Rob Dyrdek of Dyrdek Machine: 5 Things I Need To See Before Making A VC Investment

An Interview With Orlando Zayas

We have created a set of principles that we use to determine if an idea is the right fit for us . The Machine Principles are the core values that every business we create must have. We believe products that have a unique value proposition and serve a target audience — built with a clear path to liquidity and multiple revenue advantages, with a Do-or-Dier leader — will always create the most consistent ROI and impact on the world.

As part of our series about “5 Things I Need To See Before Making A VC Investment”, I had the pleasure of interviewing Rob Dyrdek.

The relentless pursuit of his childhood dreams made Rob Dyrdek a professional athlete at 16 years old and propelled him into the world of business before most people entered college. Surrounded by entrepreneurs in his youth, Dyrdek quickly learned the power of building brands.

That same approach to brand development led him to co-create and executive produce his first television show, Rob & Big on MTV. After the success of this first show, he created Rob Dyrdek’s Fantasy Factory showcasing his Do-Or-Dier® mentality towards entrepreneurship. Constantly evolving and taking calculated risks, Dyrdek beat world records with his physical feats while continuing his endeavors, launching several new brands while structuring multi-platform integrated partnerships.

Using this expertise gained developing the intersection between business and media, Rob Dyrdek has harnessed his knowledge, experience and insight gained over two decades of building his own intellectual properties and working with top brands around the world to develop his full-service venture studio, Dyrdek Machine.

The Dyrdek Machine represents not only the financial investment of Rob Dyrdek, but also his passion for partnering with disruptive “Do-or-Dier®” entrepreneurs, guiding them to achieve sustainable success. Using his proven method for predictable success, Dyrdekworks personally with his partners to help them realize their true passion and voice and turn it into a profitable, sustainable brand.

His unquenchable desire to live life to the fullest pushed him to develop a strategy for success in life, not unlike the formula he created for his venture studio. Following his life plan for happiness, balance and love while still achieving greatness in his career, Dyrdek now enjoys a fulfilling life with his family in Beverly Hills and continues to build his dream as he had not only envisioned, but designed it.

Thank you so much for joining us in this interview series! Before we dig in, our readers would like to get to know you a bit. Can you please share with us the “backstory” behind what brought you to this specific career path?

I like to say I was raised by entrepreneur wolves. I was surrounded by serial entrepreneurs since I was eleven years old. I started my first company when I was 18 years old. I was a co-founder of 11 different companies before I created my 12th company, which is a company that creates companies , the Dyrdek Machine Venture Creation Studio. Since launching in 2016 the Dyrdek Machine has created 16 companies 5 of which have been acquired for over 450 million dollars.

Is there a particular book that made a significant impact on you? Can you share a story or explain why it resonated with you so much?

The book “Start At The End “ by Dave Lavinsky. This book completely changed my perspective on business creation. Most people start a company to solve a problem or capitalize on an opportunity but few decide what they truly want out of the business . Deciding exactly what you want success to look like before you start the business will give you so much clarity for how you create your goals and long term vision for the business.

Do you have a favorite “Life Lesson Quote”? Do you have a story about how that was relevant in your life or your work?

“Before You Start ,Win “ I apply this mentality to all aspects of life and business. This is really all about getting clarity on what it takes to accomplish a goal, big or small, so you truly believe that it is possible to achieve the goal. Progression towards the goal you believe you will accomplish creates the motivation needed to accomplish your goal. At the end of the day, only those that lose belief give up. I apply to my overall life design, as well as every business that I create.

How have you used your success to bring goodness to the world?

I recently launched the Do-or-Dier Foundation. The Foundation will pursue a multi-pronged strategy to support underrepresented and underestimated entrepreneurs lacking access to the financial capital, and additional resources, required to help build their business ventures. I really want to create programs that can directly impact individuals. We launched the foundation this year and committed a million dollars from our previous 5 exits and plan to do a business plan competition later this year as our first program.

Ok, thank you for that. Let’s now jump to the main part of our discussion. The United States is currently facing a very important self-reckoning about race, diversity, equality and inclusion. This is of course a huge topic. But briefly, can you share a few things that need to be done on a broader societal level to expand VC opportunities for women, minorities, and people of color?

