FALL 2002

Ernst &Young Entrepreneur Of The Year 2002 Jeno F. Paulucci, Luigino’s, Inc.

Seeing Beyond the Risks

f you look closely at what is at the heart of most successes, you’re likely to find someone with an idea—to do something new, to do something better, Ito do something differently—and the determination to make it work. In business, these visionaries are called entrepreneurs. They are the back- bone of our country, building strong, innovative, and dynamic businesses that provide jobs, grow our communities, strengthen our economy, and improve the world. Entrepreneurs are ordinary people who achieve extraordinary things, and their efforts inspire others to do the same. That’s why 16 years ago we established the Ernst & Young Entrepreneur Of The Year® awards. It’s our way of recognizing the men and women who make the economy vibrant. Today, through the Ernst & Young World Entrepreneur Of The Year® awards—now in its third year—countries worldwide identify, salute, and support these outstanding individuals. One of them is Jeno Paulucci, the 2002 Ernst & Young Entrepreneur Of The Year. From his very first venture—an Italian-American selling chow mein in the Scandinavian enclave of Minnesota—Paulucci has time and again defied convention and stereotype. In a 67-year career that’s still going strong, Paulucci has built more than 50 companies, including four multimillion-dollar food companies, and has become a trailblazer in the frozen food industry. The following pages contain more of Jeno Paulucci’s inspiring story, as well as those of this year’s Entrepreneur Of The Year national category winners and finalists. They are justifiably proud of what they have achieved, and we’re equally proud to bring their stories to you. By any measure, successes have seemed hard to come by in the last year. But as the following examples will prove, entrepreneurs continually recognize the opportunities that defeat risks, and make the most of them. In the process they’ve learned something equally important—that sometimes the greatest risk of all is simply not taking one. It’s a lesson we all could benefit from. Sincerely,

Gregory K. Ericksen Global Director, Entrepreneur Of The Year Ernst & Young

1 One man’s dream for entrepreneurship in America is coming true. We are proud to support entrepreneurship through the Entrepreneur Of The Year® awards.

Ewing Marion Kauffman's dream for America lives on through the foundation he so generously endowed. The Kauffman Foundation works with entrepreneurs across the spectrum – young learners, aspiring entrepreneurs, high-growth entrepreneurs and social entrepreneurs – to encourage economic self-sufficiency and success by providing expertise, programs and grants to entrepreneurship support organizations. Mr. Kauffman's dream for accelerating entrepreneurship in America is coming true one day at a time. His enthusiasm for life is reflected in the smiling faces of successful entrepreneurs of all ages in healthier economic communities across the nation.

4801 Rockhill Road Kansas City, Missouri 64110-2046 888-777-GROW (4769) www.entreworld.org Contents

Seeing Beyond the Risks CATEGORY WINNERS & FINALISTS Gregory K. Ericksen Global director Entrepreneur Of The Year Master Retail Ernst & Young ...... Page 1 Joseph W. Luter III Rowland Schaefer Smithfield Foods, Inc...... Page 13 Claire’s Stores ...... Page 26 Harland Stonecipher The World’s Business Award Pre-Paid Legal Services, Inc. . . .Page 13 Lillian Vernon The Ernst & Young The Lillian Vernon Corp...... Page 28 Entrepreneur Of The Year Emerging Richard B. Cohen Program ...... Page 4 R. Greg Blair C&S Wholesale Grocers, Inc. . . .Page 28 Escort, Inc...... Page 14 Service AJury of Their Peers Douglas J. Bartek Bart Palmisano, Sr.. Meet the men and women Microtune, Inc...... Page 16 Orthodontic Centers who select our national Brian E. LeGette & of America ...... Page 29 winners ...... Page 6 Ron L. Wilson II Big Bang Products, LLC ...... Page 16 Richard V. Keith Center Partners, Inc...... Page 31 AWorld of Entrepreneurial Health Sciences Robert B. Knutson Excellence ...... Page 8 John M. Gregory Education Management Corp. . . . .Page 31 King Pharmaceuticals, Inc. . . . .Page 17 Supporter of Entrepreneurship 2002 National Ernst &Young Matthew Winkler William Bynum Entrepreneur Of The Year Ambion, Inc...... Page 19 Enterprise Corporation Jeno F. Paulucci J. Mario Molina, M.D. of the Delta ...... Page 32 Luigino’s, Inc...... Page 10 Molina Healthcare, Inc...... Page 19 Dr. Gyan R. Parida Manufacturing Silicon Alley Herbert V. Kohler, Jr. Entrepreneurs Club ...... Page 34 Kohler Company ...... Page 20 Brien Biondi Young Entrepreneurs’ Todd Werner Organization ...... Page 34 Sure-Feed Engineering ...... Page 22 Farooq Kathwari Technology/Communications Ethan Allen Interiors Inc...... Page 22 F. Neal Hunter Cree, Inc...... Page 35 Real Estate Victor Tsao John C. Mascaro Linksys ...... Page 37 Mascaro Construction Shaula Yemini Company, LP ...... Page 23 System Management Arts (SMARTS) ...... Page 37 Wilbur F. Breslin Entrepreneur Of The Year magazine Breslin Realty Global Director, Development Corp...... Page 25 Entrepreneur Of The Year: Gregory K. Ericksen Gerald T. Halpin Program Director: Nancy Clark WEST*GROUP Editorial Director: Warren Rappleyea Management LLC ...... Page 25 Managing Editor: Rebecca L. Grasso Design Director: Julia Packard Original Photography: Vincent Colabella

3 The World’s Business Award

Growing a company from an idea to an industry leader requires a special breed of individual— someone who doesn’t believe those who say it can’t be done … someone who views obstacles as opportunities … someone who won’t take “no” for an answer. It takes an entrepreneur.

ntrepreneurs are the individuals with the vision, determination, and Eleadership to create the companies that produce new industries, new jobs, new opportunities, and new wealth. Each year the most successful entrepreneurs vie for the Ernst & Young Entrepreneur Of The Year award, the most prestigious honor in its class. Entrepreneur Of The Year winners represent virtually every industry—from high tech to high touch. They are the men and women whose hard work and creativity have changed not only their lives but ours as well—people like Jeff Bezos of Amazon.com, Howard Schultz of Starbucks Corp., Pierre Omidyar of eBay, Inc., Scott Kriens of Juniper

4 E NTREPRENEUR O F T HE Y EAR 2002 Networks, Steve Case of America Online, Entrepreneur Of The Year award winners managers, or the entrepreneurs themselves. Richard Schulze of Best Buy Co. Inc., and become eligible for the national awards. All financial information submitted on the Dr. Phillip Frost of IVAX Corporation. An independent panel of judges selects nomination form is considered confidential Here’s how it works. Seven to 10 winners winners and finalists in several national and will be used only by the sponsors and in various award categories are selected categories. From the winners, one is by the independent panels of regional and from among the nominees by independent chosen as the overall National Ernst & national judges. panels of judges—comprising local busi- Young Entrepreneur Of The Year. The ness, financial, academic, and media fig- national Ernst & Young Entrepreneur Of ures—in several geographic regions across The Year winners and finalists are the U.S. In 2002, over 4,400 nominations announced at an awards gala that is the HELP US GIVE THE WORLD’S were received in 42 regions hosting the culmination of the program. The next BEST ENTREPRENEURS THE Entrepreneur Of The Year program. Entrepreneur Of The Year Awards will be Regional winners are honored at awards held Nov. 20–23, 2003. RECOGNITION THEY banquets held in each of the regions during A nominee must be an owner/manager DESERVE. the month of June. They are also inducted primarily responsible for the recent into the elite Entrepreneur Of The Year performance of a company that is at least Hall of Fame at the Entrepreneur Of The two years old. Nominations can be submit- We’re looking for successful men and Year awards event held each November at ted by anyone who is associated with a women who have founded or are growing the JW Marriott Desert Springs Resort & successful entrepreneur—spouses, employ- leading-edge companies. If you know Spa in Palm Springs. All regional ees, bankers, attorneys, public relations someone who possesses the skills and SUPPORTER OF ENTREPRENEURSHIP determination to make a great idea work,

Individuals who have made an outstanding contribution to the entrepreneurial spirit or nominate him or her for the coveted Ernst &

helped an entrepreneur become successful through business or academia are eligible for Young Entrepreneur Of The Year award. the national Supporter of Entrepreneurship award, presented by the Ewing Marion Kauffman A copy of the nomination form and com- Foundation. This award recognizes individuals who have consistently contributed time, plete information on the Entrepreneur Of money, encouragement, and/or skill development to further the cause of entrepreneurship. The Year awards program is available free Nominees need not have founded a company or organization, and may come from the corpo- from our Web site at www.ey.com/us/eoy rate world or any level of academia. To learn more about the Supporter of Entrepreneurship or by calling 1-800-755-AWARD. Deadline award, please contact the Ewing Marion Kauffman Foundation at (888) 777-GROW, or visit its for nominations is April 4, 2003. Web site at www.entreworld.org.

