New Audio Manufacturer Offers Dealers, Reps Ownership Stake
The DaVinci Group offers a unique funding model by issuing ownership shares in the company to 350 integrators and about 10 reps, who each pay annual $2,000 fee to carry the line.
Back on March 29, 1984, the Baltimore Colts football team sneakily packed its trucks and left in the middle of the night. The city and fans were ignominiously left with nothing, while the wealthy owners moved to Indianapolis to count their new-found riches.
On the flip side of that story is the Green Bay Packers. Since 1923, the team itself has been owned by its fans, with public shares offered for sale every so often.
The DaVinci Group, makers of TDG Audio, Blue Aura and Vanguard Dynamics audio brands of in-ceiling speakers and multichannel amps, might be the Green Bay Packers of the custom electronics industry. When industry veterans Dan Kippycash and Alex Chiou created the company earlier in 2013, the duo decided it wanted to create a company that shared the wealth. As such, the company’s unique funding strategy includes providing ownership shares to dealers who buy and install the lines, and to reps that carry it.
“Dealers are the backbone of the industry,” says Kippycash. “They help build the brands, then the channel can’t fuel the ‘machine’ of the manufacturers, so they go direct to consumer, open the brands up to etailers and retailers, etc.”
“Meanwhile, the reps all work on 30-day contracts with the manufacturers,” Kippycash continues. “They spend years building up brands, working for commission-only, with no guarantees. They’ve made a lot of manufacturers very wealthy. Today, all their expenses are going up and their commissions are going down.”
With that as a backdrop, the two former SpeakerCraft execs decided to offer reps, dealers and employees of DaVinci Group ownership shares.
“In the end, we choose not to go after the bank, the ‘vulture’ capitalist or the private investor who doesn’t understand this industry,” says Kippycash. “We developed a business model where every person associated with our company has shares of ownership.”
Related: Who’s Funding the Industry
350 Dealers; Approx. 10 Reps
The original plan was to cap the number of integrators at 700, with each getting shares of the company. But several large dealers have already joined on as resellers, so the new plan calls for only 350 dealers with shares and another 350 non-shareholder dealers. It also calls for about 10-11 rep firms. There is no minimum-size dealer.
Here’s how it works: The 350 dealers and the reps must pay an annual fee of $2,000 to become a DaVinci integrator. For that commitment, they not only get ownership shares, but lifetime free shipping, co-op marketing, free demo product and an annual profit-share outlay. If the integrator purchases $25,000 or more in product in any given calendar year, his annual $2,000 fee is waived.
“By making them pay, we have their mindshare. The annual contribution also guarantees that the dealer doesn’t buy in initially and then quit the business or not sell the brand, and then continue to collect profit-sharing. The money also helps us fund future product development,” notes Kippycash. “Part of this is just basic economics. It costs money to borrow money. If we don’t have to pay interest to fund the company, it helps the company grow faster.”
By capping the total number of dealers, it puts pressure on Kippycash and Chiou to select the “right” dealers and reps. To date, they have 150 dealers on board and three reps. The cumulative shares owned by the dealers and reps will equate to a 20 percent stake in the company.
“So far, it has been refreshingly wonderful,” says Kippycash. “Why can’t 200 people all sit on a beach in Hawaii someday instead of just the owner of the manufacturing company. The reps, dealers and employees are all ‘at the table.’”
There is one big difference between DaVinci and the Green Bay Packers: the Packers are a non-profit while DaVinci is not. But does this mean Kippycash and Chiou are Vince Lombardi and Brett Favre?
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Jason Knott is Chief Content Officer for Emerald Expositions Connected Brands. Jason has covered low-voltage electronics as an editor since 1990, serving as editor and publisher of Security Sales & Integration. He joined CE Pro in 2000 and serves as Editor-in-Chief of that brand. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He has been a member of the CEDIA Business Working Group since 2010. Jason graduated from the University of Southern California. Have a suggestion or a topic you want to read more about? Email Jason at firstname.lastname@example.org
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