Global South Metro Exchange
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Roughly 100 years after the completion of the Panama Canal, the Panama Canal Expansion allowing for post-Panamax ships to transit, is nearing completion in late 2014/early 2015.
Some say that this will be a global trade route game changer, and that inland ports such as Charlotte with connections to a deep water harbor and truck, rail and air freight services stand to benefit from the expansion and ensuing trade. Others speculate that any boost in trade will at best be temporary with no real long-term benefit or change to trade, transportation or distribution.
Undoubtedly, the synergy with Charlotte’s new intermodal facility will magnify any such gains, elevating Charlotte onto the global stage.
The Power of Place
Chase Saunders, a former Superior Court judge, community activist and noted historian of Charlotte, introduces the vision for Charlotte in a recent piece he put together for a creative summit:
“Charlotte owes its existence to its location at the intersection of two local, ancient trading paths. Through time, the intersection gained prominence in the region, then the nation, and now the world. That location is going to leverage Charlotte into one of only a handful of global intersections of commerce.
“Charlotte is located at one of those pivotal global intersections. Here, you can create, import, manufacture, assemble, ship, handle, and deliver just-in-time any thing. And you can do it more economically and with a better margin of profit than anywhere else. Charlotte offers fertile soil in which business can grow and prosper.
“The economic vision for Charlotte’s future is one of a global commercial hub, a great inland port city leveraging its manufacturing and logistical resources to world prominence. Charlotte is a place where your business must be located if you want to be relevant in the 21st century.”
In Create It Make It Move It; Charlotte 2030; a Global Intersection of Commerce, Saunders describes an economic vision and essence of Charlotte: “The world is connected by commercial trade lines on land, sea and air. Where those lines intersect, commerce thrives. Those commercial lines intersect in Charlotte and allow it to move anything with mass to half the United States within 24 hours or less. That is the power of place.”
Saunders was the scribe for a joint endeavor including Dr. Tony Zeiss, president of CPCC and champion of workforce training and education for economic development, and Michael Gallis, a regional and global planner with a truly visionary understanding and appreciation of how things change and the effects of change on populations and on regions, in preparing the Create It Make It Move It manifesto.
Saunders touts his case for Charlotte:
“Charlotte will be the significant beneficiary of unprecedented commercial events taking place thousands of miles away. In 2014, a huge number of Chinese trading ships will stop visiting ports in Southern California. Instead, they will are arrive at newly furbished ports along the Gulf Coast and Atlantic Coast as a result of the opening of wider Panama Canal locks. It will be a ‘gone tomorrow, here today’ economic scenario. Some estimates place the number of additional passages through the Panama Canal to reach 15,000 carriers!
“In 2014, huge amounts of cargo will be taken off Chinese Panamax freighters hauling 16 train loads of goods into ports including Mobile, Jacksonville, Savannah, Charleston, and Norfolk for distribution and assembly or manufacture. And Charlotte will be ready to take that cargo and insert it into the streams of commerce in a freight handling terminal capable of handling tens of thousands of containers.
“Huge amounts of cargo will move by rail and truck throughout the Southeast. Charlotte will be in the center of much of it, an inland port.
“And Charlotte is the best placed city to do things with that cargo because we will have the only fully functional and operational intermodal center on the Eastern Seaboard. And it is located at the airport. The airport is already the least expensive location to move people in the world. Add to that the relocation of the Norfolk Southern Rail Yard between two runways with adjacent bays to ensure adequate truck access, and you will have the most efficient place to move freight by air, land, or sea, on the Eastern Seaboard.”
Intersection of the Rivers of Commerce
The opening of a major intermodal facility at Charlotte-Douglas International Airport in late 2013, coinciding with the expansion of the Panama Canal, promises a sea change in greater Charlotte’s global status.
Charlotte will be ready. The new facility, under the decades-long leadership of Jerry Orr, is the result of more than 15 years’ planning, the assembling of acreage at the airport about as large as Hartsfield-Jackson Atlanta International Airport, and a novel strategy that provided both dirt for an elevated runway and space for a Norfolk Southern rail yard.
Orr recalls the beginnings of the project about 1990, then working with Gallis and devising a plan by the mid-1990s.
“We started looking at strategic planning and what some regions were doing—particularly in Asia where there were massive projects based on communities integrated and growing up as part of an airport complex,” Orr says.
“We needed to understand the global issues so we could focus our limited resources on strengthening our strengths and disguising our weaknesses. The basic concept of that strategic plan was pulling together all four major modes of transportation on one coordinated site under the assumption that doing that would be the pinnacle of efficiency and therefore cost-effectiveness for all four. If we were able to do that, it would place us as one of those intersections of the rivers of commerce that would distinguish us in the future and build the opportunities for business here.”
They began to look for ways to boost air freight business at the nation’s seventh busiest airport when they recognized an opening to broaden the freight sector. They figured the city could attract traffic by drastically reducing the cost, called the dray charge, of transporting goods from a rail center on the north side of the city to the airport on the west. The co-locating of the activities also brings significant reductions in energy use, traffic crowding, and environmental damage.
“We begin to realize that freight centers attracted enormous amounts of business,” Gallis says. “With the way the world was going with e-commerce, companies were looking for efficiencies. The world trade lanes were shifting and we wanted them to come through Charlotte.
“If the world recognized Charlotte as a freight center, then businesses connected with the movement of goods would all be attracted to the airport area,” says Orr.
“We took that up as our assignment and figured out how to co-locate a freight rail intermodal yard on the airport and began talking to Norfolk Southern about that. About 15 years later, we did the deed.”
Charlotte’s New Intermodal Facility / Inland Port
The new intermodal facility being built and managed by Norfolk Southern will be capable of 200,000 lifts per year, transferring containers between trucks and trains, more than doubling the 115,000-container capacity of the current rail yard. Ultimately, it is designed to handle 600,000 containers, equal to the two largest U.S. centers in Dallas-Fort Worth and Chicago.
“This facility will be state of the art here. The containers can move by either truck or rail, but they could move from the dock at the port by rail to this yard, be re-sorted and picked up by Norfolk Southern. We happen to be lucky to sit on their main line,” comments Orr.
“Charlotte is a key hub on the Norfolk Southern intermodal system and on our Crescent Corridor, a new rail intermodal network under development stretching from New Jersey to Memphis and New Orleans,” according to Norfolk Southern CEO Wick Moorman, describing how the facility will greatly expand their ability to handle intermodal traffic.
Increasingly, inbound cargo is transferred directly from an ocean vessel to railcars and then transported to an inland location, away from the more congested port itself, for further processing and distribution. These inland locations, or intermodal centers, serve as “inland ports,” with some handling as much cargo volumes as their coastal counterparts. Charlotte is already on the relatively short list of current areas widely recognized as full-fledged inland ports.
Though the inland port concept is not new, these locations are becoming increasingly critical to the global supply chain, affecting logistics decisions ranging from shipping routes to warehouse locations.
In building the intermodal facility, Gallis says, “What we had was a great opportunity to do something that the other metropolitan areas could not do. Atlanta, nor New York, had the opportunity to build a connection point for rail, for trucking and air at a single location.”
The benefits of concentrating the connected modes of transportation in one place, so obvious in hindsight, were not under consideration in the haphazard development of cities in the United States. Ties among the different kinds of infrastructure are so little recognized that they are not even all overseen by the same congressional committees.
But in Charlotte, the collaboration of public and private civic leaders seized the opportunity years before the Panama Canal expansion was planned and maintained the effort as part of a broader economic strategy ready to remake the city after the recession.
“There is an intermodal yard being built at the airport, but it’s not about an intermodal yard at the airport,” says Gallis, whose remembers the airport’s dreary resemblance to a bus station when he first arrived in the early 1970s. “There has been an incredible transformation.
“Now we see it not as an airport any more, but we call it a multimodal hub. It’s going to become something different, something we’re not used to seeing.”
The intermodal facility offers new opportunities for export as well as import and distribution. Emptied containers need to be returned for refill, and local goods, including farm, forest and factory products, could fill them.
“The backhaul business will provide an opportunity,” Saunders says. “The ship’s here. It’s got to go back. Things you could not otherwise send cost effectively become cost-efficient because you’ve got the containers. There’s a new big market to open up.”
Gallis points out that the intermodal center also will make Charlotte attractive to the international supply chain.
“It will become a huge magnet,” he says. “Nothing is made in any one place any more. Things are made everywhere today. The pieces and parts move through the world transportation grid, and as they move they get assembled in what’s called subassemblies, shipped on to other subassemblies, finally getting to the point of the final factory and the final product.”
Orr says the facility will reduce costs for companies that use it.
“It’s obviously cheaper to move containers across the ocean on container ships than it is to fly them on an airplane, by a huge spread,” Orr continues. “It is cheaper to move containers by rail than it is by tractor-trailer, and it consumes about 10 percent of the energy.”
“People ask what an intermodal center is,” Saunders says. “It is the equivalent of a gigantic commercial circulatory pump. It allows all of the business sectors to then plug in, and in particular the business sectors associated with manufacturing.
“Once you have one of these gigantic circulatory pumps, you immediately have a profit margin that works to the benefit of anybody that’s plugged into it.”
Impact of the Panama Canal Expansion
The Panama Canal Expansion will bring ships three times the size to the Caribbean Sea and the Gulf of Mexico—ships filled with containers of goods bound for ports on the Atlantic Ocean and potentially through Charlotte. The expansion involves the building of two new sets of locks and the widening and dredging of the canal lanes at various locations.
For the first time in history, inland ports—such as Charlotte’s intermodal facility—rather than seaports will be the hubs of trade and commerce, eliminating the advantage enjoyed by water-accessed cities since ancient civilizations.
Asian goods once unloaded in California for the cross-continent trip to population centers in the East now will move by water to Norfolk, Wilmington, Charleston, Savannah and Miami. Crowded docks will require quick relief, so the thousands of containers per ship will be lifted onto trains and sped inland for breakdown and further distribution.
“We’re a distribution center. We always have been,” says Saunders. “Now we’ll be able to tap into what the Panama Canal is going to do when it opens up. There are going to be at least 7,500 passages of post-Panamax ships.
“The logistics companies are putting out reports on what the impact is going to be, and there’s no doubt the Southeast will benefit as some of those ships no longer dock in California. They will come into the Southeast and the East Coast ports.”
Norfolk already has the 50-foot depth required to receive such ships, and this year the federal government approved funding to provide such depth at Charleston, Savannah and Mobile.
When the canal expansion is complete, ships that can carry the equivalent of more than 12,000 20-foot-equivalent units (TEUs), the measure of typical containers, can pass through, far more than the present 4,400 TEU limit.
“We’re getting ready to have a trade route shift,” Saunders says. “Certain cities will be able to take advantage of it.”
Fueling the Economy; Becoming a Global City
However, it’s not just that Charlotte’s concentration of air, rail and land resources ready to receive and distribute shipments of goods from around the world will be the largest on the East Coast.
“It’s about anchoring Charlotte in the new pattern of global trade and determining how Charlotte can best compete with centers like Miami, Atlanta and New York,” says Gallis. “The big economic centers of the world are the centers that are trade network hubs. The fact that they’re trade flow centers and passenger flow centers fuels a huge part of their economy.”