5 AJury of Their Peers

2002 National Ernst & Young Entrepreneur Of The Year judges: (standing, l-r) John Bello, SoBe Beverages; Joe Sansone, Pediatric Services of America; Dennis Frandsen, Frandsen Corporation; William Saito, I/O Software; (seated, l-r) Maxine Clark, Build-a-Bear Workshop; George Dalton, Call_solutions.com; Rebecca Smith, A.D. Morgan Corporation; Paul Sarvadi, Administaff.

Selecting the best of the best entrepreneurs is a job for the experts. And when it comes to building a successful enterprise from the ground up, nobody knows what it takes better than someone who has already done it. That’s why all of the judges in the Ernst & Young Entrepreneur Of The Year program are men and women who have achieved business success in their own right.

6ENTREPRENEUR O F T HE Y EAR 2002 he selection of the National Ernst & Young Entrepreneur Of YOU BE THE JUDGE The Year is the culmination of a yearlong process that begins with nominations each January. Panels of independent judges in T Do you have what it takes to be a winning entrepre- regions throughout the U.S. select winners in several categories. The neur? How would your business rank against the regional winners are recognized at banquets during the month of June. world’s most successful entrepreneurial ventures? This year nearly 450 entrepreneurs in 42 regions received awards. All of the regional winners become contenders for the national awards. Find out in The Ernst & Young Entrepreneur Of The The national judging takes place in San Diego under the direction of the Year Award® Insights from the Winner’s Circle Ewing Marion Kauffman Foundation. (2002). The book, by Gregory K. Ericksen, global Each judge receives an extensive dossier on all of the national director of Entrepreneur Of The Year (EOY) for Ernst & candidates. During the judging process, they discuss and Young, draws on the debate the merits of the individual candidates in each category insights of both EOY against such criteria as leadership, profitability, management, winners and judges culture/values/incentives, originality, and degree of difficulty. As experienced entrepreneurs, the judges know firsthand the for an insider’s look vision, determination, inspiration, and risks it takes to create a at how and why winning business. entrepreneurs suc- ceed across the full When their deliberations are complete, the judges select a national winner in several industry and general categories. But that’s not range of business the end of their responsibilities. From the field of national cate- opportunities—and gory winners, the judges must narrow their selection even fur- obstacles. ther—to one individual whose leadership and entrepreneurial excellence clearly makes him or her the best of the best. Judge how you and To determine their choice as the Ernst & Young Entrepreneur Of your business prac- The Year, the judges engage in a spirited debate on the merits of the tices stack up various national category winners. Afterward, each judge selects his against the best of or her top three choices, in order of preference. This year, only one the best—the winners of the Entrepreneur Of The entrepreneur was named on every ballot, and was the top choice of Year Award. Ericksen outlines make-or-break criteria six of the judges. developed over 16 years in the EOY program to reveal “This guy is awesome,” said one of the judges. “He is the American Dream. ” the business practices that can make the difference “Everything [he] touches turns to gold,” added another judge. between entrepreneurial success and failure. Learn how you rate in the critical areas that help determine After some debate on the merits of the other first-choice candidates, business acumen, including leadership, innovation, the discussion continued. Finally, the moderator called for another team-building, and financial performance. vote, and it was unanimous—Jeno Paulucci was selected as the National Ernst & Young Entrepreneur Of The Year. The Ernst & Young Entrepreneur Of The Year Award® “Jeno Paulucci epitomizes what EOY is all about,” says one of the judges. Insights from the Winner’s Circle is published by “I don’t think anyone can argue with what this man has accomplished.” Dearborn Trade Publishing, a Kaplan Professional See for yourself what the judges saw in this outstanding entrepreneur. Company, and is available through Amazon.com. The story behind Paulucci’s nearly seven decades building winning companies begins on page 10.

7 A World of Entrepreneurial

or the past 16 years, the Ernst & Young its second annual World Entrepreneur Of The According to Wall, “Successfully coping with Entrepreneur Of The Year awards have Year® awards in Monte Carlo to honor the both the intellectual challenge of high-end Fbeen identifying and recognizing the world’s most successful entrepreneurs. technology and the practical needs of going to people and companies that make a difference Germany’s Stefan Vilsmeier, the 35-year- market is an outstanding achievement that has in their respective industries and communities. old founder of BrainLAB AG, was deeply impressed the entire judging panel.” In that time, the Ernst & Young Entrepreneur named this year’s World Entrepreneur BrainLAB’s mission, according to Vilsmeier, Of The Year award has become the barometer Of The Year winner. The neurosurgical is simple: “To change surgery through the of entrepreneurial leadership, not just in the software innovator was chosen from a field development and implementation of sophis- U.S. but around the globe. of 23 outstanding entrepreneurs from 22 ticated, clinically based software and to The program has continuously grown in scope countries by an independent panel of become the leading provider of software and is now held in over 115 locations in 25 judges, led by John Wall, president of for minimally invasive therapies and countries. Earlier this year Ernst & Young held Nasdaq International. cancer treatment.”

World Entrepreneur Of The Year Stefan Vilsmeier (left), of BrainLAB AG , with Gregory K. Ericksen, global director, Entrepreneur Of The Year, in Monte Carlo.

