Under Armour founder and CEO Kevin Plank has brought the one-man business he started out of his grandmother’s basement in 1996 to its first year of $US1 billion in revenue in 2015.
At the CNBC and Inc. Magazine iCONIC conference last Wednesday, Plank discussed his career and shared lessons he’s learned along the way.
He said he’s found that entrepreneurs have two big misconceptions about building a business, wrongly believing that:
1. Raising money at high valuations is equivalent to a successful business
2. Going public is a way for founders to cash out and ease up on intensity
Plank said that he’ll ask entrepreneurs how their business is going, and they will reply, “It’s going great. We just had a $US4 million raise.”
This attempt to become the next “unicorn” valued at a billion dollars annoys Plank. Raising money is essential to the life of your business, but it should not overshadow the business itself, he said.
“And you find and see people that become accustomed to the ‘business’ of raising capital,” he said. “And I think that the cheapest capital in the world is probably sitting in your inventory racks or the product you are trying to sell because, No. 1, it doesn’t require a board seat and doesn’t have an opinion to weigh in on what you are trying to do with your business. So use that as your capital. Go sell what you have, and go raise money.”
Plank is also bothered by the practice of starting a company ingrained with an exit strategy as a way to profit and then relax.
He said that even though Under Armour had a very successful IPO in 2005, he quickly learned that it was not his chance to cash out.
“The IPO is the starting line,” he said, meaning that regardless of how well the stock performs, the founder is now held responsible to more investors and has a greater chance for achieving tremendous growth.
“If you are going to be a public company because you think this is where you cash out,” then you’re sadly mistaken, Plank said. “That’s the exact opposite [of what happens]. The IPO is where you begin.”
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