Leaders say the intermodal project is part of an even larger strategy to reposition the city economically in ways that will impact every area of life, from education to employment and infrastructure to culture.
“Around the world, there are certain locations that are emerging as places where you’ve got to be,” asserts Saunders. Saunders predicts “intermodal Charlotte” will be the region’s next boom.
“You’ve got to have a vision to get there—whether you’re an individual, a community, a state or a nation,” affirms Zeiss.
The launch of a global trade hub in Charlotte offers an opportunity to elevate the city’s international stature in fields far beyond transportation and logistics, leaders say.
“We’re the new global city on the East Coast. Let’s build relationships with every major trading bloc and say to ourselves ‘How can we then capitalize on those trading relationships and bring other companies to Charlotte?’” says Gallis.
The change will also require a new mindset for city leaders, who typically have looked to Europe for international relations, to leverage and enhance existing elements of global-city life, Gallis says.
Gallis says the city must continue to address three categories required for top-tier status: “The first is, ‘How are you connected to the global network?’ The intermodal facility provides a giant step forward.
“The second is, ‘What size and type of economy do you operate?’ That’s really a question of the degree to which you’re part of the innovation economy or you’re part of the traditional economy.
“The third is, ‘What competitive resources such as medical centers, universities, cultural attractions and other amenities are available for quality of life?”
While the region has abundant water, relatively economical energy, high-quality health care and a rapidly-growing research university, UNC Charlotte, some sectors require significant improvement.
Asked about the future, Saunders enthusiastically responds.
“In Charlotte, you can create, manufacture, assemble, or make and then move anything with mass to half of the United States within 24 hours by truck. This production can be done faster and cheaper than in any other location on the East Coast adding a competitive profit margin.
“The huge airport intermodal complex is comparable to that of Houston in its ability to handle the large TEU containers and rail cars developed for use in the regional seaports of Mobile, Savannah, Jacksonville, Charleston, and Norfolk. Raw materials, parts, and finished goods can move in and out efficiently and economically via air, rail, truck, or ship.
“The region surrounding the intermodal center is the East Coast hub for manufacturing, warehousing, and assembly complex extending into adjacent counties in both North and South Carolina.
“This integration of logistics and manufacturing gives the region the same edge which the Chinese in the Pearl River Basin recognize and are using to provide additional profit margins and gain international market share. Charlotte has a similar advantage because of her location at the junction and pivot point of two high-skilled and creative manufacturing regions in North and South Carolina.
“The best manufacturing companies in the United States, Europe, and Asia will locate branches here.
“By 2030, Charlotte will realize its destiny as the center of the most economically diversified manufacturing and distribution economy on the East Coast with strong manufacturing, distribution, energy, health care, biotech, and financial services,” Saunders concludes.
Others in our community are not so confident. According to UNC Charlotte Belk Professor Doug Cooper, “While the expansion will offer the opportunity for improved global flow of goods, it comes just about as the global flow is about to undergo a rather profound and significant change. The coming rebalance of flow between the U.S. and China may actually imply less movement of canal flow rather than more.
“While much of the Walmart/China flow will be retained,” Cooper continues, “much of that relationship will be moved back to the North American region with less need for the canal. Also various other things are happening …transportation rates are going up; there are growing shortages in container port capacities.
“In the short run with the transportation hub and the relationship with Charleston, Charlotte will likely feel a small positive. In the long run, in my opinion, it’s not going to have much impact.”
Boost or boom, Charlotte will take it—as it lifts itself up on to the global stage.
In business, innovation is a good thing—a pathway to growth, a doorway to progress and possibly even a trajectory to industry leadership. But while innovation may be good for business, Pete Stewart found that being a business innovator wasn’t always easy.
Stewart admits that his career in forestry began as a high school toss-up between oceanography and forestry, which he jokes is proof that “17-year-olds should never make decisions that affect the rest of their lives.” A couple of college career days later he was studying forestry, eventually earning a bachelor’s degree from Texas A&M University and a master’s degree in forest economics from the University of Georgia.
No matter how casually made, the career choice turned out to be a smart one. According to the American Forest & Paper Association, the forest products industry accounts for about five percent of the total U.S. manufacturing GDP, producing approximately $175 billion in products each year and employing close to 900,000 people.
It was also a good choice for Stewart who found that he enjoyed the business and its surprisingly mathematical and statistical bent. His first job as a consultant in the industry moved him from his native Texas, where he was a wood buyer for a large forest products company, to Charlotte. It was not long before Stewart first noticed a systemic problem.
“About 30 percent of all timberland is owned by pension funds,” Stewart explains, “and I was in charge of valuing it. But I could never find good data. It was nearly impossible.
“I began thinking that there’s got to be a better way to collect, handle and distribute this data. At the time I worked for a company of about 50 people and we would literally spend hundreds of thousands of dollars trying to figure out the market. If a company our size was spending that kind of money, I could only imagine what the largest forest products companies were spending to get good market data. Billion dollar companies like Weyerhaeuser and International Paper had to be spending just tons of money.”
Based on that premise, Stewart went to New York and pitched an idea to some private equity groups, raised some capital and started Forest2Market, Inc. in 2000. Stewart, president and CEO of Forest2Market, likens the company to a Bloomberg-type news service specifically for the forest products industry.
“What Bloomberg did really well was develop analytical tools so their users could track the particular metrics that were important to them. We do essentially the same thing but for specific metrics in the pulp and paper, sawmill, timberland and other related industries.
“It’s all about the data, and what’s different about our data is that we collect the actual transactions as they come across the scales so we know where the trees came from on earth, how far they traveled, who hauled them—every last detail. I know it sounds like a lot of minutiae, but we’re the only ones who do that. There’s no other company in the country with that level of detail.”
The scale of data is also notable. Forest2Market collects a mass of 30 million transactions a year across all its product lines. In its most prominent markets, this equates to 92 or 93 percent of all U.S. transactions. Data is collected from both buyers and sellers to confirm its accuracy and all the participant companies, including Forest2Market, are subject to independent audits.
“Our goal is to ensure that our data is always true to market,” says Stewart. “Our next best competitor just collects survey data. They call people in the marketplace and ask them the price of wood. That just doesn’t cut it when you’re relying on this data to make business decisions.”
Barking Up the Right Tree
Stewart began collecting data by building a stumpage price database—that is, the price of trees in the forest still connected to the stump. Forest2Market now offers a suite of products that includes price reports for timber and lumber, price forecasts, wood basin supply and demand assessments, and benchmarking services for delivered wood raw materials and lumber. Their newest product is a benchmarking service for recovered or recycled fiber.
They also offer syndicated studies that identify, evaluate and quantify industry trends and proprietary studies that answer a particular customer’s specific questions or address a company’s individual business needs.
Customers use Forest2Market data to set benchmarks, price contracts, value assets and make many other decisions to enhance everyday business performance. But the data is also vital in decisions with much higher stakes.
“If a company’s putting in a new mill, they need to know that there’s enough raw material in the area to support it and at what price,” Stewart explains. “That’s not something you can determine by a casual assessment of the local area. We have the sophisticated mathematical models that allow us to simulate the growth of the forest. And since we have data about the transactions coming from the forest, we are uniquely positioned to help our customers in ways others cannot.
“If a CEO wants to shut down a billion dollar pulp mill or, conversely, expand a mill, that CEO takes comfort in the fact that Forest2Market can provide a complete picture of market conditions, including price, supply and demand for trees—not only locally but across the country. We can go to the CEO and say that we can take the guesswork out of this critical decision. With our transaction-based data, CEOs can confidently and unequivocally know how their costs stack up to their competitors’. That’s extraordinarily valuable to them.”
Stewart recalls one client situation where the stakes were particularly high. “We had a customer with a real cost issue. They couldn’t figure out why their costs were out of line and it was causing serious financial difficulties.
“They asked us to look into it and we discovered that they were hauling their timber 15 miles more than the norm; this translated into a cost eight or nine percent higher than the market. That’s a big deal when 65 percent of your costs are the raw materials coming in.
“As a result, they re-engineered their supply chain and saved about $5 million a year. And since this happened during the economic slump of 2008 through 2010, it helped them hang on till things improved. They didn’t have to layoff their employees or go out of business.
“That’s the sort of detail that we work with to find and improve those gaps in costs. These mills deal in $150 to $200 million worth of raw materials, so a savings of a half or a quarter of even one percent matters.”
David West is general manager of fiber supply at Longview Fibre Paper & Packaging in Longview, Wash. Before becoming a Forest2Market customer in 2010, he used public and survey data for market information.
“That kind of data may have helped in seeing trends, but it also allowed companies to influence the market,” West says. “Forest2Market gives a true representation of what’s actually going on in the market. And the information is timely. Within 10 days, you know the data from the last month.”
Steve Smith, managing director, forest management, for Timberland Investment Resources in Atlanta, uses Forest2Market data for appraisals and valuation purposes. He says he renewed their contract with the company because of the scope and breadth of their product across the Southeast. “They’re in all the regions we are,” Smith says.
Stewart’s vision for Forest2Market encompassed timely, accurate, unbiased data gathered from the majority of U.S. transactions at a level of detail never captured before combined with analytical tools and industry experts to interpret that data for widespread industry or specific company use. Given the industry’s need for reliable data to be competitive and successful, it seems like it would be an easy sell—but Stewart tells a different story.
Out on a Limb
“I would never have imagined how hard it would be to get people to believe something different,” says Stewart. “Change comes hard, and being a change agent, isn’t for the meek. You need money and patience. You need five times more money than you think and at least as much patience. When I started, I didn’t appreciate the inertia that’s out in the marketplace.
“When you start a new business, you better be ready to throw away your business plan every three months if you want to survive. You envision a grand plan, but the market will tell you what the market wants to buy and you have to react to that or you’ll be out of business.”
Stewart admits that his choice of business model also contributed to early challenges. “I started Forest2Market as a subscription business because it’s a solid, repeatable business model, but the first company in really gets no value because it’s only their data in the system. You’ve got to build momentum. It was 2003 before we could pay all our bills all the time.”
Even with the inherent early problems, Stewart is happy with the subscription model. “We’ve found that many of our customers use our data for something critical in their business—they use it to price a contract or the data is injected into their compensation plan. When the subscription is tied in that way to a customer’s business, the customer is very loyal. Our customer retention each year is close to 100 percent.”
Stewart’s premise starting out was that data detail would be of paramount importance to a Forest2Market customer. That turned out to be a winner.
“Yes, we have insane detail,” says Stewart. “I’m the first to admit it, but there’s real value in that level of detail. The market has really responded to it. We’re definitely more expensive than our competitors, but we’ve found that with the right quality of data, there’s little price sensitivity.”
Stewart agrees that codifying the massive data gathered by his company is less than glamorous. He even likes to tell the story of a customer who teases him by saying that Forest2Market is a success because no one else would want to do something that boring. But he balances that with the knowledge that what he does makes a difference.
“Our data and techniques solve important business problems for our customers,” he touts.
Stewart began Forest2Market by himself and made his first hire a month later. Forest2Market now has a main office in Charlotte and regional offices in Appleton, Wis., and Eugene, Ore., employing 25 people company-wide and currently serving 1,200 customers.
