Paradigm Shifting Inside the Box with Falcon Structures
Gain insight into the successes, failures and “whys” driving Stephen Shang. Stephen is CEO of Falcon Structures, an Austin-based company using shipping containers to help solve the space needs of businesses and consumers.
foundingAUSTIN: What’s the big idea behind your business?
Stephen: The problem that we’re solving is that people need functional space. They need space for storage, space to work, and space to live. The question is: how do you go about providing that? The approach that we’ve taken is to repurpose shipping containers that people don’t use anymore. We turn them into functional space, and have been doing that since 2003.
fA: Who are your clients?
Stephen: We have a wide variety of clients. The most common would be construction and manufacturing customers. But we also have regular, everyday consumers. There are people who use our containers for tailgating, to live in, or even as hunting cabins. If you did a map of our industry, you’d see it’s very well diversified.
fA: What does your annual revenue and growth look like?
Stephen: Our revenue for last year was about $7 million. Prior to selling the rental division of Falcon, we were as high as about $16 million. As far as growth goes, we were on the Inc. 5000 list six years in a row, so we’re familiar with rapid growth.
fA: What can you tell us about the evolution of your business?
Stephen: The business went through three different phases in its life cycle. First, from 2003 to 2008 we were a rental business. It was a very simple business model where we would buy shipping containers and rent them for portable storage. We grew the rental fleet to about 1,000 units. That was our cash-flow engine. Right around the time the Great Recession hit, about 67 percent of our customers were construction firms. With that industry sector struggling, we looked for other opportunities. That’s when we began to explore government contracting. Between 2008 and 2012, the second phase, we became one of the largest providers of training structures for the military. We were constructing simulated cities, mosques, schools and airports - all out of containers - to train troops. Then in 2012 we decided to take the lessons we’d learned from government contracting and become a manufacturing business. That brings us to our current phase.
fA: When you say manufacturing business, is that repurposing the containers yourselves—so you’re actually making whatever people need? How does that work?
Stephen: Absolutely. Historically the business model for repurposing containers has been similar to that of job-shop, custom build or design-build type of customer service. We took our years of experience and hundreds of containers modified, and asked ourselves, “What are some standard products that we can create that solve most of the customer problems out there? And what are some options that we can offer?” Based on what we discovered, we created a catalog of fifty products and about a hundred and fifty options. That’s what we’ve been taking to the market, and it’s really resonated well.
fA: Is Falcon your first company?
Stephen: Before Falcon I had seven different entrepreneurial ventures where either I was a principal or a significant contributor. Among those seven, we raised about $90 million in equity, but in the end had absolutely nothing to show for it.
Around 2002, after the seventh venture’s failure, if you will, I took the advice of my pastor. He told me while I usually swing for the fences, maybe this time I should focus on just getting on base. His advice was to do something “simple”. That’s when I got together with an old college buddy, Brian Dieringer, to explore low-tech businesses. We looked at a lot of different things but when we stumbled across the container space it seemed like a great fit for us.
fA: How did you fund your business? Is it self-funded or did you get some VCs?
Stephen: The opportunity was likely too small for the VCs, so we actually raised a round of funding from friends and family for operating capital. One of our investors decided to be our bank, and set up a separate offering lease company to buy all of the containers for rentals and leased them back to our company.
A lot of people seem to think that either financing is the bottleneck or the idea is the bottleneck. I would say neither one is. There’s a lot of money out there and there are a lot of ideas out there, but it’s actually the execution that’s the real bottleneck - whether or not you can do it.
fA: What do you consider your top strengths that were crucial to your success?
Stephen: I think for Falcon, I wouldn’t really call it successful yet; you know success is a journey not a destination. But I think it really is the partnership that’s been crucial. Brian and I have been partnering together since 2003 and if you look at us we’re very different people with very different skill sets, but we have a common value system. We trust each other a lot and we enjoy being with each other.
fA: What has been the most difficult lesson that you’ve learned as an entrepreneur?
Stephen: As an entrepreneur outside of Falcon, I learned that failure is part of the journey. That when you choose to be an entrepreneur you’re choosing to fail. I think the media really glorifies some of these one-hit wonders. For true entrepreneurs, it’s not that easy. We can’t all be Mark Zuckerberg. It was difficult to learn that failure is an important part of the journey. When you choose to be an entrepreneur you choose to fail, but then you’ve already chosen to get back up. There are no ifs, ands, or buts.
fA: What do you love about being an entrepreneur?