8ENTREPRENEUR O F T HE Y EAR 2002 Excellence

Established in 1989, BrainLAB has indeed leading physicians and medical organizations. economic development and make the world a become a worldwide leader in neurosurgery “I also require each employee to participate in better place. By investing in the Entrepreneur Of and radiotherapy. The company develops soft- annual site visits to observe an operation,” said The Year awards, Ernst & Young fosters the role ware and medical systems for the radiation of Vilsmeier, “even people from our accounting of entrepreneurs as change agents for good and tumors and the navigation of surgical instru- department. That way, we’re always reminded awards their contributions and initiatives.” ments in the human body. of why we’re here.” More than 8,000 men and women from Vilsmeier actually started out as an author. By In addition, company engineers are required to around the world were nominated for the the time he entered the University of Vienna, contact one customer each month. “Being close to Ernst & Young Entrepreneur Of The Year he had already written a popular book on 3D our customers makes a difference,” Vilsmeier award in their respective countries in 2001. graphics and was convinced that they had uses said. “We bring back hundreds of ideas about how Following an extensive independent judging above and beyond computer games. to improve or expand products and services.” process, including regional awards, 23 In 1990, Vilsmeier developed the world’s first Ernst & Young Chairman Jim Turley honored all were honored as their country’s overall menu-driven software for neurosurgical plan- of the country winners by saying, “Entrepreneurs winner and each was a World Entrepreneur ning. Three years later BrainLAB had sold its are among the most prominent leaders who drive Of The Year finalist. first system, and in 1994, systems were installed in China. Under Vilsmeier’s leader- 2001 ENTREPRENEUR OF THE YEAR COUNTRY WINNERS ship, the company has helped create clinical procedures and new applications in close col- Australia—Dr. Peter Farrell, founder, chairman and CEO, ResMed, Inc. laboration with doctors to improve the quality Belgium—Jean-Pierre Delwart, CEO, Eurogentec of health care all around the globe. Brazil—Marco Aurélio Garib, founder and CEO, EverSystems Informática Comércio Its VectorVision software works like a global Canada—Kenneth E. Field, chairman, Commercial Alcohols, Inc. positioning satellite for the human body, pro- Caribbean—Ronald Bulkan, managing director, Precision Woodworking Ltd. v viding wireless, real-time feedback on a 3D Czech Republic, Zdenekv Jandejsek, managing director, Rabbit Trhovy´ Stepánov, a.s. image about the position of a surgical instru- Denmark—Lars Larsen, CEO, Jysk ment. With this product surgeons can localize France—Pierre Saubot, CEO, Pinguely-Haulotte lesions or treatment areas precisely, plan each Germany—Stefan Vilsmeier, president and CEO, BrainLAB AG step of an operation on a 3D computer model, and calculate the ideal access route to the treat- India—Brijmohan Lall Munjal, chairman, Hero Group ment area. VectorVision can be used on the Indonesia—Dahlan Iskan, director and CEO, Jawa Pos Group brain and in procedures such as spinal Ireland—Martin McVicar, managing director, Combilift Ltd. implants and total knee and hip replacements. Italy—Silvano Pedrollo, sole director, Pedrollo S.p.A. BrainLAB, which has grown an average of 74% Japan—Tetsuya Iizuka, CEO, THine Electronics, Inc. each year since 1994, now employs more than Netherlands—Monique Brummans, managing director, Dieman &Van Gestel 440 people in 50 countries. Sales in 2001 were New Zealand—Michael Whittaker, CEO, Atlantis Group 81 million euros. The company has earned 54% South Africa—Mark Lamberti, CEO and chairman, Massmart Ltd. of the worldwide market share for cranial radio- Spain—Simón Pedro Barceló, co-president, Barceló Group therapy/radiosurgery. In Germany, Italy, Korea, o Spain, South America, and Taiwan the company Sweden—Bengt Agerup, president and CEO, Q-Med AB has captured market shares of more than 70%. Switzerland—Fides P. Baldesberger, president and CEO, Outils Rubis SA To retain the innovative environment of a United Kingdom—Vijay Patel, chief executive; Bhikhu Patel, managing director, Waymade Healthcare start-up, BrainLAB works with thousands of United States—Dr. Phillip Frost, founder, chairman, and CEO, IVAX Corporation

9 MASTER

Jeno F. Paulucci

by Kathy Bull Luigino’s, Inc. Luigino’s,

National Ernst & Young Entrepreneur Of The Year

TITLE: Founder/Chairman CITY: Sanford, Fla. FOUNDED: 1990 WEB ADDRESS: www.michelinas.com

10 E NTREPRENEUR O F T HE Y EAR 2002 MASTER

eno Paulucci is a man few people can Like a farmer, I want to put back into the soil in my own forget. With an affable, “tell it like it is” “ Jpersonality, an ever-present laugh, and way in order that I can get a better harvest. … irrepressible energy, this active octogenarian ” has built more than 50 companies and orga- nizations over the course of a colorful 67- much as he could sell and truck to nearby the previous day.” It is Paulucci’s quality and year career that’s still going strong. Duluth each night. cost-competitive strategy that has allowed him to become one of the leaders in the Born to poor Italian immigrant parents in The chow mein was marketed under the frozen foods industry very quickly. post-WWI Minnesota, Paulucci helped his Chun King brand, which eventually grew into mother run a small grocery from the front of a line that included egg rolls and other spe- Quite possibly the crown jewel among his their modest home to help the family make cialty products. The Chun King Corporation creations is Luigino’s, the frozen food ends meet during the Great Depression, held 80% of the national market when company that he started in 1990 at the age Paulucci sold it for $63 million in cash in while his father, an iron ore miner, worked of 72. Based upon his mother’s authentic 1967 to R.J. Reynolds Tobacco Company, long days for little pay. The experience intro- recipes, and named Michelina’s in her when it decided to diversify away from honor, Paulucci developed a line of high- duced the young Paulucci to the grocery tobacco. They hired Paulucci as chairman quality, high-value entrees that features business, a strong work ethic, and his great of the new R.J. Reynolds Foods, now the more than 200 products. gift for sales and relating to people. RJR-Nabisco giant. But he soon found the In just 12 years, the company—which Upon returning from a tour of duty in the corporate pace to be an uncomfortable fit includes Michelina’s entrees and snacks Pacific in WWII, Paulucci held a job in for a hands-on entrepreneur. and Michelina’s Yu Sing Oriental entrees— grocery sales that proved successful but After four years helping to put together is one of the leading producers of frozen left him yearning for a more independent the new R.J. Reynolds Foods, Paulucci prepared foods worldwide. With the career. During the war, he noted that decided to turn his focus full-time to his Budget Gourmet brands acquired in early American GIs had developed a taste for pizza business. His Northland Foods com- 2001, Luigino’s brands now rank second in Chinese food. It was then, in the unlikely pany had been making Wilderness brand pie the U.S., accounting for one out of every market of Scandinavian-settled northern fillings and pizza mixes since 1950. In 1968 four frozen food sales, and holds a 42% Minnesota, that the Italian-American he formed Jeno’s, Inc. after adding frozen market share in Canada, making it that decided to market a chow mein he’d pizza and a unique frozen pizza roll snack. country’s leading brand. adapted to American tastes by adding The thought had occurred to him that a Not only were his products innovative, but spices and chicken broth. It was his only pizza roll could be produced with the same Paulucci had a knack for producing them product, and he canned and packed only as equipment as egg rolls, without any cost-efficiently. When Paulucci started additional capital investment; only the Luigino’s, he did so without a penny of fillings would be different. The resulting investment. In return for creating local jobs, Jeno’s Pizza Rolls were a phenomenal he received low-interest government loans. success, and in 1985 Pillsbury bought What’s even more surprising is that he part of the assets of Jeno’s, Inc. for entered his new Michelina’s product line into about $150 million. the competitive frozen food market with no Paulucci has a rule by which he has built advertising. Savings such as these allowed his companies: “Quality first, cost Paulucci to be the low-cost producer in the second. I know it sounds insignificant, field. He relied on the quality of his products but it isn’t,” he says. “The quality has to create word-of-mouth advertising, which absolutely got to be there, and that’s why cost him nothing and allowed him to offer we sample our products every morning or the best value and lowest prices in the “ This is my sport, and I’ve won a few games. I’ve lost a few, too, but the sense of accomplishment is what I value the most.”