Over the last 12 years, Forest2Market has helped over 100,000 landowners ranging in scale from individuals owning 50-acre tracts of timber to companies owning several million acres. They also count as clients giants with commonly recognized names like Potlatch on the forest and wood products side of the business and Duke Energy on the bioenergy side.
Currently, the company is experiencing 30 percent annual revenue growth, and expansion is on the horizon.
“I’m traveling down to Brazil this month,” Stewart says. “We’re looking at extending our wood raw material data services to South America, principally Brazil and Uruguay. The economies of both those countries are growing and their forest products industries are booming.
“We’re also opening an office in London to serve our European bioenergy clients and specifically to develop a business to meet European Union sustainability regulations required for EU utility companies.
“The utilities need to have a measurement of the amount of carbon used in their process, so they need to determine how much diesel was used to cut down the trees and to haul them to the mill, all the energy used in the manufacturing process and transporting materials to port, and finally, the fuel used to ship it to Europe.
“Forest2Market has a way to track all of that so we believe we’re in a unique position for this business. That would be a whole new customer base for us. A number of our customers are also suggesting we develop a pricing system for northwest Russia and Eastern Europe.
“Our growth strategy was to spread across the U.S. and then expand across end product lines (lumber, for example). We’ve pretty much accomplished that. It’s a natural progression to expand to overseas markets now that the company is big enough to support those sorts of operations.
“Still, it’s a lot easier to envision it than actually do it,” Stewart says with a smile. It’s a lesson he’s already learned—business innovation isn’t always easy.
Trust and integrity and insight are three crucial qualities that are essential to the successful management of your money and your financial success. Add to that a set of skills that help you execute a precision strategy from carefulplanning based on real-life experience. Taken together, it is just the right mix to support your business and help you adjust to changing economic forces.
When you choose your accounting firm, you want a firm that exhibits those qualities and displays those skills. But how do you know? One of the best ways to find out is to ask other clients.
Dr. G. Adam Shapiro, a foot specialist and surgeon with Foot and Ankle Associates, will tell you, “Daniel Ratliff & Company has been a genuine partner in maintaining the financial health of my practice. Like good physicians, the team at Daniel Ratliff listens, cares and promptly responds to my needs. That allows me to focus less on business and more on what matters most…mypatients.”
Jacqueline Ford, co-owner and president of Great Food Services, Inc., tells you why they go above and beyond traditional accounting services: “We enjoy working with Daniel, Ratliff & Company because they have always taken a great interest in helping our business in any way they can, including bringing excellent resources to the table for all type of services, not just financial.”
Daniel, Ratliff & Company provides business consulting, auditing, general accounting, and tax services. Its mission is to provide innovative solutions for financial and business success for its diverse client base.
Since its founding by Debbie Daniel, John Ratliff and Terry Corriher 16 years ago, the firm has always striven to be much more than just accountants that file tax returns. And to this day, the company continues to thrive, even in this economy. It is due, in large part, to their current management team of Brian Huber, Matt Miller and Ann Clausen.
Booking the A-team
Brian E. Huber, CPA, is president and leads the management team, but he’s also a team player. He gets to know every client and ensures that they are in good hands and that “top-drawer” services are being delivered directly to each one.
Huber came to Daniel, Ratliff & Company with a passion for client service. After moving to the Charlotte area, he worked for Gleiberman, Spears, Shepherd, & Menaker, which merged with Grant Thornton in 2002. Huber preferred working with small- to medium-sized client firms, though, and when he discovered Daniel, Ratliff & Company, it was a perfect fit.
He brought his client base to the firm and became a member of the ownership group in 2007. With more than 25 years of experience in public accounting, he was the perfect candidate to become the new president of the firm in October 2011. Huber also oversees Accounting and Business Services.
“By coaching and partnering with our clients, they are better equipped to grow their businesses. And when clients grow, we grow,” says Huber.
As a QuickBooks Pro, he assists clients with QuickBooks software setup and training. He also helps clients understand their financial statements in order to have a better understanding of their business activity. Many clients have profited from the application and implementation of financial planning software that Huber uses to show the effects of management decisions.
When Huber isn’t working with clients, he can be found at CPCC where he educates the next generation of QuickBooks experts. He also serves as Treasurer of Temple Kol Tikvah of Lake Norman.
Matt Miller, CPA, is vice president of finance and assurance aervices within the management team. Miller graduated from UNC Charlotte in 1993 and began working for the Charlotte office of Coopers & Lybrand, a national public accounting firm. He then moved to the large local Charlotte accounting firm, Hunter & Hunter, P.A., before joining Daniel, Ratliff & Company in 2001 to focus on smaller businesses.
Miller became a member of the firm’s ownership group in July 2006 and is responsible for the firm’s financial management plus oversees all assurance and audit services. His personal involvement with client audits allows him to develop an in-depth knowledge of client operations and forms close working relationships. This knowledge is very valuable when helping clients meet their goals.
When Miller is not working with clients or attending to firm administrative duties, he can be found at Camp Care, a nonprofit organization that provides summer camp experience and other activities for children with cancer. Miller serves as the treasurer on the non-profit organization’s executive board.
Ann Clausen, CPA, is vice president of marketing and tax services. Clausen began her career managing the accounting functions of two department stores. After a few years, Clausen migrated to academia to teach college accounting courses. In 1988, she relocated to the Washington, D.C. area and worked in the tax software business which provided the opportunity to work closely with the Internal Revenue Service.
In 1990, Clausen formed her own public accounting practice providing tax and accounting services for her entrepreneurial clients. Ten years later, Clausen moved her practice to North Carolina and joined Daniel, Ratliff & Company in 2009. She manages the firm’s tax department which prepares individual, partnership, LLC, corporation, non-profit, and fiduciary tax returns.
When Clausen is not managing the tax department, she can be found networking with various groups in Charlotte. In addition, she serves on the board of Midweek Business Connections and the NCACPA local board.
A Passionate Culture
The founders of Daniel, Ratliff & Company knew small businesses would benefit more substantially from an accounting firm that did more than just prepare tax returns. The Charlotte market provided opportunities to support their motivation and growth in this direction. They wanted to be more than just accountants; they wanted to be business partners to their clients.
Each and every day, Huber, Miller and Clausen and their staff make conscious efforts to further those partnerships. Huber explains, “Just the other weekend a client emailed me with an urgent question. Instead of waiting to reply on Monday morning and knowing an answer would provide peace of mind, I called the client. That saved our client the anxiety of waiting and we addressed their issue immediately. But more than that, it showed that we are there when they need us the most.”
As confirmation, Craig Cass, of Cassco, Inc. adds another endorsement, “I have worked with Daniel, Ratliff & Company since their inception in 1996. They have been integral in the growth and success of our business, and have been with us every step of the way!”
The trio believes in building their business with all employees being involved. A good example is heard on the telephone. Brandon Ratliff’s voice is the first one to greet current and potential clients. He makes it a point to go above and beyond being friendly.
“In fact,” Clausen commented, “we recently acquired a new client because of the manner that Brandon exhibited on the phone. The client said, ‘It’s not often you hear a young man answering the phone, but if he’s any indication of how we’re going to be treated as a client, we’re all in.’”
All the employees are very dedicated and experienced. Many have been with the firm in excess of seven years and several have over 20 years of accounting and tax experience. From the administrative staff to the CPAs, the common theme is providing the best client service possible.
Every employee is committed to providing exceptional accounting and consulting services, with integrity and mutual respect for each other. We are determined to be the trusted advisor and champion to the clients we serve. We even provide a customer bill of rights.
Huber talks about one of the firm’s success stories: “One of our clients had accumulated a large amount of unpaid payroll taxes and was suffering monthly net losses. We worked with the IRS to set up an installment arrangement to satisfy the tax liability. But we went further and helped the client better manage their business on a daily basis. Now the client is making a profit, planning to stay in business, and consequently 150 jobs have been saved.”
Recognizing the need to balance work and family, Daniel Ratliff & Company provides a very liberal vacation policy and even provides an extra eight days of leave during the summer.
“Family is very important to us,” explains Clausen. “And we want our employees to spend time with their families and relax.” This balance makes the firm a better place to work.
Daniel, Ratliff & Company also believes in giving back to their community and especially to those who need it the most. Each November, the employees volunteer to help decorate a local senior citizen community for Christmas.
“The residents are always very appreciative. This experience enriches our lives and makes us feel more like a family,” remarks Miller. “We are also involved in gathering food for local non-profit groups, participating in golf tournaments to raise money for charities, and volunteering for non-profit leadership roles.”
“We strive to place the important priorities in life first,” adds Huber. “Being involved in the community is one way that we build long lasting relationships. Creating a great work environment and paying attention to the needs of our staff help us deliver superior customer service to our clients.”
Growing the Right Way
While the past three years have been challenging to many local businesses, Daniel, Ratliff & Company continues to thrive, acquiring new clients and discovering more ways to be helpful to our continuing clients.
“We are especially proud when our clients grow as a result of our advice and hands-on assistance. We make a point to show our clients every advantage they can use to lower costs, increase revenues and save money. When they do well, they have even more need of our services,” boasts Miller.
Clausen elaborates on this point: “We have helped many of our clients reduce their taxes through cost segregation studies. We work with experts who perform these studies for our clients. The studies are fairly inexpensive and yet can save our clients thousands of tax dollars. In fact, one client saved $75,000 in taxes as a result of one study.
“We expect to grow and expand this practice. Growth ensures the continued health of the firm,” Clausen continues. “We work to keep great people. They are our most valuable asset.”
Miller adds, “We want bright young professionals who want to be a part of this company and make a career with us. Down the line, we expect to offer ownership opportunities to those who have proven their management and technical skills ensuring the continued success of the firm.”
With a combined staff experience totaling more than 100 years, Daniel, Ratliff & Company has a proven track record helping clients grow their businesses the right way. They keep their commitment to do more than just prepare financial statements and tax returns—their services are strategy-based and designed to add value.
“At this level, you can work with the owners and decision-makers and make a significant difference in their business,” attests Miller. And Clausen adds, “Our clients are looking for advice and strategies. We will do all we can to be helpful to them.”
Dr. William Mitchell, M.D., of Southern Oncology Specialists, comments, “Daniel Ratliff & Company have been an integral part of my life for over 10 years. As a physician, I rely upon them for everything financial for my practice. Whether it’s taxes, profit-sharing, mergers and acquisitions, or buying office equipment, they have been there every step of the way. I highly recommend them for all your accounting, financial and tax needs.”
Daniel, Ratliff & Company is passionate about being one of the best accounting firms in the Charlotte region. The named founders share the pride in the business they started with the succeeding team now in place. The firm’s success is mirrored in the success of their clients. And the firm is rewarded by adding value to those they are privileged to serve.
Bonded Logistics, Inc. is celebrating its 40th anniversary this year. While it has steadily progressed into the 21st century, keeping pace with the many changes in the logistics industry and new developments in technology, there is one thing that remains the same: Family.
“We’ve always been a family business,” says Barbara Carr Woodall, executive vice president and co-owner, who works alongside brother Scott Carr, president of the company. “This company is an extension of us. We have always had one mission: To make sure that everything we do is handled with the highest quality and service level.”
