Entrepreneur Spotlight

 

Rick Alden

Founder & CEO Skullcandy, Inc.

 

By: Anmaree Osmond

 

It's amazing what a little bit of people watching can do for the entrepreneurial minded. Serial entrepreneur Rick Alden launched his most recent company, Skullcandy (www.skullcandy.com), in January 2003, but the idea behind it was born years earlier.

Alden was sitting on a train in Osaka in 1998 and observed that nearly everyone was wearing a pair of headphones, listening to music. When cell phones would ring, headphones would come off, only to be put back on again later. It was a constant battle between the two technologies. He noticed the same behavior in London, and found it interesting that people on opposite sides of the world were doing the same thing.

When Alden experienced that scenario himself, he got the idea for what would become Skullcandy's first product — Link. He was sitting on a chairlift listening to music when he heard his phone ring. As he was pulling off his gloves and reaching into his pocket for his cell phone, feeling somewhat annoyed at the inconvenience, he realized there had to be an easier way. Reflecting on the people watching he had done, he added to his list of "potential future products." He decided that someday, when he had nothing better to do, he would invent a device that would allow people to hear both their phone and their music player through one pair of headphones.

Someday came, and in January 2003 Alden launched Skullcandy, a company that produces "hard core audio and wireless solutions."

Launch had the opportunity to meet with Alden to learn more about his business experiences and the journey that led up to the creation of Skullcandy.

 

launch: Skullcandy offers several products, but tell us about the product that started it all.

Rick Alden: I love the Skullcandy Link. It's a pair of stereo headphones with two plugs, one for your music device and one for your phone. While you're listening to your music, if the phone rings, it rings directly into the same pair of headphones you are listening to your music on. When a call is received you can turn down the music. We recently received a patent on Link.

 

launch: You have been called a serial entrepreneur. When did that interest in entrepreneurship begin?

RA: In 1986, a friend and I were both going to business school at the University of Colorado and racing on the snowboard circuit on the weekends. Being busy with school, it was tough to stay competitive. We realized we weren't going to excel at that so we started thinking of some fun things to do within our fledgling sport of snowboarding. At that time, everyone wanted to try snowboarding, but mountains didn't have instructors, or in many cases, even rentals available. We rolled out the first ever learn-to-snowboard demo tour called the Snowboard Jam Series. For $10 people could get boards, boots and a snowboard lesson. That grew into a large nationwide tour. We ran the tour for seven years and had a ton of fun.

In 1989 we expanded our event properties to include pro, amateur and trade events, and also began a snowboard membership program. For $30 snowboarders could buy what we called the Shred AmeriCard, which gave them discounts on lift passes, hot waxes and all sorts of things. We got tens of thousands of kids to send us $30 for the membership card.

Then, in 1993, I got an idea for a new-style snowboard boot and binding system that would make it so snowboarders wouldn't have to deal with all the straps. We'd had a reasonable exit on the events and the membership programs, and that money helped finance that next project — the first ever step-in boot and binding system for snowboarding called the Device System. We launched it in 1995 then sold it in 1997 to a publicly traded snowboard company called Ride Snowboards. We had a very good exit on that project. In 1999 I reacquired Device and sold it a second time — this time to the Atomic Ski Company in Austria.

 

launch: Skullcandy seems to target the snowboarding industry. Was that a conscious choice right from the start?

RA: I have always been in the snowboard industry. It is still my heart and the core of this company. We are not a snowboard company, but we launch our products as if we were. The products fit a youth oriented market, so the marketing must as well. Skullcandy is an edgy name and product line, but we have found that conservative will buy edgy, but edgy will not buy conservative. We are intentionally more aggressive than standard audio brands, but we try not to alienate anybody. We sell to a whole lot more than just surf, skate and snow shops. Our products can be found at major retailers such as F.Y.E., Best Buy, Staples, Zumiez and almost every college campus, guitar shop and CD outlet in the nation. And the list grows daily. Music is universal; people put headphones on. And fortunately, Steve Jobs has created a huge wake for us to surf behind and sell headphones to all of his customers.

 

launch: How have you funded Skullcandy?

RA: I personally financed it in the beginning. I had some capital from the sale of Device and later pulled out a large home equity loan. I believe the first $1 million is always the most difficult stretch for any company. After you hit a million bucks, investors will look at you, but zero to a million is a tough window. I was very fortunate to be able to finance things through the $1 million plus mark.

Eventually, we needed investors to grow the company further. We have some really amazing investors, and we could not have realized our fantastic growth without them.

We actually had a unique experience recently. I am the kind of guy with the kind of businesses where I am lucky if the banks allow me to use the drive-up tellers. We don't get a lot of conversation with the banks, but one of the key players in Utah banking came into the office recently with some documents, ready to sign us up for a lot of money. It was a real turning point having a bank come to us.

 

launch: What has been your biggest challenge in trying to grow the company?

RA: Being able to pay for the manufacturing of the product to be able to sell it. When you are an unknown company, you get very poor terms with your factories. We missed out on numerous opportunities because of a lack of manufacturing capital. Vendors don't pay in advance, and factories don't build without cash upfront, so it's a real catch-22 when you are just getting off the ground.

 

launch: What do you think has contributed most to your success?

RA: We have an amazing team at Skullcandy, and we love what we do. But most importantly, our product line seems to be relevant in the marketplace, and sell-through has been fantastic.

On a more personal side, I married great, and my wife, Holly, is very tolerant of the entrepreneurial lifestyle. She has endured the highs and lows, insane hours and crazy traveling. It is a different life being married to someone who is always taking out another loan against their house to get the next business off the ground.

 

launch: What advice would you give to people who want to start a business?

RA: Make sure your idea is not dumb. A lot of people have ideas for products that should never even be discussed again. The worst ideas I see are the ones people have when looking in on other peoples' worlds. Guys who have never snowboarded before should not create a product for snowboarders. If you are not your own customer, you don't know your product well enough to bring it to market.

It is also important to have passion for whatever the product is. When people come from the world they are going to innovate, and they have great passion for their innovation, they will find a way to make it work. It is amazing what human tenacity can produce. Make sure you are your own customer, that you know your product innovation intimately, and then just put it out there — with passion and a good idea it's amazing what can happen.

 

Launch - Mar/Apr 2007