11 MASTER

industry. By keeping quality high and prices low State of Minnesota, State of Wisconsin, and “This is my sport, and I’ve won a few games. Michelina’s was able to gain market share and National Rehabilitation Association. I’ve lost a few, too, but the sense of accom- become one of the leading brands in the U.S. “Like a farmer, I want to put back into the soil plishment is what I value the most,” says Paulucci says the people around him are his in my own way in order that I can get a better Paulucci. “I marvel at what you can do if you secret for staying on top of his many busi- harvest and deserve what I am doing,” says work hard, are honest, and make fun out of nesses. “I feel that without dedicated people, Paulucci. He tills that soil on a regular basis, your work. And that’s what I do.” you can’t succeed,” he says. Excellent com- by staying dedicated to numerous causes. He While waiting out the duration of a non-com- munication and performance-based incentives led the way to passage of changes to the pete agreement with Pillsbury, Paulucci and allow Paulucci to motivate his managers, and Taconite Amendment, also known as the his family created Heathrow, an amazing, trust them to do what they do best. Paulucci’s Paulucci Bill, which enabled steel industry self-sufficient, “city of tomorrow” spanning Republic Banks of Minnesota, which he 3,000 acres of Central Florida not far from purchased in 1989, are a prime example. He Disney World—a unique showcase live-work- has visited the banks only twice, and they play community. The residential sector took are doing very well, thanks to an excellent, off immediately. But with the commercial empowered management team. sector not faring as well, Paulucci took up the “We visit with our people,” Paulucci says. challenge of finding a major new corporate “We listen, whether it’s about work, family, resident. The American Automobile health, or whatever, and if there’s a prob- Association was looking for a new location, lem, we try to take care of whatever it is. So and Paulucci wanted it to be Heathrow. we build sort of a family relationship.” That After numerous attempts to talk with AAA atmosphere of caring is reflected in the brass, Paulucci finally landed a 15-minute company’s very low turnover rate, with meeting, but was delayed by traffic. In char- many people having been on staff more acteristic style, the then-68-year old Paulucci than 20, and some even 40, years. got out of his hired car, crossed multiple Making a difference in his employee’s lanes of traffic, ran up a hill, scaled a barbed- lives is something Paulucci has always wire fence, and, after stopping only briefly to been dedicated to. Because of his willing- freshen up, made it to the meeting on time. ness to hire, train, and employ at union AAA became the city’s first major corporate investment of nearly $3 billion in Minnesota’s wages those whom others considered “unem- tenant. In May 2001, Heathrow was named ailing mining region, creating 20,000 jobs, ployable”—the mentally or physically dis- one of the fastest-growing commercial and another $1 billion more in tax revenue. abled, the disadvantaged, addicts, or areas in America by Southeast Real Estate He also founded and led the National Italian- convicts—the President’s Council on the Business magazine. American Foundation and, with his wife, Employment of the Handicapped and the Despite the fact that at the age of 84 most Lois, established the Jeno and Lois Paulucci National Association of Manufacturers people would have retired long ago, Paulucci Foundation, dedicated to a more productive chose Paulucci as the United States has greeted his ninth decade by doing what he life for the poor, disadvantaged, and elderly. Employer of the Year in 1972. Similar does best, creating something new. His latest honors were accorded by the City of Duluth, “I look at my businesses and I’ve made venture—or adventure as he might prefer to money. But I also look at my non-business think of it—is Self Serve Centers, Inc., a activities, and those give me more satisfac- company designed to deliver quality foods Being able to come in tion,” Paulucci explains. “You don’t directly to consumers through vending “ measure greatness, in my opinion, with machines, club stores, convenience stores, with a creative product how much money you make or what kind university food courts, and the Internet. of record you’ve had.” Paulucci is enjoying himself so much and bring it to the With everything Paulucci gets involved in, he these days he doesn’t think he’ll ever retire. does so because he loves the challenge and The reason is simple. “Being able to come American public, it’s just the fun. He thrives on the creative problem- in with a creative product and bring it to solving that comes with starting something the American public, it’s just so damned so damned much fun.” new, whether it’s a business or a social cause. much fun.”

12 E NTREPRENEUR O F T HE Y EAR 2002 MASTER

JOSEPH W. LUTER III SMITHFIELD FOODS, INC. TITLE: Chairman CITY: Smithfield, Va. FOUNDED: 1936 WEB ADDRESS: www.smithfieldfoods.com

owners fired Luter, but rehired him in 1975 Smithfield’s proprietary genetic stock, to rescue the then-failing business. Within which enables the company to produce its just one year, Luter turned an $8 million loss Lean Generation pork products. into a $393,000 profit. FINALIST: Joseph Luter was just 23 when— Today Smithfield Foods is the largest hog following the sudden death of his father, who Luter has successfully integrated more than producer and pork processor in the world, had been running the company—he took over 17 acquisitions in the last 20 years to with more than $8 billion in revenues. management of the pork packing company expand Smithfield Foods products in the During Luter’s 25 years of leadership, the started by his grandfather. After six years, U.S. and internationally, and vertically inte- company has delivered 28% average annual during which he worked to buy back non- grated hog production and processing to compounded rate of return, and has outper- family shares, Luter sold the company for create safe, affordable, consistent, and trace- formed the S&P 500 Index and S&P Food $20 million. Six months later, the new able products. At the heart of the strategy is Index by more 250%.

HARLAND STONECIPHER PRE-PAID LEGAL SERVICES, INC. TITLE: Chairman, CEO CITY: Ada, Okla. FOUNDED: 1972 WEB ADDRESS: www.prepaidlegal.com

FINALIST: Necessity is the mother of inven- Pre-Paid Legal Services takes the tion, and Pre-Paid Legal Services is a prime concept of “attorneys on call” from example. Harland Stonecipher became a strictly the domain of corporations and pioneer in providing prepaid legal expense wealthy individuals to the realm of the Pre-Paid Legal Services, which went plans in the U.S. after an auto accident for common man by providing access to an public in 1977, currently has 1.3 million which he was not at fault brought on devastat- attorney for a small monthly fee. Members individuals and more than 25,000 groups ing legal bills not covered by insurance. Stonecipher launched Pre-Paid Legal Services choose an attorney from a network of under contract. The company increased on the premise that everyone needs an attorney contracted providers, who are pre- earnings per share by 40% in 2001 and on call for legal advice and assistance, whether screened and continually monitored to now markets legal expense plans in every an auto accident or a dispute with a roofer. provide the best service. U.S. state and four Canadian provinces.

13 EMERGING

R. Greg Blair

by Brian Moskal Escort, Inc. Escort,

Emerging Category Winner

TITLE: President CITY: West Chester, Ohio FOUNDED: 1997 WEB ADDRESS: www.escortradar.com

14 E NTREPRENEUR O F T HE Y EAR 2002 EMERGING

reg Blair has created a phoenix in the radar-detector business So Escort executives hit the road, met face-to-face with critical suppli- from the ashes of not one, but two, bankrupt companies. The ers, and explained their business plan. The company promised to pub- Ggalvanizing force? An unquenchable entrepreneurial spirit. lish forecasts routinely, and orders would be consistent with its forecasts. When Blair joined Cincinnati Microwave, Inc. as director of operations “Most importantly, we promised that we would pay for what we ordered,” in 1984, the radar-detector maker had a backlog of 25,000 units. It says Blair. By the end of year one, only one supplier insisted on prepayment. could manufacture only 50 units a day, and by the end of the year, the That rescue experience taught Blair some invaluable lessons. “I learned backlog had climbed to 35,000. Blair applied his operations experience not to try to do too much at one time, always deal in facts, and never let gleaned from 15 years at Procter & Gamble to CMI’s operations, and the word hope appear in the business plan,” he says. “Have a plan, focus within six months had completely eliminated the backlog. It earned him on what you do, and stick to it.” the reputation as the “fix it person.” In January 1998, after eight straight months of prof- Even so, CMI struggled financially in the 1990s, and itability, Escort entered into a supplier contract with in mid-1996 Blair presented a survival strategy for the Best Buy to provide high-end radar detectors. The big company. Top management rejected the plan, and in loser in the deal was Beltronics Co., a major radar- April 1997 CMI filed for bankruptcy. Blair, however, detector competitor that was soon forced to file for its purchased 15% of the Escort product line assets from second bankruptcy in three years. the CMI bankruptcy. A Chicago-based private investor In January 2000, Escort Inc. purchased the assets of purchased the rest of the company with the stipulation Beltronics, making it a wholly owned subsidiary. “I that Blair would be in charge of operations. had admired Beltronics for years when they were a Blair’s strategy was straightforward. “Run lean, do chief competitor of Cincinnati Microwave,” says what you do best, say ‘no’ to diversions, like a distrib- Blair. “Whenever a headhunter would call me, I ution channel that doesn’t fit your brand, and realize would recommend the best managers at Beltronics, that you can’t be all things to all people.” because I wanted them hired out of the industry,” he adds with a chuckle. Blair hired 53 former employees from CMI (less than 50% of the comparable staffing) to join the new company, now called Escort, Inc. Have a plan, focus on what you do, and He provided a personal loan guarantee to his bank in order to obtain a “ credit line, and downsized from a 172,000 square-foot facility to stick to it. 24,000 square feet. ” Fixing Beltronics, however, required more drastic measures than CMI. “We reduced our magazine advertising by two-thirds, accepted the Beltronics had been losing money for four years and had experienced anticipated 50% drop in sales volume, and sized the company based on two bankruptcies, so suppliers were even more uncooperative. But, what we thought we’d sell versus trying to sell enough product to make according to Blair, “Having the Escort turnaround behind us helped us the company profitable,” he says. to win over Beltronics’ suppliers.” Using the same business plan originally rejected by CMI, the fledgling In addition, Blair brought back a key operations manager who had company made money in its first month. During the first six months, worked for Beltronics when it was the industry’s 800-pound gorilla, Blair accepted 35% gross margins. “That’s a win that I’ll take any day,” downsized the company by 30%, and fired several unprofitable he says. “After six months, we expanded our product line and distribu- accounts. “We cut sales commissions by 50%, but that gave the reps 4% tion channels to include a big-box retailer, electronics’ boutique stores of something, rather than 8% of nothing, because Beltronics wasn’t and new car dealerships, and expanded the gross margins to 40%.” shipping product,” observes Blair. Key to the success, according to Blair, was the amount of drive and The five-year-old Escort—capitalizing on the synergies of the Escort energy in the employees. “If we had a leg up when we started Escort and Beltronics brands—has averaged 80% revenue growth in the last Inc., it was the people,” he says. “They had great talent and energy. It’s three years. “It’s all in the details,” Blair maintains. “There is no such one thing when people are totally disheartened and you’ve got to figure thing as luck.” out a way to get them excited. It’s another to see people who are ready to get it done. We just had to tell them where to focus, because they Blair likens his organizational wisdom to his experiences as the came fully motivated.” crew chief of a Porsche Speedster racing car team. “Nobody ever Good people aside, Blair faced a major short-term challenge— won a race they didn’t finish,” he explains. “If the car breaks, you regaining the cooperation and trust of the parts suppliers and media don’t win. If the driver gets too aggressive and wrecks, you don’t advertising vendors who had lost money when CMI failed. finish. In order to win, you must be there at the finish.”