The two are the second generation operators of this Charlotte-based global, third party logistics (aka3PL) outsourcing company for warehousing, shipping and packaging. Their parents, Jim and Robin Carr, started the business in 1972 under the name Bonded Distribution, Inc.
“We primarily perform services for companies that are looking to outsource their distribution and storage needs. We provide secure warehouse space and maintain staff and equipment to handle any of our clients’ distribution or packaging needs,” explains Carr. “Ours is a true outsource model. Our customers pay for only the services they utilize in either labor or space.”
Bonded Logistics operates out of 1.2 million square feet in Charlotte at several different locations. The company also has contract warehouse space in South Carolina and a 4PL relationship with a warehousing group in Los Angeles.
An Extended Family
“On any given day, we will receive product, process orders and ship product out to our clients’ customers.” The company doesn’t take title to any product but, rather, is the contractual steward of it. Product generally arrives in full truckload quantities and is shipped out in less than pallet quantities or case pick. “There is a lot of labor involved,” emphasizes Carr.
With its own full-fledged transportation brokerage and close proximity to the ports of Charleston and Savannah, Bonded Logistics guides 80 to 120 trucks including 20 to 30 sea containers in and out of warehouse properties during a day’s activity. “We believe the expansion of the Panama Canal will only increase the number of containers we handle in any given day as more product is shipped directly to the east coast ports,” Carr highlights.
“Some customers have their own means or trucking fleets but when they don’t, we coordinate an alliance with local area companies such as Epes Transport or Cargo Logistics to serve them,” adds Woodall. The company also coordinates movement of product by ship container and air freight.
“We have a footprint in the global market with clients from all over the nation and some in Europe,” says Carr. “We also ship to Europe as well as to South and Central America.” A west coast alliance advances Bonded Logistics’ shipping capabilities. The company sets up fourth party logistics groups (or 4PLs) to distribute across the country.
“Collaboration is key in this industry,” notes Carr. “It might not make sense to go to another city and open up a building or a smaller account, but we can still contract with a peer group that is a good partner and can provide services at the same level we can. We’re very particular about those we partner with, and in those instances we maintain total management of the client account.”
Carr adds, “Not only are we a regional and national presence, but we also do things locally as we are plant support for local factories, storing raw materials coming in from overseas and holding them until needed for plant production. We see the expansion of the airport as an opportunity to capitalize on Charlotte’s location and really make this a premier distribution hub for the eastern region of the United States.”
Bonded Logistics’ clients come from many different industries including consumer packaged goods, food grade goods and home construction. It is most heavily vested, however, in medical devices and supplies. It services business-to-business (b2b) and business-to-consumer (b2c) needs for clients. Additionally, it ships to all of the major retailers and has staff members trained in the retailer compliance vendor guidelines.
“Once you establish the stringent controls required to bring in medical devices, we can apply those lessons learned to all clients,” emphasizes Carr. “There are a lot of guidelines and regulations.”
There are regulations at the federal level including those of the Food and Drug Administration and the National Fire Code, the state level including the N.C. Department of Agriculture, and the municipal level—for example, Charlotte/Mecklenburg for hazmat concerns. Sanitation audits are conducted by the American Institute of Baking. Additionally, in order to handle medical devices, strict inventory controls are in place including lot control and recall capability.
Security also demands constant vigilance. Entrance onto company premises is through a monitored gate. Everyone on site must wear identification badges. Staff members are well trained in inventory risks, particularly because of the high resale values for electronics and pharmaceuticals.
“There is a crime component out there,” says Carr. “We are in our eighth year of ISO 9001: 2008 certification.”
Bonded Logistics packaging division, Bonded Pac, is a contract packaging group which has been part of the company for 19 years. Workers there package bulk quantities using manufacturer’s specific requirements for individual store displays. Bonded Pac provides POP design services—including display design, product sourcing and display building—and dedicated staff to manage each project from concept to final design and product delivery to the store. In addition, Bonded Pac provides liquid fill and shrink wrapping, sleeving and bagging.
“Technology is a huge part of the business now,” says Carr. “We’re automating as much as we can. Clients have secured Web access to their inventory and can watch its movement in real time. Companies can predict with much greater accuracy their need for safety (back) stock, so they are not storing more than is needed at a given time.
“We’re really focused on exchanging information and data. This is more and more important out in the market place because expectation is very high and time is a very important commodity.”
Carr describes how off-site servers utilizing cloud computing are monitored 24/7. Redundant backups assure performance in the event of electrical problems or other things than can cause IT systems to stall.
The siblings’ father, Jim Carr, started the business in 1972 under the name Bonded Distribution, Inc. He had been working in distribution for General Foods in White Plains, N.Y., and was sent to Charlotte to set up a distribution center. He liked the South so well, he took a job with Jack’s Cookie Company as director of distribution and moved his family to Charlotte.
Soon an opportunity presented itself to purchase a small warehousing group off Palmer Street and he decided to establish his own distribution business in a 30,000-square-feet building. He subsequently built his first building on Graham Street in 1986 and the second in 1996. Then, in 2002, he turned ownership of the business over to his son and daughter.
Scott Carr was 10 when the family moved to Charlotte and warehousing became his ongoing part-time job throughout his teen years.
“I started at the bottom— swept floors, drove trucks,” remembers Carr. After graduating from Western Carolina University in 1981 with a degree in marketing, he returned to work in the family business.
“Part of it was timing. When I came out of college, there was opportunity here. I’ve now been here for 31 years,” he says. Carr is married and has three daughters and a granddaughter which he touts as “the focus of my personal time.” Carr is also very involved in his church. Another family tradition—tennis—is one that he likes to pursue as time allows, but admits, “It’s a challenge with trying to grow a business.”
Woodall was born in Charlotte and she, too, spent many weekends at the warehouse. As an adult, it was not her intention to work in the business, opting instead for a career in travel. But, after years as a travel agent, she came to work with her family, starting in the warehouse office in 1986 as a clerk.
“From there it was on to customer service; then to computers. I was doing a little of everything. That’s what I saw my mother doing,” Woodall remembers.
“Our parents instilled a good work ethic in us,” Woodall says proudly. “Both of them still come into the warehouse once or twice per week. They built the basics; we hope we have moved it along.” Woodall has one son attending Clemson University, and enjoys baking and keeping up with her tennis.
The Company Family
More than 140 permanent employees, most of them cross-trained for different functions, call Bonded Logistics their workplace. An additional 60 to 70 temporary employees are present at any given time.
“We can’t determine what the workload will be until at most the night before, so our relationships with staffing companies and temporary workers are very important,” says Carr. “We’re fortunate to have a fairly stable temporary workforce so we don’t have to train each time.”
It’s not unusual for the company to transition temporary employees to permanent ones when there is a predictable steady workload, according to Carr. Inside the warehouse there are management positions, IT workers and developers, clerical staff, warehousemen and packers.
With an average tenure of 10 years, the company has enjoyed excellent employee retention. Carr and Woodall attribute this to Christian ethics. “We are very committed Christians and we try to run our business with Christian ethics,” says Carr. “We treat our employees and our clients fairly.”
“It’s not just a statement. We keep a mindful eye toward treating our employees well. Working through Corporate Chaplains of America, the company provides a chaplain to every employee on a weekly basis, although being Christian is not a requirement for employment.
“We have employees of other religions and we don’t discriminate in any fashion,” says Carr. “Everybody understands humanity and ethics.”
Because of its age, Bonded Logistics is currently transitioning through a relatively high number of retirements among key positions. “We’re bringing new people into the business to work in areas of demand to accommodate growth and technology. It’s a time of both challenge and restructuring.”
Carr and Woodall have seen more than their share of industry challenges.
“In our business, a recession has a big effect,” says Carr. “In commercial warehousing, we get paid to bring product in and move it back out; what we call cycles or turns. When the economy recedes, we are hurt when there is little to no movement with the products. This is what we saw in 2009,” Carr explains, and says that Bonded Logistics guards against this by working with industries that are recession-resistant like food stuffs and medical supplies.
“Nothing is absolutely recession-proof,” he admits.
Surprisingly, Carr says the company was fortunate during that time to actually expand. “It wasn’t dramatic growth but it was growth,” says Carr. “Our attention to detail and the reputation we have for matching our clients’ sense of urgency and compliance paid off. Our staff goes above and beyond.”
Both Carr and Woodall predict that as the economy rebounds, there will be increased need for warehousing logistics. Carr acknowledges, “Charlotte—which is a great place to do business—is growing and the need for logistics is growing nationally, as well.”
Carr and Woodall give serious attention to finding ways to give back to the community. Carr serves on the board of Samaritan’s Feet. The company also works with A Child’s Place, an organization that assists homeless children. Charlotte/Mecklenburg School System, Salvation Army, local food banks and Susan G. Komen are all examples of organizations which the company supports.
“We’ve created our own in-house angel tree during the holidays to anonymously help employees who may be dealing with a hardship,” says Woodall. “We’re just getting started,” she says with a smile.
“In terms of the future, our mainstay is setting our infrastructure for growth, making sure we have the right people, and making sure that as we grow we continue to service our clients very well,” says Carr. “We just want to be recognized as a very competent, premiere company for warehousing and packaging.
Neilsen’s fourth quarter 2011 survey revealed that 45 percent of Americans who own tablet PCs use them on a daily basis while watching television. A recent study of consumer media habits commissioned by Time Warner’s Time Inc. found that digital natives (20 to 29 years old) switch media venues about 27 times per nonworking hour, or more than 13 times during a standard half-hour television show.
The people behind Charlotte-based OtherScreen understand the implications of these usage statistics for any business or concern—such as television broadcasters—that relies on audience engagement for its success. The company has developed a software platform and service that drives attention back to the broadcast and increases viewer engagement, providing value to the advertiser.
In the beginning…
In the beginning, mankind watched television one show at a time, commercials and all. There was no such thing as a remote; it hardly seemed worth the trouble to get up and walk across the room to change the channel. When the sponsor said “stay tuned,” mankind followed instructions.
Then, when the broadcaster took “a short break,” mankind learned it was okay to do the same; leaving the television behind for a trip to the kitchen or bathroom. That’s when all the trouble started.
Ever since, advertisers have sought out more creative and sophisticated ways to capture and keep the viewers’ attention; advancing the art of advertising to a complex social science. Fast forward 60 years and, despite the phenomenal success of broadcasting, the challenges have grown exponentially.
Now, viewers can channel-surf through hundreds of stations while avoiding the commercials that support the shows they seek. Plus, broadcast content is distributed in many different ways—by Netflix, Amazon Instant Video, Apple TV—the list goes on and on.
The problems—or opportunities—don’t end there. For many, young and old, modern life now includes possession of numerous mobile Internet devices including tablets and smartphones, readers and laptops and they are all competing against each other for attention.
“The Internet has dramatically changed television by becoming an ever-present competitor,” says Chris Halligan, CEO and co-founder of OtherScreen along with President Garth Moulton and Vice President, Products, Andrew Gertig.
“Advertisers can no longer count on having a captive audience or even a mildly loyal one,” points out Halligan. “OtherScreen helps retain and drive audience engagement by making the Internet an ally, rather than a competitor.”