I think most importantly you need to make a commitment to diversity. It sounds simple but it requires being much more proactive and actively pursuing opportunities led by diverse founders rather than waiting for it to show up in a pitch deck. We currently have created a bench of diverse founders that we are actively developing ideas with rather than waiting on the right idea, right founder to just show up.

Can you share a story with us about your most successful Angel or VC investment? What was its lesson?

My investment in Chemistry Holdings was a unique success. They developed a green algae encapsulation technology that has the potential to disrupt multiple categories. This also had a big opportunity to disrupt the cannabis space which drove them to build a separate cannabis based business with the technology called Made By Science. In 2017 the business was being developed and before they were ever brought products to market each was acquired for nearly 150 million dollars. The lesson learned is that really defenddle innovative IP will create extraordinary value.

Can you share a story of an Angel or VC funding failure of yours? What was its lesson?

Since launching in 2016 the Dyrdek Machine has brought to market 14 companies and had 5 exits and one loss. One of the very first companies we created and developed was a live 360 video platform called Ultracast. The company ran out of cash and went out of business by 2019 . This is the only company that we have created that has gone out of business. In 2016 there was this emergence of live video streaming for mobile devices along with a lot of hype around the market for live virtual events in VR. We were seeing a lot of money being raised in the space. All the insights from research led us to believe that this market was about to explode.. We built and launched the company and by 2018 the market was gone. There was almost no appetite for the live 360/VR video at all. I would equate it to the 3D television set trend that lasted a few years . The lesson we learned is a great idea and an amazing founder will always be trumped by the market. Learning to understand all aspects of the market along with it’s vitality and the consumer behaviour is essential to finding success .

Can you share a story with us about a problem that one of your portfolio companies encountered and how you helped to correct the problem? We’d love to hear the details and what its lesson was.

Outstanding Foods had an amazing CEO and team that was creating innovative great tasting plant based products but the brand itself was not matching that same innovation. It was called Fresh Soul which did not connect with the innovation and uniqueness of their products . We pushed them to be more aggressive and loud in the plant based space and this evolved the brand to Pig Out and Outstanding Foods. Really evolving the messaging and building a much stronger concept. The lesson learned is you should always build a strong brand to support a great product. Never let the brand be an afterthought. As it is the soul of a company.

Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?

A brand that I recently passed on was Truff Sauces. I just absolutely love the way the brand was built and its potential as a platform. I really felt the Founders did not have the experience to scale the business. The business has since exploded . The lesson is sometimes a really innovative product can lead the way and you can grow into the right leadership overtime.

Super. Here is the main question of this interview. What are your “5 things I need to see before making a VC investment” and why. Please share a story or example for each.

We have created a set of principles that we use to determine if an idea is the right fit for us . The Machine Principles are the core values that every business we create must have. We believe products that have a unique value proposition and serve a target audience — built with a clear path to liquidity and multiple revenue advantages, with a Do-or-Dier leader — will always create the most consistent ROI and impact on the world.

This is an in depth overview of the Dyrdek MAchine and our process including the 5 principles from Build with Rob :