15 EMERGING

DOUGLAS J. BARTEK MICROTUNE, INC. TITLE: Founder, Chairman, CEO CITY: Plano, Texas FOUNDED: 1996 WEB ADDRESS: www.microtune.com

powerful enough to handle the audio, video, Experts called it the most revolutionary advance and data performance requirements of new in tuner technology in the last 50 years. classes of broadband applications. So promis- Today Microtune designs, manufactures, and ing was his vision that within six weeks Bartek FINALIST: From his boyhood days working in markets tuners, amplifiers, transceivers, and his father’s television repair shop, Douglas J. received $8 million in venture funding in a short-range wireless radio and baseband Bartek developed an interest in electronics. handshake deal honored fully by investors. processors for the global broadband commu- As an adult, armed with a degree in electrical In 1999, Microtune took an existing, dollar-sized nications, automotive electronics, and wire- engineering and a M.B.A., he left a secure mechanical tuner with hundreds of components, less connectivity markets. The six-year-old management job and took an 80% pay cut to expanded its functions and performance, and company has grown to 1,100 employees, and follow his dream—developing an integrated reduced the chip to the size of a dime to launch has been awarded 14 U.S. patents, with 42 radio frequency circuit that was small and its first product, the single-chip MicroTuner. applications pending.

BRIAN E. LEGETTE (left), RON L. WILSON II BIG BANG PRODUCTS, LLC TITLE: Co-CEOs CITY: Baltimore, Md. FOUNDED: 1997 WEB ADDRESS: www.bigbangproducts.com

FINALIST: Brian LeGette and Ron Wilson Wilson had sold more than are two engineers with degrees from 1,000 units on campus. Wharton Business School who placed their After they had exhausted their entrepreneurial dreams ahead of six-figure personal funds, 18 of their fellow students at sold to customers in 40 countries. incomes in Corporate America. It began in Wharton believed in the ear warmers so much graduate school when, as part of their LeGette and Wilson have designed, that they invested $100,000 of their corporate studies, the two had to create a consumer patented and marketed more than a dozen signing bonuses to seed the start-up. When the product. After hundreds of ideas and sev- products, including beach mats and chairs, eral prototypes, they designed a pair of ear warmers debuted on the QVC home gloves, and sunglasses, that are sold at such wrap-behind-the-head ear warmers. By the shopping network, 4,000 sold in four minutes. retailers as L.L. Bean, Macy’s, Saks, the time they graduated in 1995, LeGette and To date, more than 8 million units have been Sports Authority, and the Sharper Image.

16 E NTREPRENEUR O F T HE Y EAR 2002 HEALTH SCIENCES

John M. Gregory

by Danielle Dayen Inc. King Pharmaceuticals,

Health Sciences Category Winner

TITLE: Founder and Former CEO CITY: Bristol, Tenn. FOUNDED: 1993 WEB ADDRESS: www.kingpharm.com

17 HEALTH SCIENCES

combination of hard work, strategic acquisition, and good timing has allowed King Pharmaceuticals to grow from a If you’re not willing to take risks, it’s Asmall manufacturing plant with $13 million in revenues to a “ major player in the pharmaceutical industry with revenues topping hard to grow. $870 million in 2001—in less than 10 years. ” largest pharmaceutical IPO of that year. Then in May 2000, King For founder John M. Gregory, King Pharmaceuticals is more than a moved from the Nasdaq to the New York Stock Exchange, and in business; it’s a family affair. Gregory had already September of the same year was chosen by Standard launched two successful businesses—his own retail & Poor’s to represent mid-cap pharmaceuticals in pharmacy and General Injectables and Vaccines, a the S&P 500 Index. That year King also made company that purchased pharmaceuticals from Investor’s Business Daily’s top 10 list of publicly manufacturers and sold them directly to physicians. traded medical companies for 2000, outranking But in 1993 he tapped into a pool of talent he had industry stalwarts Merck and Pfizer. been surrounded with his entire life—his broth- “The growth has been so rapid and the market was so ers—to found King Pharmaceuticals. ripe for what we were doing, the main challenge “One of the unique things about my brothers is that we’ve had to overcome over these last nine years was they all have different talents,” Gregory says. “James trying to have the right mix of debt and equity as we has a degree in public administration, Henry is a move forward,” Gregory says. “The other challenge medical doctor, Joseph has a business degree, we’ve had is that some of our growth has not just been Jefferson and I are both pharmacists, and Jefferson product acquisition, it’s been company acquisition, so is also a lawyer. There was a job for everyone in the company.” we’ve had to integrate companies into the King Pharmaceuticals cul- With a small initial investment and a lot of debt, the Gregory brothers pur- ture. But I think that was a challenge we’ve been able to accomplish.” chased a pharmaceutical manufacturing facility in Bristol, Tenn. With just 90 In fact, while growth and profits are important, people are Gregory’s employees they began operating as a contract manufacturer for other phar- main concern. His commitment to people is demonstrated with excel- maceutical companies. Under John’s direction, the company transitioned to lent benefit packages, child care subsidies and educational assistance, branded pharmaceuticals, acquiring and integrating Medco Research, Jones free and confidential counseling through an assistance program and on- Pharma, and more than 50 branded drugs into its operations. site chaplain’s office, and employee stock options. Today, King Pharmaceuticals’ diverse portfolio of prescription products In addition, Gregory founded the King Pharmaceuticals Benevolent ranges from cardiovascular and critical care medications to anti-infec- Fund, a non-profit corporation dedicated to ministering to people in tive, endocrinology, and women’s health products. The company oper- need. Fully funded by the Gregory family and King Pharmaceuticals, ates five manufacturing sites and multiple offices in North America and and operated by Gregory’s sister Maryanne, the Benevolent Fund dis- Puerto Rico and employs more than 1,700 people. tributes medications and medical supplies to third world countries; A major factor in King’s success has been selectively acquiring branded administers The Lord’s Storehouse, a food distribution ministry serving pharmaceutical products that have growth potential, complement the community-based ministries within a 77-mile radius of the fund’s company’s product portfolio, and are exclusive or can be made exclusive. Bristol, Va., headquarters; and assists widows who have little or no Through focused promotion, marketing, and life-cycle management, family support through The Widow’s Mite ministry. The fund has also King then increases the sales and value of these products. “King was provided 49 ministries with financial gifts and aided disaster relief there at the right time, when big pharmaceutical companies were selling efforts in West Virginia. products, and we were able to take advantage of that,” Gregory explains. In June 2002, Gregory officially handed over the CEO position to his One such product that has had a big impact on the company is Altace, brother Jefferson. While no longer a part of the company’s manage- an ACE inhibitor that received a new clinical indication for prevention ment, John Gregory hopes his brother’s leadership will continue the of stroke. “That propelled that product to unbelievable sales,” Gregory acquisition growth strategy that has made the company so successful— says. And a direct-to-consumer marketing campaign launched in April and add more research and development on products to move King to 2002 featuring professional golfer Jack Nicklaus didn’t hurt either. It is the next level. a good example of the savvy marketing and promotion that the com- “As an entrepreneur, you have to be willing to take risks. If you’re not pany has used to propel the growth of its products. willing to take risks, it’s hard to grow,” Gregory says. “I also believe it In a relatively short time, King Pharmaceuticals has had some helps to have a grounded relationship with your family. That provides a significant milestones. To ensure the company had the capital to type of stability in your own life that gives people a confidence to continue its rapid growth, King went public in June 1998 with the follow you and believe what you say.”