While both broadcasters and end users can be considered customers, the company’s revenue comes from broadcasters who obtain licenses to operate the platform. The first customer to sign up was FOX Charlotte. OtherScreen provides companion content to the Wednesday night show called FOX News Edge.
“Prior to visiting, we covered FOX News Edge with 20 of our regular users,” remembers Halligan. “Out of the 25-minute news program, viewers stayed engaged for 22.5 minutes. The team at FOX saw value in the platform and the concept right away.”
Turning distraction into engagement
OtherScreen makes watching television more fun—and more engaging—by turning it into a game. The company pushes companion content, via a live DJ, to a player’s laptop, tablet or smartphone.
Moulton explains: “Imagine you’re watching the Panthers play on Monday Night Football. We’ll ask the viewers to predict whether or not Cam Newton will score a touchdown on the opening drive. You make a prediction; you’re in the action.
“If you’re watching the NBA, we’ll ask, ‘Who scores more this half: Kobe Bryant or LeBron James?’ We’ll also ask engaging trivia and opinion questions throughout the event—some for points and some just for fun. Plus, we raffle off Amazon gift cards at many of our events.”
Individuals can play alone or join forces with a group of people to see if they can top the company’s Social TV Leaderboard. It makes television social, fun and funny. It even builds relationships.
“For example, we have a user named Stitt Daddy,” says Halligan. “I’ve never met him but I thoroughly enjoy watching shows with him. He’s smart, he’s funny and I love listening to what he says when I’m OtherScreening (yes, we also use our name as a verb) shows with him.”
In the same manner that OtherScreen draws viewers back into the programming, it draws them to the commercials and miraculously alters people’s perception of advertising.
“Viewers pride themselves at how good they are at ad-skipping,” says Halligan. “But, when we ask, ‘Do you think there will be a McDonald’s ad during this break?’ audience attitudes about ad breaks change. It’s less of an intrusion.”
“It makes watching television more fun because you are doing it with like-minded individuals,” says Halligan, “like you would at your neighborhood sports bar.”
Making a production out of it
OtherScreen works with live, unscripted broadcasts. “Live” means not time-shifted (that is, content going to DVR) and includes the advertisements. “This is what television built their industry on and we’re helping them preserve that,” says Gertig.
“We typically cover about five to seven events (usually shows) per week,” says Moulton. OtherScreen covers news, sports, game shows and reality shows such as The Bachelor and The Bachelorette. It covered the Republican Primary debates.
“The things that make you yell at your TV screen are awesome for OtherScreen,” says Halligan with a laugh. “And all you need is a browser, a smartphone or a tablet. It also helps if you have a sense of humor.”
Even the company’s website is designed to look like an application: “Just sign on and you’re at the event and in the chat room.”
The platform, written by Gertig and Chief Technology Officer Jim Van Fleet, utilizes Ruby on Rails for the Web and also features an iOS app for iPhone and iPad users.
The partners are currently focused on building out product to satisfy the market and had closed a round of venture capital as of April of this year. Chief investors include G51 Capital out of Austin, Charlotte-based VCI Partners, and a local angel. Both Halligan and Moulton have invested in the company as well.
Beyond television, there are several possible avenues for growth in the future including education, corporate training, polling, focus groups, radio and the mining and selling of data analytics.
The idea that using Internet devices that might otherwise be considered “distractions” while watching TV could be used to actually enhance focus and engagement came to Halligan as he watched a Cardinals game with his then 14-year-old son.
“I noticed that, despite being an avid fan, he was paying more attention to his phone than the game on television. I decided to see what would happen if I sent him a text.”
Halligan’s text message asked his son to make a prediction as to whether a particular player would touch second base during the inning. After responding, his son put the phone on his chest and started watching the game again.
“It occurred to me that, used properly, a mobile device could increase focus rather than drive distraction,” says Halligan.
OtherScreen has several unique aspects to its program, according to Gertig:
“First, we have a human being pushing our content out. Certainly, some of the elements of the gamification are totally unique. Plus, we’re focusing on local television stations and audiences instead of going out and building third-party audiences like Facebook. And, our platform allows for the broadcaster to integrate our program into their Web property so users never have to ‘leave’ the site.”
Unexpected story lines
Halligan expected to follow his parents, both of whom were educators, into an education career by earning a Ph.D. in English literature. He even moved toAustin explicitly for that purpose but then accepted a position with a computer company called Dell.
“I had a great run at Dell,” says Halligan, who completed his 11-year career there by running Dell’s $2.5 billion e-commerce organization in 1999.
Halligan subsequently worked for webMethods in northern Virginia where he was part of the most successful software IPO in history, with opening day starting at 12 and closing at 306. Halligan has also built a few startup companies including Kieden which sold to Salesforce.com in 2006. He moved to Charlottein 2007, while serving as CEO to PokerTek in Matthews.
He is a co-founder of Charlotte Regional Technology Executives Council (CRTEC) which serves as a hub for executives within Charlotte’s growing technology community and awards scholarships to Charlotte area students at UNC Charlotte’s College of Computing and Informatics.
In 2010, Halligan met Moulton while both men were serving as mentors toCharlotte entrepreneurs. They discovered they knew dozens of people in common and decided they wanted to start a company. Shortly thereafter, Halligan met Gertig at a TEDx conference.
“After Chris told me about his idea, I couldn’t get it out of my head,” said Gertig, “so I went home that night, figured out how to do it and showed it to him the next day.”
“He built the prototype in one night!” says Halligan. “It was basic but it showed that it could be done.”
Moulton thought he would ride the tech bubble of the 1990s to career success and wealth.
After graduating Phi Beta Kappa and magna cum laude from BrownUniversity, Moulton successfully worked at several software companies inCalifornia.
“I watched people around me get fantastically, ridiculously wealthy, so my biggest decision was which one of these companies was going to take me to the top.”
Then, the tech bubble burst. Moulton decided it was better to own the means so he co-founded and built a company called Jigsaw, which ultimately sold to Salesforce.com for $175 million.
He came to another decision at this time. He didn’t want to raise his children in California, so he set out to find an east coast city (he’s a Vermonter) that met the needs of his family and career goals. He chose Charlotte.
“It was an on-paper move but we were immediately happy with it,” says Moulton.
Raised in Kingston, Jamaica, the son of missionaries, Gertig returned to the States to attend college at Mississippi State University where he studied electrical engineering and joined the ROTC. After serving as an officer in the U. S. Air Force, Gertig took a job in medical device sales with Medtronic that brought him to Charlotte.
Re-upped in Charlotte
“I can’t stress enough that each of us has chosen Charlotte,” says Moulton. “We believe in Charlotte; we can do this here.”
All three say they are glad to be part of the burgeoning technology community inCharlotte. All three are also advocates for startups and appreciate the support and interest local organizations like the Chamber of Commerce and Packard Placeprovide to startups in the city.
“Successful, substantial startups dramatically transform their local economy,” says Halligan. “Look at Dell in Austin and Microsoft in Seattle. Supporting your local startup is enlightened self-interest. Be their customer. Give them advice. If they’re doing something wrong, tell them.”
OtherScreen hopes to be that startup that experiences explosive growth and has a long-term, multigenerational economic effect on the Charlotte economy.
“Audience erosion and fragmentation are happening,” says Halligan. “As the broadcast industry looks for solutions to address and counteract those challenges, we want to be the leading platform to drive audience engagement.”
“We’re friends and we’re in this together; off to a good start,” he concludes.
What does a profitable, high growth company do when it sees an exciting new opportunity—whether it be a major new product initiative, a geographic expansion, or a major acquisition—but lacks the capital required to move rapidly?
It might approach Richard Maclean, Andrew Lindner and their experienced team at Charlotte-based Frontier Capital, a 13-year-old growth equity firm formed in 1999.
Growth equity firms such as Frontier provide companies with the capital they need to seize such opportunities. Similar to venture capital firms, but focusing on established companies rather than startups, growth equity firms receive investments from high net worth individuals and institutional investors and then redeploy that capital in profitable, high growth companies. The equity firm and their investors share in the profits as those companies grow and prosper.
Maclean and Lindner first met when both were working in investment banking for Bank of America predecessor NationsBank. As they became friends, they found their skill sets were complementary and determined they wanted to start a venture together at some point in their careers.
Maclean left NationsBank in 1993, and after obtaining his MBA from theUniversity of Virginia, worked in private equity for four years. Lindner left the bank in 1994, joining Stephens, Inc. in Atlanta, where he advised clients in executing corporate finance transactions and assisted the Stephens family with direct private equity investments. He headed west to Stanford University in 1997 for his MBA, and after graduating in 1999, came back to Charlotte and formed Frontier Capital.
“There was a short window in time when guys like us could raise a private equity fund more easily than we could have historically and certainly much easier than it is now,” recalls Lindner. “We combined our professional chemistry with that market opportunity to go out and raise a small fund.”
That first venture (Frontier Fund I) was a $45 million equity fund, with $15 million from private investors and $30 million of SBIC leverage from a government match program. They invested in 17 companies through Fund I, generating total returns to their investors that ranked in the top 10 percent of all peer group funds in the U.S. started in 1999.
Maclean and Lindner wanted to build a sustainable firm to fill a void they saw in the marketplace for growth capital—that space between early-stage venture capital and buyouts of mature companies.
“We wanted to build something that was institutional grade, not just raise a fund and manage it forever,” says Lindner. “We wanted to grow, add to our people and infrastructure, and constantly improve our processes to make this an institutional business.”
Today, the 12-person firm boasts an average tenure of seven years. There are four partners—Maclean, Lindner, Michael Ramich, and Joel Lanik.
“Even back in 2000, we knew we wanted to manage institutional capital,” adds Maclean. “We managed very little institutional capital when we first started, but today we manage money for leading pension funds and fund of funds from all over the world. We knew if we wanted to be positioned to do that, we had to invest in the business and the team early on.”
Their second fund (Frontier Fund II) raised $115 million in 2006, and their newest fund (Frontier Fund III) closed in June 2012 with $250 million in capital commitments. Both of these funds were fully funded by private and institutional investments.
Frontier’s funds are each separate 10-year partnerships to which investors commit for the full 10 years on the basis of a prospectus and presentations by the Frontier team. The typical investment is between $5 million and $25 million and the commitments are blind, meaning that Frontier retains full discretion on how the money is invested.
“What we do is long term because it takes us about five years to invest the money we raise and then about five more years to actually exit those businesses and return the capital to our investors,” explains Lindner.
Frontier Capital is one of the three largest equity capital firms in North Carolina, but their $250 million fund is still a small niche player compared to larger billion-dollar-plus funds around the country. But according to Lindner, their size is often an advantage.
“Many institutional investors feel that some funds have grown so big that they are no longer able to generate the returns they want,” offers Lindner. “We are big enough to have the resources of a larger firm, but we are still small enough to generate the out-sized returns our investors are looking for.”
“In the $500 million to over $1 billion and up segment of funds, you may have to chase big deals that are inherently more competitive,” adds Maclean. “Because of that, outsized returns are harder to come by.”
