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We have been talking about some startup failures in another series and how entrepreneurs can learn from these mistakes. Here, we shift gears to learn from a serial founder, Carey Smith. Starting at age nine, Smith sold handmade crafts and later Christmas cards door to door. As the oldest of four, he needed to supplement his family’s income for any extras so by high school, he sold shoes, set type for a newspaper, and changed bedpans with a cleaning crew. His main takeaways from his experiences were opinions on types of leaders and employees. By 1981, he started his first company, and then as outlined below, he had a successful exit. This July, Smith started Unorthodox Ventures, based in Austin, Texas, bringing his strong work ethic and customer-centric views.
Mary Juetten: What problem are you solving?
Carey Smith: Unorthodox Ventures is an incubator for new ideas and businesses. I’ve assembled a team dubbed “The Kitchen,” named for their penchant for cooking up unique ideas and new ventures. We’ll launch businesses of the team’s choosing, whether it’s raising indoor shrimp, brewing craft saké or designing sustainable modular housing.
Juetten: Who are your customers and how do you find them?
Smith: As we launch businesses, all will connect directly to customers. I firmly believe that selling direct is best. When you sell direct, you know your customers, how they use your products and how you can improve.
Juetten: How did past projects and/or experiences help with this new project?
Smith: In 1999, I started an industrial ceiling fan company with six employees off the proceeds of a previous business. Things soon took off, and over the next 18 years, Big Ass Fans grew more than 30 percent annually to $262 million in sales. We had 1,000 employees at our offices in the United States and around the globe. Over that time, we expanded by designing and manufacturing fans for commercial spaces and homes, as well as energy-efficient LED lighting. In all that time, I never accepted outside funding. Then, in late 2017, ready to move on to a new challenge, I sold Big Ass Fans to a private equity firm for $500 million. About $50 million of that went to more than 100 employees who had been granted stock appreciation rights for their hard work and dedication, minting 15 overnight millionaires.
Every year, entrepreneurs start more than half a million companies in America. Only 200 of them will ever reach $100 million in revenue. I know what it takes. By starting Unorthodox Ventures, I get to return to the part of entrepreneurship that I’ve always enjoyed the most. A company is the right size when I know everyone’s name, and we get to spend our days finding creative solutions to our customers’ problems.
Juetten: Who is on your team?
Smith: The incubator includes several former Big Ass Fans employees. These employees, most of whom are in their 20s and 30s, are all very creative, driven and did an outstanding job running various divisions and departments of the company.
Juetten: Did you raise money?
Smith: Just like Big Ass Fans, I’m bootstrapping this venture.
Juetten: Startups are an adventure – what’s your favorite startup story?
Smith: I founded Big Ass Fans in 1999 as The HVLS Fan Company, a nod to how our fans operated by moving high volumes of air at low speeds. But customers kept calling and asking if we “made those big ass fans.” We listened to them and changed the name. It was an important early lesson in listening to our customers, and that served us well over the years. Because we sold direct, we stayed in constant touch with our customers. We knew who bought our products, how they used them and what problems they needed to have solved. For Big Ass Fans, that meant expanding to fans for the office, the home — even lighting. My advice to other startup founders is to connect directly to your customers at every step from sales to service. That’s how you ensure a loyal customer base and long-term growth.
Juetten: How do you measure success and what is your favorite success story?
Smith: From my perspective, success means being able to take care of your employees. The first time I really felt I’d achieved this was during the Great Recession when we refused to lay anyone off despite a dip in revenues. Not only was the decision the right one for our employees on a personal level, but it was also the right thing for the company in the long run. It allowed us to rebound much more quickly than other businesses did once the economy improved.
Then, when I sold the company in 2017, one of the most rewarding moments was being able to give $50 million to some of my most loyal, hardworking employees through our stock appreciation rights program. More than 100 employees shared in the proceeds with 15 becoming overnight millionaires. It was really gratifying to be able to change lives that way.
Juetten: Any tips to add for early-stage founders?
Smith: I have three key pieces of advice for new entrepreneurs:
- Cut out the middlemen, including distributors and retailers, whenever you can. The easiest path to your customers is a straight line.
- Customer service is a lost art. You can always exceed expectations with your customer service because so many people expect the worst. It’s better, in the long run, to spend whatever’s required for top-notch customer service.
- To build brand loyalty, give your company a personality. Don’t be afraid to go bold with your brand — but back it up with quality products and service.
Juetten: And of course, any IP horror stories to share? They can be anonymous.
Smith: As important as patents and trademarks are to a company, I always tell people I would trade all of them for the brand. A brand is so hard to build and so easy to lose. (Juetten: A brand is an intangible asset and valuable IP!)
Juetten: What’s the long-term vision for your company?
Smith: Unorthodox Ventures aims to succeed by shaking up markets where the status quo isn’t good enough. I’m completely against starting a business with the sole intent of cashing out. That’s very short-term thinking. Starting a business offers excitement and intellectual challenge, but it also offers the opportunity to change people’s lives. It’s exciting to give the millennials working for me the same opportunity to start businesses and run them that I did.
It’s refreshing to hear from non-Silicon Valley companies that are built using boot-strapping and a vision for change, rather than solely chasing the cash. #onwards.
December 20, 2018 at 08:54AM
Forbes – Entrepreneurs