Anatomy of a Start-Up

With his snazzy new product, Todd Greene hopes to carve out a niche for himself in the tough razor industry. But can the HeadBlade cut it as a company?

It's not that Todd Greene really wanted to start a company. His temper just got the better of him.

As a wispy-haired 30-year-old, Greene invented a razor designed specifically for the Kojak set -- men who opt to shave their heads, often before nature does the job for them. Early last year he tried to sell the concept to two large makers of men's grooming products, only to be rebuffed. But one kiss-off was particularly cutting. It came from the Schick division of Warner-Lambert Co., a $10.2 billion conglomerate based in Morris Plains, N.J. The tacky five-sentence form letter was actually stamped "Rejection." "When I got that letter, I thought, 'Screw it. I might as well work on this on my own," Greene says.

It was an impulsive beginning for the HeadBlade Co. LLC, but then Greene tends to be an impulsive guy. Evidence: he met his wife, Danielle, by E-mail and married her three weeks later. It took him slightly longer -- 12 weeks to be exact -- to take his product to market. At 2.25 inches long, the HeadBlade resembles a miniature yellow Jet Ski and fastens loosely to the finger like a candy ring. Greene created the razor by baking clay prototypes in the kitchen of his apartment in Santa Monica, Calif.

Greene's HeadBlade debuted for sale last June on a Web site he'd built himself. He drummed up interest for the $15 item by posting messages on Web bulletin boards that catered to his target customers, which include balding men, hardcore athletes, members of the military, and aspiring bohemians. In the first week Greene tallied sales of $300; these days weekly receipts average $3,000. In addition to being sold on the Web, the HeadBlade is also available at 16 retail stores. Greene expects to lose $173,000 on sales of $1.6 million this year and hopes to make money in 2001, when sales are projected to reach $4.7 million.

But to cash in on his idea fully, Greene will have to sculpt a solid company. After all, he's hardly operating in the high-tech world, in which an entrepreneur needs only a half-baked idea to ignite a bidding war among potential acquirers. "Companies like Gillette are not really known for buying smaller companies," explains Mark Godfrey, an analyst who follows the industry for Invesco Funds Group Inc., a Denver investment firm that manages $30 billion in assets. "They spend so much on R& D that their attitude tends to be that if there's something to be developed, they'll develop it themselves."

Building an organization will require creativity on Greene's part. He's raised only $150,000 in seed capital -- not much for a business that manufactures and markets a consumer product. Even so, he claims, his goal is "to make the HeadBlade a household name, like Miracle Whip and Kleenex."

Not that the industry he's entering lacks household names. Market leader Gillette, which sold $3 billion worth of razors and blades in 1998, controls 70% of the U.S. market. "The big guys are going to swat Todd away like a bug unless he's able to create a self-sustaining business," says James R. Hunter, who is not just a consultant for HeadBlade, he's also a client. Hunter helped Greene write his business plan. "He's going to have to win, and win early, to survive," he says.

So far, Greene has proved himself to be an adept bootstrapper. Working from his home, he takes just-in-time delivery of razors from his supplier, tying up little capital in inventory. He passes shipping costs on to his customers. The razor's sleek design often wows editors, rewarding Greene with free publicity in such magazines as Sports Illustrated, Details, Entertainment Weekly, The Advocate, and Playboy. Each mention has produced a spike in sales. "If I know it's going to appear in a newspaper on the East Coast, I try to go to bed early so that I can be ready to answer the phone in the morning," says Greene with a laugh. Eager to retain his 90% equity stake -- the rest is owned by friends and family -- he has resisted bringing on employees, preferring to pay hired hands on an as-needed basis.

Hiring, Greene figures, means parting with equity cheaply. Either he'll have to raise money from investors, who will want sizable chunks of equity, or he'll have to compensate employees with shares. "He's making these decisions very carefully," says Hunter. "He's an entrepreneur, but he's not dumb about his enthusiasm. He was convinced early on that he wanted to live from revenues." In fact, HeadBlade's income statement boasts enviable gross margins of 65%. Enviable, that is, assuming that there's a potential market of 10 million out there, which is what Greene hopes, though he admits that there are no hard numbers tracking what is, after all, just a hairstyle.