Putting Capital to Work
After Frontier raises capital, they must put it to work to generate the returns their investors are looking for. To accomplish that goal, they have chosen to focus on technology enabled business services companies with annual revenues between $5 million and $30 million.
A typical target company has around $10 million in annual revenue and is growing rapidly. Frontier will take a large minority or even a majority stake by investing between $5 million and $25 million in each transaction. Lindner says the ideal “sweet spot” is an investment in the $10 to $15 million range.
“Our typical investment is in a profitable company that is growing at over 20 percent per year,” explains Maclean. “It will generally be a company that is less than 10 years old in technology enabled business services.”
Frontier’s investment may be used to buy out early shareholders or provide the founders some partial liquidity so they can diversify their personal financial profile. But much of the invested capital goes onto the balance sheet and is used to fuel growth.
The Frontier team takes what Lindner calls an “active support role” rather than a day-to-day management role. They generally take multiple board seats and assist the management team with strategic decision making.
“We’re not making the day-to-day management decisions; we’re backing good teams to do that,” says Lindner. “We help prioritize and figure out what we’re going to stop doing and what we’re going to do more of.”
“Our real expertise is taking a company that is in the $10 to $20 million revenue range and growing it to $30 million, $50 million, or $60 million,” adds Maclean.
Frontier began Fund I with a southeastern regional focus, but over the years the principals have expanded their footprint to include markets in the mid-Atlantic, Texas and the Midwest. They look at markets like Atlanta, Indianapolis or Charlotte—areas that are a little underserved and where their message resonates best. They avoid places like Silicon Valley, New York and Bostonwhere a lot of capital is already chasing opportunities.
“If we find the right company in Indianapolis, we’re going to invest there because we’re trying to find the best companies to match our profile,” explains Maclean. “We love it when we find great companies in our own backyard, but there are great opportunities in all the markets we cover. Charlotte is still a great jumping off point to cover the regions we cover, and it would be a lot harder to do what we do from somewhere without this kind of airport and transportation infrastructure.”
A Growth Portfolio
Frontier classifies the companies they target for investment into four categories: high-value niche outsourcing services, managed services/information services, software as a service (SaaS), and health care IT.
The outsourcing category includes companies like Greenville-based Perceptis, a call center outsourcer serving the higher education market; Viverae of Dallas, a provider of outsourced corporate wellness services; and Atlanta-based Ryla, a provider of call center outsourcing services. Ryla is one of the recent Frontier success stories, as they helped Ryla grow their annual revenue from $13 million to $100 million in just three years.
In managed services, Frontier has invested in LURHQ of Myrtle Beach, a network security monitoring and management service; Azaleos, a managed email and messaging provider with major operations in Charlotte and Seattle; and Peak 10, a very successful Charlotte-based operator of data centers.
The third category, SaaS, includes companies like Daxko of Birmingham that operates software for member-based nonprofits; Dallas-based Lanyon which offers travel and spend-management software; and Social Solutions of Baltimore, a company that markets performance management software for human services nonprofits.
Health care IT is really a blend of two of the other categories—SaaS and managed services—but it is focused on the health care industry. Two examples are Anodyne Health of Atlanta that sells revenue cycle management software, and Healthx of Indianapolis, a seller of online portals to health insurance plans.
These are just a few of the companies in which Frontier Capital has invested since its inception in 1999. Fund I invested in 17 firms and Fund II invested in 11. With Fund III now in place, Frontier will be very active investors over the next few years as they work to deploy the new fund. Eventually, Fund III will likely make around 14 individual investments.
The new fund has already deployed capital in four companies: Healthx; iMapData, a Northern Virginia-based mapping firm that analyzes data for government and large companies; Celergo, an international payroll services provider based in Chicago; and eVerifile, an Atlanta-based employee background check service provider.
A Bright Future
Historically, technology and growth companies have taken a back seat inCharlotte because the Queen City was known as a banking and finance town. But Maclean and Lindner are seeing a renewed interest in entrepreneurship and growth-stage companies in the Charlotte region.
“During the dot-com boom it was get rich quick,” says Lindner. “But now, after the financial crisis, it feels like people just want to control their own destiny and not be at the whim of the shifting sands in these big corporate organizations.”
“We went through the dot-com bubble bursting in 2000, the 2001-2002 recession, and now the financial crisis,” says Maclean. “During the 2001-2002 downturn we made some really good investments, and in this latest crisis, we have been very fortunate because our companies didn’t have any leverage. Since they were generally trying to help their clients become more efficient and lower costs, our companies sort of sailed through it all very nicely.”
Looking toward the future, both Maclean and Lindner see great growth opportunities ahead for Frontier Capital. But there are limits to how much they want to grow.
“I think we have as good an opportunity in front of us as we have ever had,” says Lindner. “We have the confidence of our investors on the back end and we’ve identified our real niche on the front end for companies to invest in.
“I do think there is a limit to the size of fund that makes sense for us to deliver returns the way that we do,” he continues. “But all growth opportunities that don’t dilute our commitment to what we do well are on the table, including considering additional product lines that we can offer to our institutional investor base.
“But first and foremost, our future is to continue to deliver industry-leading returns to our investors, while creating growth opportunities within our organization for our people.”
As a kid growing up in Charlotte, all Mac Lackey wanted to do was play soccer—all day, everyday, until it was dark. It was all he cared about and luckily he had talent which took him to Wake Forest on a soccer scholarship and to a year of playing pro soccer as a Charlotte Eagles’ forward.
But Lackey’s obsession with soccer was more than just a passion; it was a clear example of his “all in” personality. He did everything to an extreme.
“For a brief period in college, when I really started to care about my studies,” Lackey recalls, “I went from barely making it to doing quite well, but I didn’t want to just get As—I wanted 100s.”
For Lackey, playing soccer revealed other personality quirks as well.
“Looking back at how I played, it’s clear that I loved taking risks. With two or three seconds left on the clock, there are always players praying that they don’t get the ball. But that wasn’t me—I was the one screaming for it. I wanted to make that last shot to win.”
Lackey, founder and CEO of his sixth startup, KYCK.com, admits that, even as a child, he had personality traits typical of an entrepreneur. But he credits a light bulb moment for starting him on his unconventional career path.
“Out of school, I started working at a software development company,” Lackey remembers. “It was maybe my first or second day on the job when the company president called a brainstorming meeting in his office. Everybody started gathering up their paper and pens but he held up his hands to me and told me to stay out and answer the phone.
“I had such a visceral response to that. I had ideas. I couldn’t figure out why he didn’t want my input. That’s when the light bulb went off and I decided that I couldn’t be in an environment where my ideas wouldn’t be heard or I couldn’t push ideas that are important to me. I resigned six months later and I, and an engineer I’d become friends with at work, decided to start our first company, a software development company we called InTouch Interactive.”
Lackey recounts, “It was a true garage startup with no money, no venture capital and no resources. I had a $10,000 loan from a family member and a one bedroom apartment but no clients, nothing but an idea.
“That was ’95 and most people hadn’t really even heard of the Web then. We were quite early working on the Internet in Charlotte and the Southeast. When we started selling Internet development services but you couldn’t even really call it selling, because we were actually just doing a lot of educating.
“So, there I was, at 22, sitting at the table with mostly older business people trying to explain what the Internet was and why they should care. We left many people scratching their heads.”
Eventually, Lackey says, companies began “dipping their toes in the water.”
“But when Duke Energy ‘dips their toe in the water’, it’s enough to pay your bills,” he quips. “That’s how we got started.”
Lackey sold InTouch Interactive to iXL Inc. in 1998 and served as a senior vice president until the company went public the next year. “I resigned the day after the IPO,” he explains, “but only because I was passionate about my next idea.”
The next idea was InternetSoccer.com, which married Lackey’s entrepreneurial abilities and his love of his favorite sport.
“It was the time when big portals like Yahoo and Excite were becoming one-stop-shops for everything—news, weather, sports,” he explains. “But I had this view that soccer, like music or anything people are passionate about, couldn’t be addressed in some huge, bloated, horizontal portal. Our plan was to build a very deep, focused, vertical network that was a global news site for soccer.”
In the 14 months from the inception of InternetSoccer.com until its $15 million sale in July of 2000 to European TeamTalk Media Group, the company became one of the largest soccer-specific networks in the world.
The sale allowed the InternetSoccer.com management team to remain in place with Lackey as president and CEO of North American operations. But more important to Lackey, the business could remain in Charlotte.
“We’ve had lots of people tell us it would be easier if we moved to New York or Silicon Valley—that it would be easier to find engineers or capital—but we’ve resisted and proven that it can be done in Charlotte.
“Charlotte has advantages,” Lackey points out. “The costs of building a startup here are lower and you can have a company culture where people can focus on their families and have life balance. The biggest disadvantages are access to capital and finding the right talent. There are really talented people here, but if we want someone that has already been successful in driving app downloads on iTunes, they’re likely in San Francisco or New York. We have to be open to remote workers.”
Lackey’s many startups define him as a serial entrepreneur but, because he’s also frequently involved with several ventures simultaneously, he falls under the more uncommon dual category of serial and parallel entrepreneur.
While developing InternetSoccer.com, Lackey also founded ettain group, a software development and technology outsourcing company. In 2001, he segued from chairman to the more active operational role of CEO. During this period Lackey had another light bulb moment.
“The company was doing well,” he explains. “It was about a $14 million operation when one of the ettain board members asked me a question, ‘Do you want to be a CEO or do you want to be a startup guy? If you want to be a CEO, stick around, focus on the operation, focus on the people, add new offices, grow the business and become a more experienced CEO. But if you want to be a startup guy, go start something.’ I thought about that for about a week and then resigned from ettain.
“It was a catalytic moment. I realized I didn’t want to be a CEO in the traditional sense. I love to inspire people but I don’t like managing them.”
Lackey describes the next year as a “hodgepodge”. He did some consulting and acted as interim CEO of a small telecom business. He also evaluated plans for the future with his longtime business partner Ross Saldarini.
“We stepped back and thought about what we wanted to do, what we liked to do and then started working on the vision of that,” Lackey says. “The vision became BlackHawk Equity. The idea behind it was simple. We love to get involved with early stage companies. We like to be active—to think of them, grow them, do everything to make it happen.
“By that point, we had a small group of investors who were supportive and who essentially said that if we invested in something or bought a company or started one they would invest beside us.
“Investors wired money; we put it in the bank, waiting to find something to do with it. That was when Mountain Khakis came along.”
At that time, Mountain Khakis consisted of only a watercolor sketch of a pair of pants and the idea of an entrepreneur living in Jackson Hole, Wyoming, but Lackey loved the concept and Mountain Khakis became the first real investment of BlackHawk.
It was also the first time Lackey’s business involved a physical product. “I could hold it in my hands and see it on people,” he says. “We literally went through the process of laying things on a table and saying, ‘No, that’s no good. Try this, try that. Make more changes. Okay, now put this in the market.’”
Mountain Khakis went on to be picked up by over a thousand retailers, including several major outdoor pro shop chains. The experience also refined the career path of Lackey and his partners.
“It fundamentally changed our view on how we wanted to spend the rest of our entrepreneurial lives,” Lackey explains. “We decided we only want to do things that we’re passionate about.”