18 E NTREPRENEUR O F T HE Y EAR 2002 HEALTH SCIENCES

MATTHEW WINKLER AMBION, INC. TITLE: CEO, Chief Scientific Officer CITY: Austin, Texas FOUNDED: 1988 WEB ADDRESS: www.ambion.com

profits quickly forced Winkler to focus on prod- Positioning itself as The RNA Company, ucts that would give Ambion an edge in the com- Ambion’s catalog has grown to include petitive biomedical supply industry. more than 30 kits and 1,100 products, enabling the company to grow at a rate of FINALIST: Despite a complete lack of business The increasing use of molecular biology experience, Matthew Winkler left his job as an and recombinant DNA techniques had cre- more than 30% per year. The many uses of associate professor at the University of Texas at ated a market for “kits” that would allow RNA provide Ambion with built-in oppor- Austin, and started Ambion in a loft space in his researchers to perform procedures quickly tunities for further growth and the com- home in 1988. He originally envisioned a com- and efficiently without needing to set up pany has begun developing an RNA pany that would produce purer enzymes, solu- from scratch and purchase and test reagents organic chemistry capability, in addition tions, and other reagents for biomedical research themselves. Ambion introduced its first RNA to a new division devoted to diagnostics and sell them at lower prices. But disappointing kit in 1990 and patented a version in 1991. started in 2000.

J. MARIO MOLINA, M.D. MOLINA HEALTHCARE, INC. TITLE: Chief Executive Officer CITY: Long Beach, Calif. FOUNDED: 1980 WEB ADDRESS: www.molinahealthcare.com

FINALIST: Since its founding in 1980 by the who staff Molina Healthcare’s 21 company- late Dr. C. David Molina, Molina Healthcare owned clinics must complete a four-hour has provided exemplary managed care to cultural and linguistic training module. those people in its communities who are Employees are ethnically diverse—27% its revenues by more than 250%. In 2001, traditionally underserved. Of the 420,000 Hispanic, 13% African-American, and 14% Hispanic Business rated Molina Healthcare members receiving health care services from Asian—and Molina Healthcare is the first the 12th largest Hispanic-owned business Molina Healthcare, the average patient is a health plan to have an entire member Web single mother, often with limited English lan- page translated in six languages. in the nation and third largest Hispanic- owned service company. And national guage skills, supporting two or three children Under the leadership of Dr. J. Mario on Medicaid, state benefits, and low-wage jobs. Molina since 1997, the company has managed care research firm Inter Study To overcome financial, cultural, and lin- expanded its business model to Utah, ranked Molina Healthcare 14 on its list of guistic barriers, employees and physicians Michigan, and Washington and increased the top 25 national managed care firms.

19 MANUFACTURING

Herbert V. Kohler, Jr.

by Brian Moskal Kohler Company Kohler

Manufacturing Category Winner

TITLE: Chairman, CEO, President CITY: Kohler, Wis. FOUNDED: 1873 WEB ADDRESS: www.kohler.com

20 E NTREPRENEUR O F T HE Y EAR 2002 MANUFACTURING

ohler Company has grown from a small cast iron and steel is to have 35% to 40% of current sales come from products we’ve foundry with 21 employees to a world-class manufacturer with introduced in the last thee years,” says Kohler. K22,000 associates and 44 manufacturing plants around the To keep product innovation churning, the company reinvests 90% of its globe, making it one of the oldest and largest family-managed private profits back into the business. “That’s critical to what we do,” asserts Kohler. companies in the United States. “That’s the juice that allows us as a private company to stay on the leading John Michael Kohler, an Austrian immigrant salesman edge of product and process. Unlike a public company, turned foundryman, started the company in the midst of we don’t sell our stock or issue debt to raise capital.” an economic depression in 1873. In 1883, he entered the The Kohler Operating System, based on the continu- plumbing business when he enameled a horse-watering ous improvement principles of kaizen and Six trough, fitted it with feet, and sold it as a bathtub. Sigma quality standards, uses technology to drive “Persistence is what got the company through those cost efficiencies and improve quality. “Be it an hard times back then,” says Herbert V. Kohler Jr., who engine, a generator, a toilet, a cabinet, a piece of has led the company since 1972. “I can’t tell you the furniture or a five-diamond golf resort, there is but a number of battles that we have won against our com- single level of quality in our products,” says Kohler. petitors simply because of our persistence to pursue “We differentiate price by the function of a product, and drive an idea until fruition.” its engineering or design, or the materials we use to During its 129-year history, the Kohler Company make it. We never compromise on quality.” has been guided by just three generations of the That emphasis on quality guides Kohler’s commu- Kohler family. Walter J. Kohler took over the management of the nity efforts as well. The Kohler Company and the Kohler Foundation company in 1905 following the deaths of his father, John Michael, provide support for the arts, the environment, historic preservation, and and his brothers, Robert and Carl. The reins of the company youth at risk. Kohler’s interest in preservation led to the creation of a passed to Walter’s brother, Herbert, in 1940 and to Herbert’s son, 500-acre nature preserve along the Sheboygan River, and a 1,440-acre Herbert, Jr., in 1972. eagle preserve on the bluffs of the Mississippi. Since Herbert Kohler took over leadership of the family business, the company has grown sales, net income, total assets, and stockholders’ I expect this company to continually equity at a minimum of 10% compounded annually. Through internal “ growth and acquisitions over the last 30 years, the company has become work to be on the leading edge of a global leader in products and services for living environments. “We everything it does. believe that most real growth must come internally, not through acquisi- ” tions,” Kohler says. “When the firm does acquire a business, it’s for a Kohler also championed the adoption of a second 50-year plan for resource that it doesn’t have and can use in creative ways.” company-owned properties and Kohler Village, one of the first planned Today the Bold Look of Kohler is a grouping of 30 businesses in four communities in the United States. Kohler took wasted and abused land major categories—plumbing, engines and power generation systems, near the village and created what’s now called Destination Kohler. The furniture, and hospitality resorts. Brand names include Kohler and flagship properties of this resort area include The American Club resort Sterling plumbing products, Baker and McGuire furniture, and Ann hotel, originally constructed in 1918 to provide housing for immigrants Sacks Tile & Stone. and restored in 1981 as an elegant hotel. It is the only AAA Five Diamond resort hotel in the Midwest. “I’m inspired by any technical or artistic breakthrough,” says Kohler. “It’s the reason I work and I expect this company to continually work Kohler is also a strong believer in giving back to the business community. to be on the leading edge of everything it does.” In 2000, the company endowed the Kohler Center for Entrepreneurship in the College of Business Administration at Marquette University, Calling it one of the keys to building a successful business, Kohler creating an Entrepreneur in Residence program to put students in spends 40% to 50% of his time on new products, new processes, or the contact with business leaders. strategies behind them. “We never let up. We have a strong new-product development system that continues despite what the economy is doing,” Kohler’s leadership philosophy is simple and key to the company’s says the Yale University business administration graduate. “That’s market position. “It’s important that the leaders and most of the people because new products are the key to the company’s future.” of the enterprise understand the mission and the guiding principles,” he Kohler Company doesn’t just give lip service to product innovation. It says. “If you have that, you’ll develop a unique identity very quickly measures it. It has developed a Vitality Index that weighs current total that will create a significant financial advantage.” It’s sage advice from sales against the sales of products in the last three years. “Our objective someone who’s done just that.

