Take the element of risk inherent in entrepreneurship. The judges didn't want to see who put the largest portion of his or her personal assets on the line. They wanted to see who most minimized his or her personal risk. "I think all the finalists take risks," says Patricia M. Cloherty, general partner and president of Patricof & Co. Ventures Inc. "I want to find out how they crack the issue of getting outside capital to leverage their own personal stake in the company.'
In the Turnaround Entrepreneur category, it was pointed out that Steve Volla, CEO of American Healthcare Management Inc., held only a 2% stake in the company. That didn't trouble the Bank of Boston's Diane Fulman, who found Volla had used plenty of entrepreneurial strategies to make the foundering health-care company profitable. Although Volla's financial stake was minimal, she says, the personal risk involved in taking over a poorly operated hospital, where lives are on the line, is substantial. "He started doing things in the health industry during a period of great uncertainty. For entrepreneurs, uncertainty spells opportunity, but for more risk-averse people it means the possibility of failure," explains Fulman. "He took steps such as setting up for-profit and nonprofit alliances that others weren't even seeing at the time. That sort of vision and faith in what you are doing is very risky and very entrepreneurial."
Entrepreneurs are famous for their vision: their ability to see emerging niches, growth markets, and problems as opportunities. The national finalists don't stop there; they elaborate upon visions to make them workable as well as bankable in the real world.
Consider the complexity and mass-market opportunity associated with Trip Hawkins's multimedia endeavor, 3DO/Electronic Arts, which is setting out to change the home-entertainment center forever. Hawkins not only possesses an extraordinary imagination; he has also proven -- with the success of $200-million Electronic Arts Inc., which he started when he was just 28 -- that he can bring his vision to reality.
The first time Hawkins started a company, he bet on his vision with his own dime. But with 3DO he persuaded MCA, AT&T, Time Warner, and Matsushita to back him. 3DO was trading at $46 per share in early October -- more than 50 times earnings, without even a trickle of revenues. Donald C. Burr, founder of People Express Airlines, states, "I think it's inspiring that people have been willing to commit that kind of money to a person's vision. And he's got a demonstrated record through the success of Electronic Arts, so his story is very appealing to me."
A few words on the value of equity. None of the national finalists are members of the 100% ownership club. But from the national judges' perspective, the issue is not how long founders hold on to their equity but how adept they are at leveraging it to fuel the value of their remaining shares.
A case in point is Julian H. Danielly, CEO of Aladan Corp., a manufacturer of latex gloves and condoms. Danielly managed to leverage every dollar of a nearly $200,000 nest egg into $10 from private investors, giving up just over 50% of the stock in the bargain. Danielly is, among other things, a first-rate salesman -- a skill that comes in handy when selling equity. "I thought it was very smart how he leveraged a small amount of money into a very profitable $60 million in sales over just six years," says Cloherty.
The national finalists are also distinguished by the large size of their companies, a characteristic that demands sophisticated organizational skills usually associated with professional managers, not entrepreneurs. Says B. Thomas Golisano, "One of the things I like about Robert Nourse, founder of the Bombay Co., is the fact that he did start with his own cash....Taking on a product line and going against major department stores in malls is a very tough business.' Golisano, whose own company, Paychex, has 80 branches, adds, "Managing an organization like Bombay, with 2,000 employees in remote geography, is no easy task."
"I think we have to be very careful that whomever we select [as Entrepreneur of the Year] is an innovative entrepreneur, not just a management specialist,' says F. Kenneth Iverson, chairman and CEO of Nucor Corp., who has amply demonstrated he is both. Nourse and many of the other finalists have demonstrated the same.
There's no doubt entrepreneurship is going through an upgrade. The national winners built companies by leveraging company-building tools such as joint ventures with major corporations, sophisticated customer financing, and proprietary supplier arrangements. Their skills and resources permitted them to "organize, operate, and assume the risk for a business venture" in ways most entrepreneurs never imagined possible.
NATIONAL ENTREPRENEUR OF THE YEAR FINALISTS
The Entrepreneur of the Year
An individual whose company's success can serve as a case study of management excellence in every respect.
Monte Ahuja, Transtar Industries, Walton Hills, Ohio
Robert Nourse, The Bombay Co., Fort Worth
Tom Velez, CTA, Rockville, Md.
The Emerging Entrepreneur
A company builder whose company not only has grown rapidly within the past five years but also possesses a solid infrastructure to support future growth.
Jamie Coulter, Lone Star Steakhouse & Saloon, Wichita
Julian H. Danielly, Aladan Corp., Dothan, Ala.
Paul Jain, Media Vision, Fremont, Calif.
Gary Hirshberg and Samuel Kaymen, Stoneyfield Yogurt Farms, Londonderry, N.H.
The Master Entrepreneur
An entrepreneur who has maintained company-building and management excellence over a period of time and who is an established leader of the entrepreneurial community.
Jerral Jones, Dallas Cowboys, Irving, Tex.
Trip Hawkins, 3DO/Electronic Arts, San Mateo, Calif.
David Heerensperger, Eagle Hardware & Garden, Tukwila, Wash.