Stephen: I think of entrepreneurship in two ways. First, I think it’s part of human nature. I do a talk at Rotary’s Camp Enterprise where over a mere 3 days high school juniors are taught about the free enterprise system. They write business plans and then present them to win scholarships. It’s amazing that these kids—literally kids—are presenting business plans that I would invest in. And I think that’s because free enterprise is just part of the human spirit, and we’re giving them a language to communicate that. So what I love about entrepreneurship is that it’s the truest form of being a person - being human.
Second, I love the freedom that entrepreneurship affords. Freedom of expression—not freedom to go play golf every day, because if I do that then I won’t be an entrepreneur for very long. But the freedom to take an idea and really develop it and see it become reality—it’s just awesome.
fA: Can you share an example of a time you creatively adapted to a negative situation?
Stephen: It would have to be in 2008 when the Great Recession was upon us. I learned from my Silicon Valley days that layoffs really demoralize a team, and you can get to a point where you can’t recover from it. So instead of having layoffs we had layons—an idea I stole from a buddy of mine. We explained that instead of decreasing our operating expenses, we were going to find new ways to use containers and increase our revenue. That’s how we discovered the military training niche, and how we made it through the recession.
fA: What would you say drives you?
Stephen: It goes back to our why. Simon Sinek talks about how every organization has a why. He says that companies are usually really good at expressing what they do and how they do it, but it’s very hard for them to express why they do it. I had the opportunity to meet Simon and I asked him to help me figure out my why. He asked me, “What’s your fondest childhood memory?” I told him, “Well, I grew up in South Carolina and me and my buddy Thor would go exploring the piney woods. One day we found a baby crib and thought it would make a great fort. One night our parents let us spend the night in the fort and I still remember it was raining that night, you could smell the wet wood and it was at that point I felt completely safe.” To that, Simon said, “That’s your why. You love to create safe places.” So that’s really what drives me. I want to create that safe place for customers. But in doing so, it creates a safe place for our company, for our employees, and a safe place in our ecosystem for our vendors and people who work with Falcon.
fA: What’s the best advice you received while starting your business?
Stephen: That you don’t know everything. Be humble because no one has a monopoly on good ideas, and really most - actually all - of the great ideas at Falcon came from going out and talking to entrepreneurs or business people in other industries, listening to what they had done and learning from their experiences.
fA: What advice would you give to someone starting their own business?
Stephen: I would say, don’t worry too much about the idea - or even the business plan because it changes. When we started renting storage containers we had no idea that we would be building container structures out of them. We listened to the market forces at the time and responded. Also, surround yourself with great people, that’s what really makes things happen. How do you surround yourself with great people? You hire slow, fire fast. Make sure you pick your partners carefully.
fA: Do you have an exit plan?
Stephen: First of all I believe that you should always build the business for an exit. If it’s not worth selling it’s not worth doing. But like with our rental business, when you grow to a certain size people become interested and they come talk to you. Typically, we’ll work on the business for about five years then we’ll take a look around and decide whether we’re still happy doing what we’re doing. Right now, we’re two years into the cycle and we’re really happy. We probably won’t look for an exit for about three more years. Employees and other companies get scared when owners start talking about exits but we’ve done a pretty good job in informing them. In our last sale, no one lost their job. In fact, people got promotions. So exits can be opportunities for employees as well.
fA: When you hang the hat up, do you see yourself anywhere in particular?
Stephen: I see myself working. I don’t believe in retirement. Working gives you a mission in life. When I hang my hat up I’ll focus on coaching, mentoring young entrepreneurs and working on something more significant than net worth. Still contributing until I can’t do it anymore. That’s how I want to end.
fA: Anybody in particular who inspires you, motivates you, or has in the past?
Stephen: My mentor, Carl Warden has always inspired me. He’s taught me a lot of the lessons about entrepreneurship. He made millions and lost millions.
Guys like that - they really inspire me, and Carl inspires me. I remember he’s the one who told me, “Hey look. When you signed up for this you signed up to get back up. You’ve lost your money but you get back up right now.”
You can find out more about the many uses of storage containers, review case studies and get a quote on the website http://www.falconstructures.com/.