But the timing was wrong, and the investment was too aggressive for some of Hawk's constituents. He says he lost the interest of at least three potential investors because they viewed his plans as unrealistic. "We planned to go too far too soon," he says. "No one on our team had much international experience, especially not in Europe."
Potential investors quizzed Hawk on why he wasn't taking advantage of the untapped opportunity on the domestic front before launching the far-more-dicey international push. "And they were right," he says. "We could expand a great deal here in the States with much less risk."
Hawk revised the pitch to focus on expanding primarily through the Internet. He's happy to report that he eventually was able to raise the money--and at an even higher valuation than he had originally projected. Hawk still plans to expand internationally--but not as quickly. "Plus, the upcoming changes in the European market--the common currency, simpler shipping across borders--are going to make it a lot easier. The timing for us to expand internationally is going to be much better." --C.C.
A simple plan in a complex world
THE CEO: David Giuliani
THE COMPANY: Optiva Corp., a dental-products maker based in Bellevue, Wash.
THE BUY-IN: Europeans can't get enough of American consumer products.
David Giuliani of Optiva thought he had a pretty good idea of what it would take to make his company an international player. That is, until he tried it. "It all proved to be more difficult than we expected," he says. "Probably by a factor of two."
Giuliani assumed that going global would be a relatively straightforward process. In the mid 1990s, business books and magazines were packed with stories of companies like his achieving incredible success in Europe, Russia, and China. What those stories didn't explain is that it takes a lot of infrastructure to support operations so far from home. "It took longer than we thought to go through the various stages," he says. "I underestimated the complexity."
Giuliani found he couldn't just park his products on foreign shelves and expect sales to skyrocket. Each market had to be thoroughly evaluated on its own merits. French consumers, for example, placed a much lower priority on dental care than their U.S. counterparts did, so the per capita sales of toothbrushes in France lagged far behind those in the United States. At home Optiva could count on the professional dental community to pass along the word about its brand of electric toothbrush. European dentists proved to be much less cooperative. And European distributors were much less motivated than Giuliani had hoped.
Giuliani says he still plans to grow internationally, but in a much more measured way. From now on he'll set up his channels of distribution market by market. "It wasn't as simple as we thought," he says, "but experience is a great teacher." --C.C.
MYTH NUMBER 4: 'CAPITAL IS EASY'
From road show to spin control
THE CEO: Mogens Smed
THE COMPANY: Smed International, a $200-million office-furnishings maker based in Calgary, Alberta, Canada
THE BUY-IN: "In May, it looked like extremely easy money."
When is easy money really easy? When you raise $42 million in a day and have to turn investors away. When does it get hard? Four months after you raise $42 million, when your stock drops from $20 to $5 a share. That's what happened to Mogens Smed. If there was anything he believed about business, it was that the more money you can raise, anytime you can raise it, the more you can make. But now he wishes he'd never seen a dime of the money he raised last May.
At the time, Smed International was riding the capital-raising bandwagon. It had gone public in 1996; in its third offering in two years, the company raised more in that one shot than it had ever done before. "We were overbooked on the first day," recounts Smed, "and by the end of the road show we were oversubscribed by five times."
Then the tide turned for Smed. Among other problems, the office-furniture industry tanked in the wake of the Asian crisis. Smed International's sales suffered, and it had its first losing quarter as a public company. "We had expected to make $2 million; instead we lost $2 million," says Smed.
That was just four months after Smed's investors poured $42 million into the company. The market quickly returned the blow. Eight to ten days after the results were announced, 800,000 shares were traded and Smed International's stock lost 75% of its value. At the same time, 350 employees, including 60 members of the office staff, lost their jobs in a layoff that shook the company's close-knit culture.
Reeling from the setbacks, Smed found himself facing a firing squad of institutional investors in Toronto. Having so recently plowed $42 million into the company, they wanted a piece of the CEO's hide for letting its value fall so hard. "We assumed the 'dying cockroach position' and let them beat us with a stick," he says.
Ironically, Smed had wanted to raise the $42 million only as a "reserve"--extra capital for a rainy day. Then the storm broke, and the reserve became a burden instead of a resource. The lesson? One that Smed himself used to hear from one of his mentors, whom he describes as "a 75-year-old Jewish man who escaped the ghetto in Warsaw. He always said that if it looks too good to be true, it is." --S.G.
Do it all and do it now
THE CEO: Gary Russell
THE COMPANY: North American Sports Camps, based in Norwich, Conn., an organizer of soccer camps for young players
THE BUY-IN: "If you build it, they will come."
In 1994, Gary Russell's North American Sports Camps (NASC)-then called North American Soccer --was on top of its game. Russell had run soccer camps for 26 years. Revenues were around $2 million or $3 million.