Lackey’s latest venture, KYCK.com is definitely a product of a passion. Like InternetSoccer.com, its focus is soccer and it has global reach, but KYCK ramps it up by merging content, social media and e-commerce.
KYCK’s name was an inevitability. Lackey owns many domain names he keeps as placeholders for potential future ventures or names he just thinks interesting. “I always liked ‘Kyck’ with the alternate spelling because I thought it would be good for branding and I knew I’d have to do something with soccer again,” he explains.
The idea that he matched to the domain name started bubbling up two years ago when Lackey reconnected with old college soccer teammates on Facebook. “I was friends with these guys purely through soccer but what I saw on Facebook were their backyard projects, a family birthday party or the music they liked. It felt very disconnected,” he says.
The breakthrough came when Lackey was watching the Women’s World Cup Final with his two daughters. “I was on my iPhone talking about the game with friends on Twitter and every fourth or fifth post was something totally unrelated to the game—somebody checking into Starbucks on Foursquare or something like that. I had a massive déjà vu feeling that what was happening to Facebook and Twitter and LinkedIn was exactly what had happened to Yahoo and Excite—these huge platforms were going to fragment into verticals.
“People are going to connect about things they want to talk about. Ultimately, sites that get mind share with people are going to win and backyard projects just don’t get mind share.”
The idea of KYCK became reality in July of 2011. The company has raised $1.3 million in capital prior to its Series A round, which will begin within the next month, and just went through their soft public launch.
Lackey states that the word ‘relevance’ is key to describing KYCK. “The first thing a new member does on KYCK is build a profile,” he explains. “You tell us what teams and players you like and our custom-built algorithm goes out to YouTube and Reuters and even user-generated content to find and deliver exactly what you care about.
“Beyond that, the algorithm applies a social framework. If your friends are all talking about a game or a player, it becomes relevant. And finally, if an item is trending on our network, you probably want to hear about it too.
“The relevancy algorithm ensures that you always get something great that matters to you. But even more significantly, it ensures that every single KYCK user gets a totally different experience. It is customized to the individual level.
“We’ve also introduced media layers to the site which provides a chronological feed of information and then a second, personalized feed of media curated for you. Both feeds run simultaneously on a split screen so you can switch back and forth and still see what’s happening on both. Our team has come up with this to allow a mixture of real time and relevance.”
Lackey foresees the site being used by youth clubs to assist in training and by professional players to build and interact with their fan base. He also sees KYCK’s relevancy algorithm driving e-commerce.
“The same personalization that gives you the content you want will also allow you to purchase the products you want, whether it’s a favorite team jersey or airline tickets to a match.”
Lackey says his biggest wish for KYCK is scale. His goal is for 100,000 members by the end of 2012, and to reach one million by the close of 2013 for a “global fútbol experience.” KYCK already has members from 128 countries.
And while he has big aspirations and vision for KYCK, Lackey won’t discount the option to start something else new in the future. He says, “I love the process of building a company—the adrenaline that comes with it and the satisfaction of taking something from paper and turning it into something real.”
The disruptive shift in greater Charlotte’s economic landscape, brought on by the Great Recession, has created the climate for a thriving entrepreneurial ecosystem, with conditions favorable for the coveted high-growth companies called gazelles.
The end of the easy years when the region flourished as a banking center has left an opening for the long-ignored, little-understood sector of innovative startups capable of creating hundreds of jobs, including some with the potential for rapid, sustained expansion.
The need for new employers combined with the large-scale layoff of savvy, sophisticated, high-energy workers looking to redirect their talents without leaving the perks of the Piedmont’s quality of life, has left the populace hungry for new opportunities.
“The anecdotal evidence suggests there is more entrepreneurial activity than there has been,” says Brooks Raiford of Raleigh, president and CEO of the N.C. Technology Association that recently opened an office in Charlotte. “There’s a lot of fertile ground here. The ecosystem’s pretty good.
“With the recession and the resulting layoffs—which were sizeable—creative, talented white-collar workers have had to create their own way. A lot of entrepreneurship comes out of that. People who had been comfortably employed on a career path have suddenly found themselves not. They have begun to look more toward themselves and their own networks. All it takes is a small niche of that to create a lot of energy.”
Charlotte’s energy cluster provides an excellent example of what is required to create job opportunities and raise the region’s overall competitiveness as well as its national visibility. Harvard Business School has chosen to featureCharlotte as a role model of dynamic local leadership in its U.S. Competitiveness Project.
The Charlotte energy cluster relies on the concept, first proposed in 1990 by Harvard Business School Professor Michael Porter, that a geographic concentration of related firms and institutions can drive innovation, raise productivity and create jobs as well as competitive advantages for the region.
Already Duke Energy and over 100 highly specific ‘energy cluster’ firms make our city the global hub of electric knowledge and resources in critical industry skills—design, operations, engineering, research and construction.
Just as there are demonstrated synergies from the combination of resources and communication among energy firms, similar and substantial gains can be had from private, public and private-public combinations spurring entrepreneurial growth.
Civic resources from the city’s Chamber of Commerce to various economic development organizations and agencies are rallying to support startups with consulting advice and angel investing, as are private associations of like-minded leaders outside the traditional government and business infrastructure.
Just within the past two years, leaders say, a critical mass of connections and resources has developed to accelerate the evolution.
Bob Wilhelm has been a seminal leader and spokesperson for the combination of public and private resources as UNC Charlotte’s vice chancellor for research and economic development and executive director of the Charlotte Research Institute (CRI). CRI is UNC Charlotte’s portal for business-university science and technology partnerships.
Wilhelm says the accelerated pace of high-impact startups is the payoff for decades of groundwork, including vital research enterprises established at the 60-year-old university since the late 1980s.
“We’ve been in the incubator business for more than 25 years,” Wilhelm says, speaking of the Ben Craig Center, one of the nation’s first university-affiliated business incubators. “We’ve always been a university that looked to connect with the urban region around Charlotte.”
“Charlotte in the last few decades grew and grew rapidly because of the strength of the banking and financial services that developed here,” says Paul Wetenhall, president of Ventureprise, the renamed Ben Craig incubator at the university.
“As a result, Charlotte only recently was confronted with, ‘Oh, my goodness, what are we going to do?’ Places in the Midwest and the Northeast confronted those issues earlier,” he explains knowingly, having come to Charlotte by way ofRochester, where he was involved in entrepreneurial development after the failure of Kodak and Polaroid. He is helping the incubator transition into its new moniker and mission to be a catalyst for entrepreneurial innovation.
“The Charlotte region has many great assets and networks that directly support an entrepreneur’s ability to succeed. Our joint planning with groups across the region identified a gap in strategy, coordination and communications leveraging these resources. That is what the re-launch of the Ben Craig Centeras Ventureprise is meant to do.”
“The whole entrepreneurial community and momentum and drive literally started in 2008,” says Terry Cox, CEO of the Business Innovation and Growth Council (BIG). “The last 18 months to two years is when I’ve seen serious growth, serious increase in activity.”
BIG’s first annual survey this year showed that 94 high-growth companies enjoyed an average revenue growth of 25 to 30 percent for each of the last three years—a rate they expect to maintain this year, projecting revenues eclipse $650 million in aggregate and total employment surpasses 3,000. Cox estimates the total for all Charlotte-area gazelles tops $1 billion.
The goal, of course, is to help launch the next Lending Tree, Yap, Jigsaw or Peak 10, famous local examples of soaring entrepreneurs, the so-called gazelles that show up in about four of every 100 startup companies.
Heard of Gazelles?
Gazelles were identified by economist David Birch in 1994 as companies whose sales double every four years—accounting for 70 percent of new jobs despite their relative rarity—in contrast to less agile big-company “elephants” and steadily small “mice.”
“It’s kind of the Holy Grail—everybody wants to support high growth entrepreneurs,” Wetenhall says. “A lot of people associate gazelles with technology because those tend to be the visible examples. In fact, the gazelles span all industry sectors.
“They are not obvious to spot in advance. You can’t look at 100 startups this year and pick which four will become the gazelles. Sometimes it happens early on and companies get traction quite rapidly; sometimes long after the fact when something happens that causes an inflection point. You can’t determine to go out and start a bunch of gazelles.
“You can, however, predict where they’re likely to emerge. When you look at gazelles, in almost all cases they have an innovation component to their business that comes from one of three places.” Wetenhall describes them as:
- Technology innovation, including both tech companies and those that provide technology support for others;
- Business model innovation, such as Staples, which transformed the office supply business by slashing two layers of distribution when it created the manufacturer-to-store process, and Lending Tree, which removed face-to-face meetings with bankers from getting a mortgage loan.
- Business process innovation, such as Paychex that started in Rochester to handle payroll for small companies by collecting their information over the telephone.
“When you look at the profile of the Inc. 500, which by definition are all gazelles, what they consistently report is that most of these are not venture capital-backed.” Wetenhall adds, “Most of them are not technology-based, even though they may be technology-enabled.
“What Inc. finds is that a lot of fast-growing companies are in services as opposed to products. It’s more scalable. You can build a fairly big company without hiring a lot of employees.”
Nor is presence or absence of activity of venture capital activity a significant plus or impediment to gazelle hunting, he says, although the traditional reliance on bank loans calls for a learning curve over other types of financing.
“Generally speaking, technology-based companies need a lot of capital up front,” Wetenhall says. “Others need less. They generally need risk capital, not debt capital. That’s an issue in a place like Charlotte, which is a banking town. People think in terms of lending rather than risk investment.”
Research shows that in recent years angel investors, rather than venture capitalists, have been key to startups, with the notable exception of expensive pharmaceutical company deals, Wetenhall continues. He says that although each transaction is smaller, the 30,000 to 40,000 angel deals involved more total dollars than the 3,000 to 3,500 venture capital deals.
“Angels are a key part to that risk capital. We have a spotty history on the angel thing,” he says, including three groups that closed after the dot-com bust.
“We don’t have as much organized angel capital as you would expect in a city of this size,” although Inception Microangel Fund and WED 3 Inc. were started a few years ago. “We’re getting another round of energy on this point.”
The BIG survey showed only one company financed with venture capital, 12 percent with private equity, 22 percent had angel investment, 20 percent were bank-financed and 45 percent were self-funded. Half the companies were less than five years old, and 80 percent were less than 10 years old.
Care and Feeding
Greater Charlotte ranks high on many features that foster gazelles.
“When you look at the ecosystem that supports the gazelle dynamic, No. 1, you have all the regular business attractiveness components—good airports, a well-educated workforce,” Wetenhall says. “By definition, high growth entrepreneurial companies cover a broad geography.
“Charlotte also has a substantial presence on the global stage, with more than 4,000 foreign-owned entities in the region that enhance its reputation around the world and help attract energetic international innovators.
“In addition, there’s a highly connected entrepreneurial segment,” Wetenhall continues. “You tend to find a lot of places where people who are part of this entrepreneurial ecosystem come together.
“There is a richness of that sort of network connection; there’s generally a strong research university involved. That’s always the case around technology-driven entrepreneurship. It generates so many ideas.”
Organizations such as Ventureprise, where Charlotte Mayor Anthony is one of the group’s board members, links grassroots initiatives to the city’s highest structures. BIG provides connections for entrepreneurs and is part of the Charlotte Entrepreneurial Alliance, an informal gathering of two or three dozen business owners.
