A Business Grows Straight Outta Compton
BY Donna Fenn
In a tough business in an even tougher town, Chet Pipkin has built a Hall of Fame company.
In the beginning, Chet Pipkin just assumed that his computer-cable business would never amount to much. After all, there was no dazzling proprietary technology or stellar management team; there wasn't even an office. "We thought this was probably a really stupid thing to build a business around, and we'd never be able to be big," recalls Pipkin. "We thought the total market size couldn't be more than tens of thousands of cables," he recalls. "But we were wrong, of course."
Back in 1981, when Pipkin dropped out of college to start a business on his parents' kitchen table, the cable industry was tiny and fragmented, with hundreds of small players and no clear leader. An ambitious kid could make decent headway if he was willing to smooth-talk lots of retailers and undercut his competitors. And Pipkin did. The operation quickly moved out of the kitchen and into the garage, then spilled out to the driveway and the sidewalk, where befuddled neighbors would stop by to watch the gangly Pipkin and his ragtag band assemble cables. But he had a tough time taking his own business seriously; to him, selling cables was just a way to earn the cash to bankroll "a real business" that would sell higher-end PC-related products.
Today, that cable company, Belkin Corp., is as real as they come, with 1,000-plus employees, $464 million in revenue, and an impressive 285% five-year growth rate. It's made the Inner City 100 for five years, earning a place in the list's first Hall of Fame. Pipkin, of course, owes a debt of gratitude to the explosion in home PCs, which has given rise to office and computer superstores eager to stock up on hardware and accessories. But Belkin might have easily ended up like hundreds of its competitors, scrambling for market share in a commodity business. Instead, it owns a staggering 80% of the home- and small-office market for cables, is the leader in surge protectors, and has muscled its way into LAN products and accessories for mobile devices.
THE QUIET TITAN: Chet Pipkin is the man behind what may be the tech industry's biggest sleeper ever.
It's not too much of a stretch to compare Belkin to its inner-city surroundings in Compton, Calif.: neither possesses the kind of buzz-generating, love-at-first-sight glitz that inspires devotion. Pipkin balked, in fact, when his real estate agent first suggested a Compton industrial park as a location for his growing company. It was 1991; a few years earlier the city had been immortalized by one of the first "gangsta rap" groups, NWA, whose Straight Outta Compton album was a hard-core celebration of gang violence ("here's a murder rap to keep yo dancin' with a crime record like Charles Manson"). Crips and Bloods carved the city up into north/south territories. Pipkin worried about "the stigma that might come with a Compton address, and our ability to recruit and retain people." Plus, the building was so rundown that gutting the interior was cheaper than repairing it. Never mind, insisted the agent. Compton was halfway between the Los Angeles Airport and two harbors -- perfect for a company that shipped and received goods nationally and globally. And the rent was, well, dirt-cheap. So Pipkin took a leap of faith and moved in. He's never regretted it, even when, a year later, the Rodney King verdict triggered massive civil unrest in the area. "You could look out the back of our shipping door and see various things on fire," recalls Pipkin. On the first day of the riots, police strongly suggested that Belkin's employees evacuate the office. Compton would ultimately suffer $100 million in building damage.
It was a rocky time, but Compton's shortcomings ultimately became Belkin's assets. "We needed a ready work force and access to a lot of people quickly," says human resources director Donna Pierson. Compton, where 37% of residents live below the poverty line, was home to several effective public programs designed to train workers in disadvantaged areas. They funneled some 100 entry-level employees into warehousing, assembly, and order fulfillment at the company. Pierson even went to Mexico twice for month-long Spanish immersion programs so that she could communicate with the new workers.
Curiously, even the riots worked to Belkin's advantage. To prevent an exodus of business owners from troubled areas, the city of Los Angeles offered them hefty financial incentives for expansion. Belkin got several million dollars worth of tax credits and refunds linked to new jobs and capital improvements. In 1996, when Belkin needed to move to a larger building, Pipkin again chose a location in Compton. This time, he confidently splurged: a lobby with an aquarium, limestone floors, and granite counters; a subsidized cafeteria; a gym; rooms for nursing mothers; van service to parking lots and the metro. Employees who may have had reservations about Compton "relaxed over time," says Pierson. Still, the company hires security guards and cautions employees against walking outside. Pierson says that although prospective hires are sometimes leery of Compton, "once they see our building, those fears are calmed."