Carey Smith bootstrapped his own startup from zero to selling it for $500M. He is now a startup investor helping others grow their own ventures.
During our time on the Dealmakers Podcast Smith shared his experiences and lessons from building multiple companies, business naming, moving to the other side of the table, what you do with a $500M check, bootstrapping, and what equity fundraising and face tattoos have in common.
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San Diego Roots
Carey Smith was originally born in San Diego, CA. Though has spent much of his life traveling and running businesses in different parts of the country.
He attended school in Chicago, and has run businesses in Austin and Lexington, KY.
Carey says he tried working in the reinsurance industry. He thought he could work a job for other people. He soon found that he wasn’t really cut out for a regular job, and found the reinsurance business pretty dull.
So, he went home one day, asked his wife if he could sell the house. She said “Yes.” He did, and used the money to start a business.
Smith started his first business with his father. Not an experience he recommends to others today.
His father had little business experience. So, they ended up learning a lot by doing it themselves.
Carey says he learned a lot about marketing, and especially the power of market research, and using content marketing, like articles for promoting your business, and for educating prospective customers along the customer journey.
He learned the importance and benefits of really knowing your market and customer. As well as the fact that even if you think you do at the beginning, you probably don’t. Plus, the extreme costs and years of wasted time you face if you don’t master this. In fact, one of his top pieces of advice today, and what he helps other founders do now is to really get into market research and appreciate the need to be talking to customers early.
You want to know their problems and challenges, their interests, worries, budgets and who the right contact people and decision makers are.
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Big Ass Fans
Carey’s next company was originally called the HVLS Fan Company. Or the ‘High Volume, Low Speed Fan Company. They made a very wide fan that operated at low speed with little power used, but delivered a lot of air flow.
The name seemed like a clear description of what the company did. Though it wasn’t the most catchy or relevant to customers. They would frequently call in asking if this was the company that made those “big ass fans.” So, that’s what they changed the company name to.
Not everyone loved it, but it resonated with more people than it turned off. They listened to their customers, and it worked.
A Different Approach To Building A Company
Smith took a very different approach to building and growing this company than is common today, in a variety of ways.
Instead of outsourcing manufacturing overseas they designed, built, and sold their big fans from their headquarters in Lexington, Kentucky.
Even when they expanded into Asia, they manufactured and distributed their fans from their own plant in Malaysia.
They kept their customer service in the US, and expected them to ensure their customers were well taken care of.
Instead of trying to get away with paying the minimum, they prized great talent at all levels. They chose to pay them 30% more than the national average, and 50% more than the average local wages in KY.
Bootstrapping To Big Exits
Carey effectively bootstrapped the fan company all the way through a pretty big exit. Growing by fundraising alone wasn’t and isn’t something he sees as a real business model.
One day, when he expressed how tired he was, the COO he had brought in asked if he was interested in finding a buyer for the company at $500M.
What Smith says was so great about this is that in contrast to most startups today, that $500M was effectively all his to take home.
Contrast that with many of today’s founders who may only own single digits of their own companies. Or who may sell their businesses for $450M, and walk away with zero after they pay out all of the investors who funded the company. Even those who get something typically have to give up even more of that to the IRS.
That’s a big difference.
Storytelling is everything which is something that Carey Smith was able to master. Being able to capture the essence of what you are doing in 15 to 20 slides is the key. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) where the most critical slides are highlighted.
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What do you do with that kind of money?
Well, Carey rewarded many of his loyal employees who had come along for the journey and took a bet on working there through a stock appreciation rights program he had previously set up. Around 20 of them became instant millionaires. Even forklift drivers got payouts of $70k or more. All found it meaningful and life changing.
Then he took the change and began his latest company, Unorthodox Ventures. An investment firm that not only provides capital to startups, but essential support in helping them build profitable companies.
Listen in to the full podcast episode to find out more, including:
- How Unorthodox Ventures helps other startups
- What Carey reads, and what it has taught him
- What he thinks is most important in building a business
- The right time to accept funding, and not