Cox, who started BIG in 2006 with the support of CEO David Jones of Peak 10 and some 15 other high-growth entrepreneurs, moved from San Francisco in 2003 and took over the Metrolina Entrepreneurial Council, which had flourished in the late 1990s but suffered after the dot-com crash.
“Nobody really cared about entrepreneurship to be really honest,” she says. “In San Francisco that’s all there is—high growth entrepreneurship. It was a bit of an education process.”
A partnership with Inc. magazine helped BIG attract interest for the first couple of years, but the Great Recession propelled the agency to bigger success.
“Since 2008, it hasn’t mattered at all,” she says. “We’ve grown on our own. BIG took off when the economy went down.”
The member-supported organization focused on high-growth entrepreneurial companies from startup to revenues of $25 million has some 100 members and more looking to join.
“I put on a lot of events,” Cox says, including old-fashioned social networking where entrepreneurs meet face-to-face. “I try to provide relevant and meaningful content for a high-growth entrepreneur. We’re very deliberate about the content we deliver.”
Jones, an impassioned entrepreneur, has a vision for what Charlotte could be: a regional hotbed for growing companies. As CEO of Peak 10, a data-center company he founded that’s now worth more than $400 million and is one ofCharlotte’s largest success stories, he hopes to help others find similar success.
Other major successes include Yap, a voice-to-text technology company sold to an Amazon affiliate last year; Jigsaw, the business crowdsourcing company sold to Salesforce.com after cofounder Garth Moulton moved to Charlotte; and LendingTree.com, sold to IAC/InterActive Corp. and now returned as Tree.com Inc. to its Charlotte founder, Doug Lebda.
“We became sort of the poster child for a lot of the entrepreneurs,” says Jones, a member of BIG whose 12-year-old company has 24 data centers and 330 employees in 10 cities. “When we came to Charlotte, we were just a small company with 20 employees.
“As we grew as a company, my interest was in helping other people avoid the mistakes I had made. I became engaged with younger entrepreneurs in Charlotte; they were sort of unsung. We were not the type of guys that would go out and beat our chest in a mix of personal modesty and competitive paranoia,” he says.
Jones was convinced that Charlotte is a hotbed of entrepreneurial activity and, as past chair of BIG and a strategic adviser, organized the first annual survey as a means of confirming what he already believed and what was even more evident as a result of the recession, that “business growth comes from small companies.”
“The BIG survey confirmed the role and got the entrepreneurial community much more on the map. Through BIG, we’re able to amass the information; it brought a lot more visibility to entrepreneurs,” he notes.
“There is a lot of activity percolating. There seems to be more structure around it than just talk. I think Charlotte has done a lot more now to give exposure to entrepreneurs,” he says, including ways small companies can do business with large recruits such as Chiquita.
Traditional business-supporting organizations such as the Charlotte Regional Partnership and the Charlotte Chamber of Commerce are encouraging and collaborating with the movement that has grown mostly from grassroots.
Keva Walton, a senior vice president at the Charlotte Chamber of Commerce, says the chamber aims to support the burgeoning entrepreneurial community with services while respecting entrepreneurs’ inherent free spirits.
“An organization like the chamber doesn’t necessarily fit with who and what they represent,” he says. “It’s not about the chamber, it’s about the collaborative spirit of building this entrepreneurial ecosystem. How do we make sure there’s a voice in the room for the entrepreneur or the gazelle?
“They’re creating jobs. They’re attracting new creative, innovative people. They’re reusing some of the talent that has been outplaced. They’re part of our overall economic ecosystem.”
New Breed in Town
Walton views the current surge of entrepreneurship in the context of a history that includes the founding of such companies as Lance and Family Dollar and the early initiatives of North Carolina National Bank under Hugh McColl to seize the opportunities of banking across state lines.
“Charlotte has always been entrepreneurial,” he says. “Creativity and innovation come together in Charlotte. It’s not that we’re launching. It’s more like we’re re-launching, or causing a greater awareness of who we’ve always been.”
Charlotte, founded at the intersection of Native American trading paths, has always been a commerce center and, beyond its homegrown banking sector, depended mostly on the harnessed power of the Catawba River to attract industry from outside—first textile mills and, thanks to air conditioning, other Northern businesses in the last 40 years.
But with the state’s textile and furniture and tobacco industries decimated by offshoring, financial services hard-hit by the recession, and business recruiting unable to create the needed number of jobs, attention has turned to entrepreneurial startups at an unprecedented level.
Among other things, UNC Charlotte and Central Piedmont Community College are taking greater roles in the entrepreneurship ecosystem.
Renee Hode, director of Central Piedmont’s Institute for Entrepreneurship, says 80 percent of clients are just starting a company while 20 percent are business owners coming for help with new ideas.
“We’re more of the gateway or the entry block for those who are looking at entrepreneurship as a career option,” she says. “They’re looking for opportunities. We work with them in that startup capacity, honing in on opportunity exploration, developing the process of getting their business launched,” often sending them to the next step at the Small Business Technology and Development Center.
Wilhelm says UNC Charlotte has developed 19 Ph.D. programs since it started the Ben Craig Center in 1986 and expects to have 25 within five years.
“We see that our opportunity is to be the urban research university for North Carolina,” he says, with advanced manufacturing, energy, medicine, computing, information security and informatics, including bioinformatics, among leading research topics.
The university spends $30 million on research, part of a total of more than $50 million including its collaborators—a fraction of the more than $1 billion in the Research Triangle Park Area, but an efficient engine that launched five startup companies just this year.
“We’re very oriented to translation and commercialization,” Wilhelm says. “We put a lot of emphasis on licensing the inventions our students and faculty come up with.”
One success is Digital Optics Corporation, started by electrical engineering Professor Michael Feldman to make a cellphone camera component, which sold to Tessera Technologies for some $60 million in 2006 and still operates inCharlotte.
Today, 15 companies, mostly startups or small businesses, work on campus with faculty, staff and students, and construction is underway for a 90,000-square-foot building that will provide room for many more by 2014.
“We’re looking to attract more companies, larger teams of companies,” Wilhelm says.
Yi Deng, dean of the College of Computing and Informatics, says the Charlotte Informatics Partnership aims to create an informatics industry for the region, a leader in the emerging field of big data with application to such fields as business intelligence, business analytics, health care, financial services and energy.
“We’ve been working on that for about three years. Now it’s become a national movement,” he says. “As we’re doing that, it will naturally stimulate the entrepreneurs, the job growth, the business competitiveness.”
The effort could become the core of an informatics cluster that could serve banking and finance, health care and other sectors. Such clusters, gatherings of businesses within an industry, stimulate a multiplying synergy that benefits the gazelle ecosystem.
Keith Luedeman, who founded goodmortgage.com in 1999, recalls when entrepreneurs were largely an underground movement during the dot-com boom—and gun-shy after the bust.
Today, some of them are sharing space in his 44,000-square-foot building, a diverse collection that includes groups working on telecommunications, commercial bond trading, bamboo cloning, and ancillary devises to enhance television watching.
“I’m just giving back to try to help people get to that next stage,” Luedeman says. “Entrepreneurs are kind of built differently. I like working with them. There’s a lot of entrepreneurial activity going on in Charlotte.”
Adam Hill, executive director of the downtown Packard Place center that helps support startup companies, says an informal Charlotte Entrepreneurs’ Alliance formed last year and meets monthly, sometimes with the mayor.
“Charlotte’s really hit a critical mass,” Hill says. “We meet as a group rather than let it explode in any random direction.”
In addition to influencing public policy, the group is raising two funds—one of at least $1 million to assist not-for-profit entrepreneurial support organizations that help foster gazelles and one for-profit fund of $25 million to $100 million to invest in high-growth startup companies.
Dan Roselli and his wife, Sara Garcés, owners of REDF Marketing, CustmerStream, and TargetPoint Consulting, bought the 90,000-square-foot building that became Packard Place in 2010 order to establish an entrepreneurial hub. The 1928 building was available because its owner, a condominium company, went bankrupt in 2008.
“We host probably 100 meetings a year—startup weekends, chamber events, different networking groups,” Hill says, in free event space that can hold up to 300 people. “About 25 percent of the building we made co-share space, functionally similar to incubator.”
Some 20 companies with one to six workers lease offices in the building, where services and infrastructure are shared. The month-to-month rent accommodates fast-growing gazelles that likely will need larger space before completing a long-term lease.
“Within that space we facilitate groups that have different industry focuses,” he says. “It’s a launching point for different incubators.”
Tenants include Queen City Forward, a spinout of Durham’s Bull City Forward for social entrepreneurs; Joules, an energy incubator seeking to add startups to Charlotte’s well-established energy industry; and RevTech Labs, an early-stage tech community.
In addition to the workforce, facilities and financial opportunities, gazelles look for a high quality of life—a feature that makes Charlotte especially attractive, leaders say.
Winn Maddrey, a communications expert and senior consultant at Fleishman-Hillard, says entrepreneurs who can live anywhere are attracted to Charlotte for its lifestyle features.
“With technology, you’re seeing the ability for ‘place’ to be defined,” he says. “You need a warehouse, a little bit of money and an Internet connection, and people can be anywhere they want. “We’re drawing in 20- to 30-somethings and keeping them.
“Most of them came here from what we saw then without a job but coming to an interesting place to work and play. There’s fun stuff to do. You can get to the beach, you can get to the mountains, it costs a lot less than Boston, New York or D.C. It’s a good place to be a 20-something. It’s a good place to raise a family, it’s a good place to start a business.”
More people who already lived here are making the choice for entrepreneurship, he says, giving up the security of stock options and 401(k)s in big banks, utilities or company headquarters to own their dreams.
“I think in the past, people would be like, ‘Why would you do something stupid like that?’” Maddrey says. “I think that mindset has shifted or is shifting. The security that has been attributed to at least the banks here locally—that got shattered in 2008.
“There are people who are going, ‘I did the corporate thing and I appreciate the corporate thing, but there might be other things out there for me. In the last four or five years, a lot’s changed in the Charlotte market.”
“Charlotte has a lot going for it,” Hill agrees. “I chose to move to Charlotteabout two years ago because I thought it was a great place to live and a great place to possibly start a business.”
“You’ll find that most of the hotbeds of entrepreneurial activity are places that people want to live—places that attract the kind of person that is this hot-shot entrepreneur, places where people who are more reactive, more innovative, more fast-moving want to live,” Wetenhall says. “That’s a thing that Charlotte’s got. Lots of people want to be here.”
Jim Van Fleet, a software development expert and chief technology officer at OtherScreen, says Charlotte’s longstanding attractions are attracting entrepreneurs while its entrepreneurial ecosystem is still developing, although the city is already becoming a regional hub.
“So far, it is that kind of migratory culture that Charlotte has overall that is contributing mostly to the kind of gazelle activity that you see,” he says. “A lot of these business are beings started by people who aren’t Charlotte natives, by and large.
“The ecosystem is not about everybody fitting one mold. There’s different things you need in an ecosystem, and sometimes they get combined together in strange ways. There’s a groundswell in this city to build this climate and this ecosystem.”