"It was incredible," Russell recalls. "Not only could I see that people really liked what we were doing with kids, but I could see that some of them had calculators going off in their heads--figuring out, if we went into eight different sports, with millions of campers in each, what could we make? The big question was, How could we get the capital to do it?"
Branching out into other sports would be a costly proposition. Russell's ongoing business concept was simple enough. During the off-season--fall through spring--he and his staff would approach community groups, sports clubs, park associations, and others about jointly offering a soccer camp for local youngsters for a week or two during the summer. If interested, the community group would sign up the campers and come up with the soccer field. NASC would handle the rest, which boiled down to hiring and training coaches to run a morning or afternoon program according to the company's curriculum and motivational philosophy. The beauty of the system was that local groups didn't charge Russell a fee for their involvement or ask for a share of the revenues. They were happy simply to have a quality summer program for their kids.
Building the Right Team
Garofolo had lots of ideas about ways Russell could position the company to raise capital and boost its growth rate. "I really believed that the company had blockbuster potential," he says. "Most of the sports-camp industry was mom-and-pop operations run out of somebody's basement with high school coaches running the program and their wives handling T-shirt requests. There weren't a lot of companies out there that offered the kind of high-quality training, curriculum, and other intangibles that Gary brought to the table."
Garofolo's recommendation: if Russell could finance the company's growth and set up barriers of entry to keep out the competition--by associating NASC with the major professional sports organizations and their icons--its opportunities would be limitless. He also thought that NASC could boost revenue growth by marketing more products to campers, especially if the products were tied to professional sports leagues or superstars.
By February 1995, Russell and Garofolo were talking to Jack Nicklaus's Golden Bear Co. about possible collaborations on golf camps that would be run according to NASC's curriculum and philosophy. The following month they launched similar discussions with the NFL. Russell smiles at the recollection. "When I think about Paul's activities back then, I think about the children's television show about Mr. Rogers and his neighborhood. Paul got us to visit another neighborhood, in fact, lots of neighborhoods, that I probably would never have had the confidence to visit on my own."
During the spring, NASC's staff worked with local lawyers to come up with an investment memorandum, which Garofolo shopped around to some of his business contacts. The goal was to raise $2 million to $3 million. The memo took a couple of months to draw up, and all it generated that summer were rejections.
It was a painful failure.
Paul Lawrence, NASC's president and one of the company's earliest soccer coaches, was convinced that the right money would come along when the time was right. "If we could impress all those professional sports organizations," he says, "I knew that the right financing deal would happen."
By August 1995, Garofolo decided that the company needed a new capital-hunting strategy, one that would be guided by professional financiers. He introduced Russell to some investment bankers, including Brown, Gibbons, Lang & Co., a well-connected firm that was also based in Cleveland.
Although the biggest Wall Street firms dominate the private-placement market--with Merrill Lynch, J. P. Morgan, and CS First Boston handling a whopping $38 billion worth of deals in 1995--regional bankers are more open to handling small private placements for small and young companies. With only $3.5 million in sales, NASC's fund-raising ability was limited. It wasn't simple to persuade even a regional banker to represent the company.
Bill Vogelgesang, the senior vice-president who ended up managing the private placement for Brown, Gibbons, is frank about his firm's early attitude. "This is a company where you go in at first and you think, 'It's small and it runs camps. That's not exactly the stuff of the Wall Street Journal,' " he drawls. "But from the moment you really get down to talking with Gary Russell and his people about the business and what makes it unique, you can almost hear a sucking sound as they pull you into what they're doing and how much they believe in it. They're almost evangelical. And a lot of very sophisticated people at our firm ended up being enamored of this company."
Most entrepreneurs don't realize that long before they succeed in selling investors on their company's potential, they first must convince an investment banker. With Russell setting his sights on raising $2.5 million--a ballpark sum that he, his key managers, and Garofolo had come up with--his company had a lot of persuading to do.
It wasn't easy. "They put my department through six weeks of hell" is the way Colin Redhead, NASC's senior vice-president in charge of finance and another former soccer coach, describes it. But the experience taught him the difference between the company's earlier failed forays into the capital market and a first-rate investment bid.
