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BUSINESS PLANS

Anatomy of a Start-Up Collection
 

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In Big Plans," an article in the January 2001 issue of Inc. magazine, Anne Marie Borrego brings us news about eight companies that were profiled in Inc.'s Anatomy of a Start-Up case studies from 1996 through 1998. Here are links to the original profiles -- plus three more updates.

From the Inc. Archives: The Original Anatomy Profiles
1. In Celebration of Golf
2. Slanted Publications (formerly Smug Inc.)
3. CDnow
4. Streamline.com (formerly Streamline Inc.)
5. Switch Manufacturing
6. Cruel World (formerly Career Central Corp.)
7. Excelsior-Henderson
8. Oregon Chai

More Big Plans: Updates on Three Anatomy of a Start-Up Subjects
JONES SODA
Company: Jones Soda Co. (formerly Urban Juice & Soda Co. Ltd.)
Founder: Peter van Stolk
Date of Inc. Anatomy: "Brand New," April 1997

Vital signs then: Van Stolk created a beverage company from his existing beverage distribution business, based in part on his theory that, as he said, "one key to successfully launching a new brand is getting the right distribution."

He used innovative (read cheap) marketing techniques -- such as product placement on hip Gen-X television shows -- to promote his retro-chic flavors. Van Stolk predicted that in 1998 he could sell 1.1 million cases of his brands and rake in $21 million in revenues.

Based in Vancouver, British Columbia, the company went public in 1993 and traded on the Vancouver Stock Exchange.

What the experts said: Some questioned van Stolk's belief that brand equity can't always be sustained (thus, his decision to name the company Urban Juice & Soda, not Jones Soda, so that he could create a succession of additional brands) and suggested that he'd have to get behind the brand to attract distributors and consumers. Others felt that the company showed promise if it could grab a cult following of trendsetters on its shoestring budget.

Vital signs now: Van Stolk finally got tired of explaining his Urban Juice & Soda name, so he's officially changed the company's name to Jones Soda, to match its signature offering. He moved the headquarters to Seattle, and the company is also trading on the OTC Bulletin Board exchange. Jones Soda didn't reach the revenues it projected for 1998 -- a shortcoming van Stolk blames on a problem with flavor deterioration in 1996 -- but it should come close to $20 million for 2000.

It has, however, garnered a loyal following of soda enthusiasts who send in photos for Jones Soda labels. In 1999 soda fanatics sent 48,000 original photographs to the company in hopes of securing a coveted spot on a Jones Soda bottle label. Jones even set up a Web site (myjones.com) that allows customers to use their own digital photographs to design custom Jones Soda labels. Although the company reported an operating loss for the first nine months offiscal 2000, it posted a profit for that time period because of thesettlement of some litigation with a former ingredient supplier. Jones Sodahas introduced an energy drink called Whoopass and is increasing the size ofits sales staff.

What the experts say today: "If I'm interpreting this correctly, it seems to me that Mr. van Stolk has decided that the idea of a fashion-oriented transitory brand is not a long-term strategy for success," says Jim Mullen, founder and former CEO of Mullen Advertising, in Wenham, Mass. "It's pretty much what the other folks and I were saying that he should do, in 1997. There is a reason why one invests in a brand. It's because the brand is the most durable asset that the company owns. Founders die. Warehouses burn. Patents run out. Technology becomes obsolete. But brands are forever. So I congratulate Mr. van Stolk. He did the right thing." --Anne Marie Borrego


U.S. BICYCLE CORP.
Company: U.S. Bicycle Corp. (formerly the Chicago Bicycle Co.)
Founder: John Sortino
Date of Inc. Anatomy: "A Bicycle Built for You," April 1996

Vital signs then: The founder and former CEO of the Vermont Teddy Bear Co. dropped the warm and fuzzy stuff in favor of starting a new, top-of-the-line bicycle company that would sell to the age 40-plus customer who had $1,000 to spend on a new pair of wheels. Sortino contended that eliminating the dealer would save him the markup, and building to order would lower inventory costs. He hoped to hit $51 million in sales in 1998.

What the experts said: Good luck. Without dealers, Sortino would have a tough time getting the word out to consumers. Plus, persuading customers to pay $1,000 for an unfamiliar brand of bike could prove even more difficult. Still, an analyst noted that it could be done and that going direct could be a powerful way to build a brand.

Vital signs now: Sortino left Chicago Bicycle in January 1998, and Chief Operating Officer Stephen Marmon took over as chairman and CEO at the request of the investors. At that point, the company was suffering substantial losses. "I shut down all production within days of becoming CEO," says Marmon.

Although he still felt that an expensive cruiser could be a viable business proposition, Marmon says the built-to-order model didn't work. "The cost of production was too high," he notes. That, coupled with the low number of bikes the company produced, made profitability virtually impossible. Now, Marmon says, he's working with investors to turn what's now U.S. Bicycle Corp. into a roll-up.

What the experts say today: Scott Montgomery, a director of Cannondale Corp, a bicycle manufacturer in Bethel, Conn., suggests that Chicago Bicycle's original model failed not because its bicycles weren't attractive to consumers but because the company showed up as a virtual unknown, without secure distribution. The baby boomers who understand cycling and want a top-quality bike go for a known brand, he says.

As for the roll-up plans, Montgomery doesn't find the odds in Marmon's favor. "What looks so good in so many other industries doesn't seem to bring increased sales or increased profitability" in the bike industry, Montgomery says. "That's why, when someone tells me they're going to do a roll-up in the bike industry, I roll my eyes and say, 'Go for it. Bring it on. But do it with somebody else's money, not mine." --Anne Marie Borrego


SOLOPOINT
Company: Solopoint.com Inc. (formerly SoloPoint Communications)
Founders: Martin McKendry and Charlie Bass
Date of Inc. Anatomy: "Phone Improvement," February 1996

Vital signs then: In April 1993 engineer McKendry and venture capitalist Bass set out to conquer the SOHO (small office/home office) market with a $379 personal call manager (PCM) that would sort and direct both voice and fax calls to the SOHO worker -- wherever he or she might be. With $2.6 million in backing from the likes of venture capitalist Hambrecht & Quist and Ameritech, the Midwestern telecom corporation, SoloPoint hoped to hit $4 million in sales for 1996 and $27 million in 1998.

What the experts said: Potential customers were thrilled, but one expert was worried that Ameritech wouldn't be able to deliver on marketing the product. Others thought that only a truly hassle-free product would appeal to the SOHO market.

Vital signs now: SoloPoint had created the prototype in 1998, but management soon realized that the personal communications market wasn't going to be as ripe for their PCM as they had thought. By the end of 1999 SoloPoint had a new business plan, new management, and a new name -- Solopoint.com. Bass and McKendry were out, and Artie Chang and Ed Esber were in as CEO and chairman, respectively.

Chang and Esber are trying to market a telephone/Internet appliance to broadband Internet service providers. The ISPs would, in turn, give the appliances to residential customers for home use. Solopoint.com plans to have the first test product out in early 2001 and to defray the cost by selling advertising.

What the experts say today: Bottom line: Solopoint.com isn't the only company that is pushing Internet appliances. Compaq, IBM, Intel, and Microsoft are all in the game, says Andrea Leon, a former analyst at Gartner's e-commerce group in San Jose, Calif. And because most of those established companies have the name brand and the money to cover costs while the general public gets up to broadband speed on the fancy little devices, Leon believes they'll also have the advantage. --Anne Marie Borrego

Copyright © 2000 G+J USA Publishing

Last updated: Nov 15, 2000




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