all ideas churn out big money, leaving a big hole in investor's pockets instead. Famous for his keen observation, Kevin O'Leary has invested more than $8.5 million in roughly 40 companies since the show debuted in 2009. But his one deal on the show resulted in a massive $500,000 loss. 

Although O'Leary declined to name the company due to ongoing litigation, the man described the experience as a painful but valuable lesson in trusting his instincts, as per CNBC Make It. The trouble began after his initial $250,000 investment when the startup founder contacted him just four months later with alarming news. "You put $250,000 on a deal. And then the guy calls you up four months later saying, 'Look, I burnt through all the cash. But I know what I did wrong. I need another [$250,000],'" O'Leary shared.

Despite feeling uneasy about reinvesting, O'Leary allowed his connection with the founder to sway him. "In my stomach, I didn’t feel right about it. 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].” Unfortunately, O'Leary's doubts became a reality as the company quickly burnt through the additional funds without delivering any results. "He went to zero 60 days later. So I lost half a million dollars," O'Leary explained.

Reflecting on the experience, O'Leary stressed, "The lesson is: Listen to your gut because that is your experience [talking]. You gain that over time. You can't forecast it. You have to learn it." O'Leary also blames his worst investments on startup founders who fail to 'pivot' and adapt to changing circumstances. "They can’t get out of their own way," he explained, criticizing their refusal to listen to advice. O'Leary labeled such entrepreneurs as 'stupid' as "they don’t understand [that] the world moves and you have to move with it."

O'Leary is not the only Shark who had bad deals. His fellow investor, Mark Cuban, also shared his biggest investment loss on the 'Full Send' podcast, as reported by Entrepreneur. Cuban revealed he lost $500,000 on a smartphone breathalyzer pitched by entrepreneur Charles Michael Yim on 'Shark Tank' in 2013, called Breathometer. During the pitch, Yim impressed the sharks by providing champagne for them to test the product themselves. This led to a historic moment on the show: all five sharks were willing to invest, collectively contributing $1 million for a 30% stake in the company.

Despite its promising start, Cuban quickly realized there were serious problems with the business. "The guy—Charles—I looked at his Instagram and he'd be in Bora Bora...Two weeks later, he'd been in [Las] Vegas partying, and then he'd be on Necker Island with Richard Branson," Cuban explained. Yim claimed his extravagant trips were part of 'networking,' but the business was not progressing as expected. Cuban lamented, "Next thing you know, all of the money's gone."