1. Do-Or-Dier Leader — The cornerstone of the Dyrdek Machine is the Do-or-Dier entrepreneur . A Do-or-Dier is an entrepreneur that has the grit ,determination, fortitude and ambition along with a relentless work ethic and unwavering self belief in their ability to create their own destiny. A business must have a Do-Or-Dier® leader. This way of being is essential to create and build a successful thriving company. We seek out qualified Do or Dier entrepreneurs that see an opportunity in a market they have deep experience and knowledge in. Often referred to as “Founder Market Fit” it is essential to launching a successful brand. Our portfolio company Outstanding Foods CEO is are archetype Do-or Dier Ceo. He had a vision for creating an innovative plant based snack food company and stopped at nothing until that vision was realized. He showed grit, determination, fortitude and ambition through a series of setbacks and ultimately a timely pivot from the hero product of the PigOut pigless bacon chip to the PigOut pigless pork rind and took the company from 0 to 100 million dollar valuation in a few short years. The Outstanding Foods story from Build with Rob: https://dyrdekmachine.com/build-with-rob/how-we-learned-to-pre-pivot-with-outstanding-foods-bill-glaser
2. White Space Concept — The business serves a unique value proposition to a targeted consumer with a product that appeals to a broad audience. This can be accomplished in a multitude of different ways, from proprietary innovation and unique marketing positioning. Our Portfolio company Mindright — Good Mood Superfood is the perfect example of finding white space in a competitive market like better for you foods and snacks. The CEO Chris Bernard watched the evolution of two markets and combined them to create a white space product. He saw how there was a mature trend of better for you food and snacks with functional benefits and combined this with the trend of emerging nootropics and adaptogens from the supplement space to create the first mood enhancing superfood brand. The Mindright creation story from Build With Rob: https://dyrdekmachine.com/build-with-rob/marketing-testing-a-brand-changes-everything-with-mindrights-chris-bernie-bernard
3. Impact The World — We only want to create authentic brands that are built to last forever and impact the world. Meaningful business that will leave an imprint on culture and consumers .We don’t create brands to simply make money. We are in the business of creating businesses and will always determine success by the return on our investment but we will never create a company just to make money. We want to make sure that every business we create is something meaningful. When we initially launched Saint Midas it was really all about just capitalizing off an opportunity in high margin cheap jewelry targeted at a young audience. Our partner had a ton of success on his own selling cheap jewelry and we thought we could help scale what he had created .This was not the case. The business did not work at all and it was very embarrassing. Instead of going out of business we decided to pivot the brand and create a more meaningful concept that would be proud of and the business became profitable and sustainable. The Saint Midas story from Build with Rob that was the reason for creating this principle: https://dyrdekmachine.com/build-with-rob/will-you-be-proud-if-your-idea-fails-with-saint-midas-emilio-dangelo
4. Multiple Revenue Advantages — The business has a multitude of advantages that create an accelerated path to revenue. These can come in many forms, including strategic investors, manufacturing and distribution relationships, influencer network, industry expertise and consumer access, just to name a few. Superjacket Productions is a great example of launching a business with clear revenue advantages. I already had a television show on television ( Ridiculousness) and knew that we could negotiate to have the producing rights . We knew if we could secure these rights it would allow us to be profitable and sustainable overnight . We also had deep relationships with a handful of the networks that gave us an advantage when selling shows. We secured the rights for Ridiculousness and sold 3 other shows and went from $100,000 in revenue to $50,000,000 in revenue in one year. The Story of Super Jacket from Build With Rob: https://dyrdekmachine.com/build-with-rob/build-a-company-for-exit-with-superjackets-shane-nickerson
5. Clear Path to Liquidity — The business must have a clear business model with strong unit economics and high growth potential. It must have a cost structure with a precise path to creating and distributing dividends, or high growth in a market with significant M and A activity. We are passionate creators who love building business but we always determine success by the two gold standards of financial performance. ROI and IRR. At the Dyrdek Machine we have much more flexibility in how we approach venture investment for two main reasons. The first is we are co founders as well as the first money in most businesses we create and invest in. This means we are creating companies from the idea stage so we share both common shares and preferred shares. This dramatically increases our overall return profile compared to most VC’s . The second is we don’t have the LP/GP structure so we have much more flexibility in the types of companies we can build and invest in. All of the capital we deploy is my personal capital so this allows us the option to invest in business concepts that are meant to be profitable and dividend producing and rather than just pursuing long term capital gains inside a set timeline. We want to make sure that a company we create has a tactical path towards a liquidity event or a dividend. We have the flexibility of chasing or creating companies that have a high likelihood of being acquired as well as smaller companies that may never be acquired but provide cash flow for the Dyrdek Machine .

You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be?

I really want to push people to a systematic approach to happiness and life design — the importance of designing your life rather than allowing life to happen. Your life is a series of interconnected systems that work together to create the output of your complete life. You get to design these systems and by perpetually optimizing them, you can master your reality and create your ideal life. After all, that is everybody’s mission.

Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why?

Ray Dalio, no doubt. We are so aligned in our thinking as it relates to systems and personal evolution. I know there is so much to learn from some like Ray.

This was really meaningful! Thank you so much for your time.