For Mike Maloney, founder of KOTA Longboards, the only thing that stays the same is change.
Winner of the Chase Mission Main Street Grant and $150,000, the rush of publicity and recognition, including a national television ad campaign, fueled a sales surge -- leaving KOTA and Maloney on the hunt for capital to finance more growth.
It's the story of so many small manufacturers. "We're growing at an extraordinary rate," Maloney says. "The $150,000 was great. Now we're ready for the next round."
Chase is obviously a willing lender, but Maloney is wary of funding growth with more bank notes. "I don't want to service debt with debt," he says. "On our current pace, we should be cash flowing this fall, but we're doubling and tripling our raw materials orders. It's a close call if we have enough cash on hand to keep up this pace. However, over-leveraging the company is something I don't want to do."
It's a challenge. Maloney is moving quickly to extend the successful KOTA brand into a line of soft goods, licensing agreements, and partnerships with other lifestyle companies. "KOTA's a lifestyle brand," he explains. "We have all of the attributes such as meaning, context, and authenticity. If we do this right, it could end up being a billion-dollar brand." To back up the point, he flips through a catalogue with featuring KOTA apparel and describes plans for accessories like messenger bags.
Maloney's vision is compelling in that KOTA seems well positioned to follow the path of other well-known gear and outdoor companies that started with a signature product, only to see an entire franchise blossom. Maloney will have to navigate the infamous "death valley" to become the next Burton or Oakley; KOTA's revenues are still catching up with costs incurred from a first round of financing -- in people, equipment, and new product development.
It's why Maloney doesn't spend any time now reveling in the ongoing national recognition from the Chase Mission Main Street Grant, as good as it continues to be. "KOTA is a 'visual' brand so the ongoing national exposure alongside Chase and Google, two exceptional companies, is invaluable for us," he explains. The marketing reach alone is worth well more than the amount of the grant. The experience has been incredible."
But he's focused on the next round of investment capital he believes will push the company beyond startup phase into sustainable growth. "We used the grant money to prepare KOTA to rapidly scale. Increasing production staff and output, lining up multiple touch points such as international distributors, domestic rep groups, large co-brand partners, and introducing new product. We've always known we'll need another, larger round of investment to take advantage of this growth. If we can get to cash-flow stability, we open up debt, convertible debt, and equity-based capital sources. If we need money before that event, additional equity investment may be our best -- or only -- choice."