"We decided to go to an audience that would understand our project: CEOs and founders of marketing and manufacturing companies," Dan says. "We found their names in annual reports and business journals, and picked up the phone and started pitching our story to them."
It worked. By April 1994 the Hanlons had raised enough money to move out of Dan's basement and into new offices. By the end of 1996 they had taken in more than $15 million in private-equity capital. "I didn't invest in the company per se. I invested in Dan and Dave," says David Pomije, CEO of Minneapolis-based Funco Inc., a video-game retail chain, who has invested $1.1 million in Excelsior. "Concept is only 3%, while execution is the other 97%. These guys are bright, resourceful, and resilient, and have that certain spark and ingenuity that maybe one in a million entrepreneurs has."
In July 1997 the brothers took Excelsior-Henderson public, raising $27.6 million after commissions through the sale of 4 million shares at $7.50 apiece. The stock was hovering around $6.30 a share by mid-September. The successful completion of the initial public offering, which represents 31% of the company's equity, gives Excelsior-Henderson a market value of nearly $100 million. Proceeds from the IPO will go toward industrial design, engineering and testing, completion of a new factory, and sales and marketing. The company's books show a loss of $6.2 million through June 30.
To supply the manufacturing know-how they lacked, the Hanlons sought professionals to build their factory. During an early scouting trip to Triumph Motorcycles Ltd.'s Hinckley, England, facility, they met Allan Hurd, then production engineering manager at the new Triumph. The brothers so impressed him that Hurd defected to Excelsior, becoming its vice-president of manufacturing and operations. Working alongside him is Neil Wright, another Triumph alum, who is designing the Super X's engine. Hurd and Wright are considered among the best in the industry and played key roles in the revival of the Triumph motorcycle in 1990. (The original company had gone out of business in 1983.) "I'm not a gambler," Hurd says. "I wouldn't be here if I didn't think we could do it. Remember, I've done it once before."
After a national search, the Hanlons recruited Dave Auringer, who had built an extensive dealership network for Sea-Doo Watercraft. As Excelsior's vice-president of sales and marketing, he has already signed up 35 dealers nationwide by offering them high margins, said to be about 25%. The company's chief financial officer, Tom Rootness, has 30 years of accounting experience. "The Hanlons have been very systematic in what they've done," says Ed Youngblood, president of the American Motorcycle Association. "They've attracted a lot of support."
IV. Excelsior versus Harley
Having put together a topflight team, the Hanlons turned their attention to Harley, a fierce competitor. With enviable customer loyalty, a golden, all-American brand name, and 592 dealerships nationwide, Harley inspires a cultlike devotion among its followers. It is a quasi religion, an institution, a way of life. In 1996 the company had a record year, with revenues of $1.5 billion and net profits of $166 million. Some dealers have waiting lists up to two years long for popular Harley models, notably the Heritage Springer. Harleys have become so hot that a new Kansas City, Mo., factory is under construction to help the company meet its goal of producing as many as 200,000 bikes a year by 2003, up from 119,000 in 1996. Harleys are so popular that companies such as Big Dog and California Motorcycle Co., among others, have flattered it in the sincerest possible way: by copying its products, building thousands of bikes every year that look and sound like the real thing.
Though the Hanlons tactfully disavow that they're aiming for Harley's market, their strategy is clearly to siphon away bikers who value a made-in-the-USA heavyweight heritage cruiser. The brothers believe the Super X will succeed, in part, because it's not a Harley. Even Harley diehards, they figure, will want to add Excelsiors to their collections. "Our competitive advantage is that we're different. Our name is different. Our history is different. Everything's different," Dan says. "We're fostering the Excelsior-Henderson lifestyle. And we're going to do that through rallies, apparel, and merchandise, and most important, through the statement of the motorcycle."
Besides Harley, Excelsior has to grapple with the entry of a new U.S. competitor into the heavyweight-cruiser market. Polaris Industries Inc., a $1.2-billion, Minneapolis-based manufacturer of snowmobiles, personal watercraft, and all-terrain vehicles, will introduce in 1998 the Victory, a high-tech, midpriced bike that is already winning good reviews. Polaris, a 43-year-old company, has manufacturing, marketing, and engineering muscle. The Victory will cost thousands less than Excelsiors or Harleys and will mainly compete with the Japanese bikes. BMW also has just unveiled a new heavyweight cruiser.
Harley's chairman, Rich Teerlink, cautions that Excelsior had better do more than simply offer an alternative. "I think the best thing for them to do is go after new customers and build new experiences for people," he says. "They have to create a sense of need for their bikes."
Excelsior could easily take a spill, especially if the company runs out of money before production begins. "I think they've got a really tough road ahead of them," motorcycle-industry analyst Don J. Brown says. "The Japanese are building better bikes all the time, and Polaris has produced a first-rate V-twin cruiser."