21 MANUFACTURING

TODD WERNER SURE-FEED ENGINEERING TITLE: President CITY: St. Petersburg, Fla. FOUNDED: 1998 WEB ADDRESS: www.sure-feed.com

the industry. Equipment sales of his fledgling industry with an envelope inserting system company skyrocketed, only to be snuffed out that can handle 12,000 envelopes, up to 10 x when it lost a yearlong, $1 million-plus 13 inches in size, per hour. patent infringement suit. FINALIST: Fourth-generation entrepreneur In the three years since the FlowMaster was Todd Werner parlayed a high school job as a Two months after losing the lawsuit and shut- introduced in 1999, Sure-Feed Engineering mailing machine technician into rebuilding ting down his first company, and two years revenues have quadrupled, net income has discarded machines in his garage and selling before he won the case on appeal, an unde- increased nearly tenfold, and employment has them at a profit. He gained an intricate terred Werner started a new company, Sure- tripled. The coup de grace: Since the spring knowledge of the machines and, by listening Feed Engineering. He quickly designed, built of 2001, the company’s mailing and packag- to his customers, was able to develop and a prototype of, and patented the FlowMaster, ing products have been marketed and ser- patent a new type of paper-feeding device for a mailing machine that revolutionized the viced worldwide by Pitney Bowes.

FAROOQ KATHWARI ETHAN ALLEN INTERIORS INC. TITLE: Chairman, President, CEO CITY: Danbury, Conn. FOUNDED: 1932 WEB ADDRESS: www.ethanallen.com

FINALIST: Farooq Kathwari is a risk-taker— another risk, and led a successful manage- first when he protested against Indian rule ment buyout of the company. He immedi- in his homeland of Kashmir in the 1960s, ately undertook the reinvention of the stale then again when he immigrated to New colonial-style furniture manufacturer. To manufacturing process by abolishing York, where he founded KEA International meet crushing interest payments on the traditional production lines in favor of Inc., an importer of Kashmiri crafts and buyout debt, Kathwari eliminated 50% of start-to-finish work groups. He has made wall hangings. In 1980 Ethan Allen the product line within 24 months and repo- entrepreneurism the central tenet of Ethan Interiors purchased KEA and hired sitioned the company as an affordable Allen’s business strategy. Between 1990 Kathwari as vice president in charge of maker and retailer of contemporary and and 2001 sales grew almost threefold to merchandising and international operations. classic collections as well as colonial styles. $904 million, and the debt-to-equity ratio When Ethan Allen’s parent decided to sell Kathwari has refocused advertising on stood at a remarkable 2.1%. the furniture maker in 1988, Kathwari took brand awareness and restructured the

22 E NTREPRENEUR O F T HE Y EAR 2002 REAL ESTATE

John C. Mascaro

by Roger Morton Company,Mascaro Construction LP

Real Estate Category Winner

TITLE: President, CEO CITY: Pittsburgh, Pa. FOUNDED: 1988 WEB ADDRESS: www.mascaroconst.com

23 REAL ESTATE

onsidering his background, it might seem that Jack Mascaro was be willing to give his newly formed company its first major construction destined to make his living in construction. But it was also his vision, contract if he could get a bond. Mascaro took a second mortgage on his Cexperience, and entrepreneurial drive that led him to create and build home, which gave him enough bonding capacity to get the job. Mascaro Construction Co., a general contractor, construction management, “My wife was the accountant and timekeeper, and I was the estimator and design/builder and major development force in the Pittsburgh area. and project manager,” says Mascaro. “I worked off my ping-pong table You could say that construction is in Mascaro’s blood. His grandfather, for three or four months.” Business was good enough in the first year Vincenzo, was a stone mason in Italy, building for Mascaro to pay off his mortgage, and the company homes and remodeling churches. Vincenzo’s son, has continued to grow in income and prestige. Peter, who is Mascaro’s father, earned a degree in Today, a stunning mural Mascaro commissioned from civil engineering and a Ph.D. in mathematics in Italy, Douglas Cooper of Carnegie Mellon University greets then came to the U.S. to study American building visitors entering the company lobby. “The artist repre- methodologies, eventually starting a small bridge sented some of my Dad’s roots with pictures of his vil- construction company in 1941. lage in Italy, and there’s a montage of jobs we’ve done Construction was always a topic of discussion at in Pittsburgh that have added to the city landscape. home when Mascaro was growing up. He and his There’s a little section, too, with pictures of the family. brother worked as laborers on job sites, and his So there’s a message in the art,” says Mascaro. sisters were secretaries in the company office. Mascaro Construction has been part of many important Although the business went bankrupt while Mascaro projects in the Pittsburgh area. Two from which was still in college, the desire to be in a family business lingered. “It is Mascaro derives particular satisfaction are the remodeling of Heinz Hall important to me to carry on a tradition and make our name synonymous from a multi-purpose facility into a great symphony hall for the Heinz with quality, integrity, and professionalism,” says Mascaro. Family Endowments, and Heinz Field, home for the Pittsburgh Steelers It is important to me to carry on and Pitt Panthers. “ Passionate about his profession, Mascaro has been president of his a tradition and make our name contractors association for the last three years, working to build strong bridges between management and the unions. Mascaro helped inaugu- synonymous with quality, integrity, rate a program on construction management at his alma mater, and established a scholarship in honor of his father. To further perpetuate and professionalism. the company name, Mascaro’s three sons are in the business. John Jr. is ” in charge of field operations, Jeffrey is the chief estimator, and Michael After graduating from the University of Pittsburgh with a civil engineering is manager of business development. “My goal is to make sure my kids degree, Mascaro worked in the field long enough to know he didn’t want are part of this tradition,” says Mascaro. to be just an engineer for the rest of his life. He went to work for a con- Mascaro believes he has been blessed with success so he can help other struction company, where he was given the opportunity to grow, eventually people, and he has a lot to give back. He is creating a foundation that becoming a regional vice president. But after nearly 20 years and feeling will allow him to continue to give money to the religious, educational, he had gone about as far as he could, Mascaro struck out on his own. and environmental causes he has supported for many years. Included in What excited Mascaro more than anything else when he decided to these wide-ranging interests are the Holy Family Institute that treats start his own company was that he could develop a culture unique in children whose families are in crisis, the Construction Management the construction business. “When there were full service gas stations,” Program at the University of Pittsburgh, and the National Aviary. explains Mascaro, “I always went to the one where the attendant said, Mascaro still loves to work at his work. In moving toward the ‘Hi, Jack. How are you today?’ He automatically washed the windows future he reminds himself that getting older makes people more and checked the oil and the tires. He did all the little things right. I cautious, but that he must continue to be willing to take risks. wondered why I couldn’t provide that kind of customer service in the Mascaro also understands that part of his future will be giving up construction business. the reins of Mascaro Construction, taking a back seat, watching “So, that became the company culture,” says Mascaro. “We were going his children and other key people run the business. That’s just to do things right the first time. Even if it costs extra to get it done, if fine with him. we say we’re going to get it done, then that’s what we’re going to do.” “I have to listen to the younger people,” says Mascaro, “because Mascaro’s success has been a result of his willingness to take risks and the great thing about youth is they don’t know what they don’t work hard to achieve his goals. In 1988, Mascaro found a client who would know. I have to nurture that entrepreneurial spirit.”

24 E NTREPRENEUR O F T HE Y EAR 2002 REAL ESTATE

WILBUR F. BRESLIN BRESLIN REALTY DEVELOPMENT CORP. TITLE: Founder, President CITY: Garden City, N.Y. FOUNDED: 1953

When he opened Breslin Realty, a residential spaces, and improvements to road patterns. real estate office, times were propitious. Breslin Realty has participated in the Breslin capitalized on the growing number of creation of 12 major residential communities, people seeking to relocate from crowded met- FINALIST: Wilbur Breslin’s journey to developed more than 29 retail centers, and man- ropolitan areas to suburbs like Long Island. becoming a major force in residential real ages 6 million square feet of real estate in five With Breslin’s finely honed sense of real estate on Long Island, New York—and in states. Fourteen major development projects on estate values, the company has flourished, five other states—began in a family fruit adding commercial realty and offering full Long Island include the Hub at Hempstead, a and vegetable store. It was there that he real estate services. A hallmark of Breslin national model for successful redevelopment came to understand business success is Realty is converting decaying properties into that rejuvenated Hempstead village by replac- predicated on knowing and filling needs of attractive venues, including adding to the sur- ing more than a dozen outdated buildings with the customer. rounding area through landscaping, open a shopping center with national retailers.

