- Consumer electronics businesses need a lot of capital to operate and grow, so it's a bit unusual when a high-tech manufacturer doesn't use equity financing.
- William Wang conceived of Vizio when the economy was reeling from the dot-com bust and money was scarce, so he mortgaged his home to bootstrap his television business.
- Seventeen years later, industry metrics show Vizio is a top brand in the US smart TV segment, sales are growing strong, and the company is still privately held.
- Business Insider spoke with Wang about how to navigate the challenges and embrace the advantages of bootstrapping a tech company in a $200 billion industry.
- Visit BI Prime for more stories.
Recessions are painful, but they can give rise to new opportunities.
The dot-com bust was such a moment for entrepreneur William Wang, who noticed that the major manufacturers were not responding with enough urgency to TV's digital HD future.
Drawing on his electrical engineering experience designing computer displays, he was certain he could develop a mass-market HDTV without a $10,000 price tag.
"I saw this great opportunity by making a great high-definition display people want to buy, and I knew I could make affordable," Wang said, "not just for the millionaires who live in Beverly Hills."
Seventeen years later, the company he founded is a leader in smart TVs and sound bars. Competing with giants like Samsung, LG, and Sony.
But while Vizio's competitors are diversified public companies with massive market caps, Wang's Vizio is — and has always been — privately held and focused on a specific segment.
Wang spoke with Business Insider about navigating the challenges and embracing the advantages of bootstrapping a tech company in a $200 billion industry.
A bootstrapped and cash-strapped start
Venture equity investment was hard to come by in California following the collapse of the dot-com bubble, so Wang had to get creative.
"I had a house that was was all I had at the time, and I took a second mortgage that let me borrow $430,000," he said.
With the new debt, a $50,000 VC investment, and about $100,000 from other sources, Wang started Vizio.
"It was kind of tough in the beginning," he said. "With $600,000, you can't really do much."
At the time, computer manufacturer Gateway was looking to enter the TV segment to sell in its nearly 500 Holstein-branded retail stores.
Wang positioned Vizio as a contractor to lead the design, manufacture, and distribution of Gateway's new product line for a commission.
"We basically left the commission we made in the company and that's how we built out the company for the first two years. So we've been profitable since day one," he said.
A brief walk on Wall Street
Wang entertained the idea of going public roughly a decade later, going so far as to file an S-1 with the US Securities and Exchange Commission, but plans changed when a Chinese company offered to buy Vizio for $2 billion in cash.
The parties negotiated the deal for a year before it eventually fell through due to what Vizio described at the time as "regulatory headwinds" with the Chinese government.
Since then, Vizio has been focused on developing its own smart TV platform services, improving its 4K displays, and strengthening its position in the accessory soundbar market.
And while other tech companies reach ever-higher equity valuations in the public and venture markets, Wang said his strategy of playing nice with connected-home services from Amazon, Apple, and Google has helped Vizio grow sales and earn real cash returns.
"We're real company with real cash flow," Wang said. "We're not just selling the story of a public currency. I mean, we have a real business here."
Vizio isn't required to disclose financial information, but it did announce that sales from Black Friday to Cyber Monday in 2019 were up 40% over the same period the year before.
Focus on the core mission
Wang attributes Vizio's success to its strategy of sharply defining its core mission around how people engage with its products.
"We believe TV is the anchor of the future for smart home. We believe focusing on that will get us to a very good place," he said. "And I will work with people like Apple or Google to make that happen."
Wang said it's the same approach that motivated Vizio's entry into the $4.5 billion soundbar market: the internal speakers of flat-screen TVs sound awful.
With products that integrate with other hardware and services, Wang is positioning Vizio to meet the demands of a ballooning market for content.
"What we try to do is help people like Netflix, Disney+, Apple TV, NBC, CBS, and ABC to distribute their content," he said. "They bring good content. We're bringing the audience."
Vizio delivers that audience via roughly 13 million screens, according to the Wall Street Journal, which reported that the company is ramping up its ad sales operation in 2020.
And Wang is thinking beyond the binary of cable die-hards and streaming cord-cutters: "Even with an antenna, we'll make sure we can make it happen," he said.
Stick with it, don't give up
Wang's bootstrapping story may be unusual in the tech industry, but the reality is that the overwhelming majority of founders will never use equity financing to grow their businesses. One survey found that only 0.05 percent of startups raise venture capital.
When asked for his advice to those entrepreneurs, Wang said that big ideas and practical planning must go hand-in-hand.
"Most entrepreneurs come with a great business plan that is always growing like a hockey stick," he said, referring to one model of rosy revenue forecasting. "I guarantee you 100%, there's no hockey stick business plan in the real world."
Instead what the real world has are big problems that require the solving of a lot of smaller problems along the way.
"Every single entrepreneur has a great problem they want to solve, but along the way, reality bites and many give up," Wang said. "I think that's one of the one of the biggest reason that most entrepreneurial companies don't make it."
One of the biggest challenges for any business owner is finding enough financing and talent to grow. That is why public shares and equity-based compensation exist, after all.
"I think having a public currency would help me recruit better, and a lot more cash would probably help me grow the company faster," Wang said. "But the same time it could really hurt me, because I could lose some of the discipline that we practice every day."
"If you ask me one thing I want more of, I want to have more time," he said. "But well, we don't."