Vital signs now: Hyman didn't hit his revenue projections in 1998 -- Career Central's fees that year were $2.1 million. In 1999 revenues from fees were higher, coming in at $4.4 million. While the company's revenues were growing year after year, so were its losses. According to its S-1 registration statement, the company lost $10 million in 1999. That's right: Career Central, which is now known as Cruel World Inc., wanted to go public. Although Hyman thought the company would raise $57 million last spring, the Nasdaq dove, and the company decided in May to pull back. By late fall Hyman had laid off a significant percentage of his workforce, had suspended Cruel World's Web-link affiliate program, and was leading the company into what he characterized as "a transition."
What the experts say today: "To tell you the truth, I'm amused that they managed to stick around," says Margaret Riley Dikel, author of The Riley Guide, a Web-based primer on Internet job searching. With the consolidation trend hitting well-known job sites like CareerMosaic and CareerBuilder, Riley Dikel says that in order to survive, Cruel World would have to offer a service that others don't. And even then, Cruel World could still get stomped by such headhunters' Web sites as LeadersOnline, the online Heidrick & Struggles company, because "they're long-established firms with excellent customer relationships," she says.
Excelsior-Henderson
Founders: Dave and Dan Hanlon
Date of Inc. anatomy: November 1997
Vital signs then: The Minnesota brothers and bike fanatics set out in 1993 to challenge industry giant Harley-Davidson by relaunching the 84-year-old Excelsior-Henderson brand. In 1995 and 1996 they raised $15 million in private-equity capital, and in mid-1997 they took the company public, raising $28 million more. With the design for a motorcycle in the can, the company said it was ready for production. The Hanlons projected revenues of $5.4 million for 1998.
What the experts said: Analysts agreed that the market had room for more motorcycle players but felt that the road to production would be tough and capital-intensive.
Vital signs now: Despite rave reviews from the motorcycle industry, Excelsior-Henderson filed for bankruptcy protection in December 1999 after spending $100 million in seven years of development and only eight months of production. This past September E.H. Partners Inc., an investor group, acquired Excelsior-Henderson out of bankruptcy.
What the experts say today: "It takes about $150 million these days to field a new motorcycle of that type," says Don Brown, an independent motorcycle analyst with DJB Associates LLC, in Irvine, Calif. The Hanlons didn't help drive down costs, Brown adds, when they built their own manufacturing plant. To make matters worse, he adds, the Hanlons discounted Harley-Davidson's ability to dominate the category. "They probably overestimated the market, and they probably didn't do enough research to determine the styling and performance elements and the price point that would stand the best chance," Brown says.
Oregon Chai
Founder: Heather Howitt
Date of Inc. anatomy: September 1997
Vital signs then: Environmentalist Heather Howitt left the recycling trade in 1994 to sell chai, a milky tea that, although it had been around for centuries in India, had yet to hit the espresso set in the United States. With 1996 revenues just under $1 million, she poured every penny back into the business. The company, which is based in Portland, Oreg., became profitable in early 1997, and Howitt hoped to reach 1998 sales of $5.4 million.
What the experts said: Most beverage bigwigs were quick to cite chai's high profit margins as a plus, but one tea purist looked down his nose at Oregon Chai's liquid concentrate, which required the ditching of traditional tea bags in favor of a large carton. But those manning the barristas were thrilled with the prospect of a new specialty-tea drink that could complement their espresso offerings.
Vital signs now: Oregon Chai has surpassed Howitt's estimates, hitting $6.8 million in sales for 1998 and topping $10 million in 1999. Howitt credits the company's success in part to increased awareness of chai, thanks to the introduction of the drink at Starbucks. She's beefed up her staff, including her new sales department. "We have 29 people, which is insane," Howitt says, noting that Oregon Chai has penetrated chic cafés, natural-foods stores, and even large supermarkets like Safeway. The company was #18 on the 1999 Inc. 500 list of the fastest-growing private companies in America.
What the experts say today: "Chai is to the emerging U.S. tea market what cappuccino and latte were to the specialty-coffee market when it arose a few years ago," says Brian Keating, founder and president of Sage Group International LLC, a tea market-research company in Seattle. Back in 1996 the entire U.S. chai market amounted to only $7.5 million in sales. For 2000, Keating's group estimated that sales would be in the neighborhood of $28 million to $30 million. And at nearly $11 million in annual revenues, Oregon Chai has a huge stake in the chai business. Oregon Chai's success, Keating says, is due to the way Howitt spiced up the traditional flavor, focused the product offering, and made it easy for food servers and consumers to make the drink. "I think of them as the Gatorade of chai," says Keating.
Anne Marie Borrego is a reporter at Inc.
You can read three more updates of companies profiled in Anatomy of a Start-up.
THE START-UP ISSUE
Part 1: Your Way
Part 2: Anatomy Update -- Big Plans
Part 3: The Start-Up Diaries -- Year One
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