In Cecil B. DeMille’s 1956 epic The Ten Commandments, Moses leads the Exodus to Mt. Sinai, where he receives the Commandments from on high. At Unorthodox Ventures, that got us thinking: Why not chisel our own commandments for founders into digital stone? Like the Old Testament Decalogue, our commandments form a seriously strong foundation for life — if your goal is to prosper in business.
Carey Smith | Founding Contrarian
Many venture capitalists don’t seem to care what a founder does with their money, as long as the founder is as charismatic as an evangelist with a TV ministry. At Unorthodox Ventures, we’re different: We don’t believe in reckless spending or flying by the seat of our pants. And we certainly don’t believe in being “all hat, no cattle,” as they say here in Texas. The tenets of our faith are: start with a great product, have a good business plan, hire and coordinate a great management team, spend money like it’s your own, and keep as much equity as you can.
Back in 1999, I founded Big Ass Fans and was its “Chief Big Ass” for nearly 20 years. Without any outside help, we grew annual sales to $300 million while bringing a new level of comfort to workplaces of all types. But who wants to think about fans all their life? I went into business because I love challenges and had strong convictions about how a business should be run.
So I sold the fan company for $500 million and with some of the proceeds started Unorthodox Ventures, where our focus is on really helping startups. We don’t hand founders a whopping check and say, “Go get ‘em.” Instead, we offer the expertise to grow faster and stronger while they retain the majority of equity.
The advice we give is based on collective decades of real-world experience. It’s also based on the belief that business is about more than pocketing profits and running for the exit — it’s about feeling energized by each day’s challenges and doing the right thing. It may sound trite, but we believe it’s the only way to look at business, and we look for founders who think the same way.
Here’s what founders can expect to hear from us — our “Ten Commandments” for business, you might say:
Thou Shalt Solve a Problem: Too many founders come to us with solutions in search of a problem. Before you do anything else, determine whether your product fills a need. How? By doing your research. Remember, technology for technology’s sake is worthless.
Thou Shalt Not Focus on Valuations: Keep in mind, many VC firms drive up valuations of startups to show their own investors that they’re using the money that’s been entrusted to them. A high valuation serves the VCs, but it doesn’t necessarily serve the startups’ founders, who are then faced with the Herculean task of proving it’s justified. High valuations create unrealistic expectations, impose substantial burdens and force founders into endless cycles of raising money. There are all kinds of reasons not to be tempted by a VC’s whopping check, and we’ve written before about them here.
Thou Absolutely Shalt Pen a Plan: Nothing is more important for growing a healthy company than having a strong business plan. If you do your homework and determine how much you’ll need for manufacturing your product, taking it to market and building revenue, you’ll probably realize that you don’t need nearly as much money as you think you do. And this leads directly to the following commandment.
Cherish Thy Equity: We’ve met too many founders who retain only a pittance of their companies. This is a tragedy of epic proportions, because once you’ve doled out most of your equity it’s hard to attract new backers and you’re left with few options other than working for existing investors or selling. Remember, if you have a good business plan as your foundation, you almost always need less money than you think. Cling to your equity, because in the end, it’s everything, and why the f*ck would you toil away on your business if not to make some dosh for yourself?
Thou Shalt Covet Neither Facebook Nor Amazon: For many entrepreneurs, advertising on social media and selling on Amazon constitute the entirety of their business plans. We tell people to carefully study the cost of customer acquisition before jumping in. And Amazon is the middleman to end all middlemen. We’ve posted about the hazards of selling there more than once.
Sell Thy Merchandise Direct: Selling direct allows you to form a relationship with your customers. You learn who is buying your products, what they want in them, any problems they might be having, and what other products they might need. The most effective tracking system in the world can’t influence potential customers or educate them the way a human can, and the best AI can’t (yet) detect an opportunity in the course of a conversation.
Thou Shalt Not Venture Offshore: Keep your suppliers close. So many entrepreneurs turn to contract manufacturers, but most are offshore and create just as many problems as products. Unfortunately, you rarely discover the problems until the boat has docked after its trip across the Pacific. Read our post on the many perils of using CMs here.
Honor Thy Customers, Employees and Suppliers: In other words, follow the Golden Rule. It’s that simple. We had an enviable net promoter score at Big Ass Fans — more than triple the industry average — because we treated our customers, employees and suppliers right. For our customers, we gave silver-platter service, and when we blew something, we made it right, no matter the cost. For our employees, we paid 30% above the national average and offered challenging, exciting work. And for our suppliers, we paid quickly and worked hand-in-hand to ensure that their businesses grew alongside ours.
Discount Not Thy Product: By offering discounts, you’re basically stealing from yourself, and you’re lowering the perceived value of your product for all time. There are other, better ways to attract buyers that don’t cut into your margin. Add a warranty, for example, or extend a free service. Read more of our thoughts on discounts here.
Thy Brand is Thy God: I can’t impress enough on entrepreneurs the importance of a strong brand. It’s important to build it and do everything you can to protect it. And remember, you don’t need an agency to create it, because they don’t know your company like you do.