GERALD T. HALPIN WEST*GROUP MANAGEMENT LLC TITLE: Founder, President, CEO CITY: McLean, Va. FOUNDED: 1962 WEB ADDRESS: www.west-group.com

FINALIST: Gerald T. Halpin’s 50 years in the WEST*GROUP has a well-earned reputation real estate business are marked by a for quality and integrity through its work on a number of pioneering accomplishments, long list of highly successful office, retail, including development of one of the first industrial, and residential endeavors and has Halpin leads by example, and no small mixed-use office parks in the Washington, garnered numerous industry awards. Among the part of his success has come through D.C., metro area. Halpin entered real company’s recognizable and respected works his ability to create the right teams to estate in 1952 with the construction are the WEST*GATE and WEST*PARK office accomplish the jobs at hand. He gives of a major manufacturing complex for parks in Tysons Corner, Md., headquarters to back to the greater community by serving Atlantic Research Corp. In 1962, he major corporations such as Capital One, as a driving force on many corporate founded Westgate Corp., which became Freddie Mac, MITRE Corp., and Gannett/USA and charitable boards, especially those WEST*GROUP, a full-service real estate Today. In addition, WEST*GROUP has five concerned with environmental preserva- development, construction, brokerage, and prime properties within one mile of tion and conservation. management organization. Washington’s Dulles Airport.

25 RETAIL

Rowland Schaefer

by Suzanne Carr Claire’s Stores

Retail Category Winner

TITLE: Chairman, President, CEO CITY: Pembroke Pines, Fla. FOUNDED: 1961 WEB ADDRESS: www.clairestores.com

26 E NTREPRENEUR O F T HE Y EAR 2002 RETAIL

owland Schaefer doesn’t have an MBA. He didn’t come from a stores throughout North America, Japan, the United Kingdom, Ireland, background of wealth or privilege. But he does have an entre- Switzerland, Austria, Germany, and France. Rpreneurial drive that has propelled him further than education Schaefer credits his success to deep-rooted principles that he lives by. or circumstance ever could. “Treat people with respect, always be honest, and, most important, be It was Schaefer’s past that truly positioned him for the future. A child of honest with yourself,” he says. “If you don’t tell the truth, people will the Great Depression growing up with no father and little money, doing get wise to you.” without was par for the course. For Schaefer it built a lifelong philoso- He also believes that the easiest way to grow as a person is to surround phy of constantly taking risks to better his situation, regardless of how yourself with people smarter than yourself. “I tell everyone, give me an much success he achieved. argument and tell me when I am wrong—I know I Schaefer dropped out of high school at 16 and went don’t have all the answers,” Schaefer says. “I am very to work to support his mother and brother. It was proud of all of the people who work for us.” during that time he learned many important business Schaefer thinks of his employees as extensions of his lessons that have carried him through his career. At family and treats them accordingly. When an one of his first jobs as a door-to-door vacuum sales- employee learned that her husband had a brain tumor, man, Schaefer tried to talk to his boss about the Schaefer paid for the couple to come to New York in daunting sales climate he was facing. His boss order to receive treatment at Sloan Kettering Cancer replied, “Either you get the job done, or don’t come Center. He paid for the funeral of a family member of back.” That kind of pressure motivated Schaefer to an employee who couldn’t afford it, and helped work to succeed, regardless of the odds. employees whose homes were destroyed when After a succession of sales jobs, Schaefer launched Hurricane Andrew hit South Florida. Fashion Tress Industries (FTI), a retailer of fashion Although considered a father figure by many of wigs, which he took public in 1961. He learned the business and Claire’s employees, the people who most admire Schaefer are his became a pioneer in the industry, buying hair in India and the Orient for four children, two of whom now serve on Claire’s management better prices and setting up a factory in Korea to export wigs to the U.S. team. E. Bonnie Schaefer is executive vice president of Real Estate Schaefer grew FTI into the largest importer of wigs in the world before for the company, and Marla Schaefer is executive vice president of the industry flattened. Claire’s Boutiques, Inc. In 1973, the company name was changed to Claire’s Stores Inc. when Schaefer purchased the 25 Claire’s accessories outlets. His vision was to Treat people with respect, always be sell fashion jewelry and apparel to one of the fastest growing consumer “ groups at the time—teen and preteen girls. He was a first mover in tap- honest, and, most important, be ping into this previously overlooked market segment, which estimates honest with yourself. now place at more than $150 billion in disposable income. ” Schaefer’s focus on the end user—from store design and customer ser- What Marla admires most about her father is his ability to turn his set- vice to trend monitoring and merchandising—has kept the Claire’s backs into successes. “He wasn’t always successful, so he was never brand en vogue for more than 40 years with a notoriously fickle cus- afraid to take a risk,” she says. “He never worried about the outcome. He tomer. “Jane Q. Public is our boss,” says Schaefer. “If she doesn’t buy always found a way to make it work. His setbacks propelled him forward.” what we are selling, we better find out what we are doing wrong.” Marla describes her father as a man with a strong sense of family. When Through smart strategic decisions and acquisitions Claire’s has experi- his eight-year-old granddaughter (she’s now 21) was diagnosed with enced explosive success over the years—and continues to grow. Since diabetes, Schaefer vowed to find a cure. He has donated more than 1997, the company’s revenues have increased 97% from $466 million to $10 million to the Diabetes Research Institute Foundation and serves on $918 million for 2002. This remarkable growth has been achieved with- its board of directors. Schaefer has also given much to the South Florida out advertising. Instead, Claire’s has successfully harnessed the power of Community where he lives, serving on the board of governors for the brand recognition, customer service, and location. Weizmann Institute of Science and as Honorary President and Claire’s Stores has become the leading mall-based retailer of popularly Humanitarian Founder of the Miami Jewish Home and Hospital for the priced—typically $2 to $20—accessories, costume jewelry, and apparel Aged. And he is helping to fund a solar research center in Israel. for young girls and women aged seven to 26. The Claire’s brands now The still vital and energetic octogenarian has achieved a great deal in his include Claire’s Accessories, Icing by Claire’s, and Mr. Rags, which life, yet he remains as grounded and humble as when he began. “I did merchandises casual apparel and accessories to teen boys. Schaefer’s nothing special,” Schaefer says. “I only tried to be friends with the goal to “accessorize the world” has built a truly global company, with American public and tried to give them what they want.”

27 RETAIL

LILLIAN VERNON THE LILLIAN VERNON CORPORATION TITLE: CEO CITY: Rye, N.Y. FOUNDED: 1951 WEB ADDRESS: www.lillianvernon.com

become one of the leading specialty catalog consumer Web site, which is experiencing and online retailers in the country. Today double-digit growth and is the company’s Lillian Vernon Corporation has more than fastest-growing business segment. $250 million in annual revenues, and offers FINALIST: Lillian Vernon has a long history In her more than 50 years in business, of being ahead of the times. In 1951, the over 6,000 gift, housewares, gardening, Vernon has led the way in the workplace as expectant housewife took $2,000 in savings seasonal, and children’s items. well by supporting women’s issues, educat- to go into business for herself, with just Among Vernon’s numerous firsts, hers was ing men and women about sexual harass- two products—a monogrammed purse and the first company founded by a woman to be ment, and instituting a flex time and a belt—and a single $495 ad in Seventeen listed on the American Stock Exchange. And maternity-leave policy that guaranteed job magazine. Vernon received $32,000 in in 1995 Lillian Vernon was an early pioneer security long before the Family Medical orders, paving the way for what has in e-commerce with the launch of its first Leave Act came to pass.

RICHARD B. COHEN C&S WHOLESALE GROCERS, INC. TITLE: Chairman, CEO CITY: Brattleboro, Vt. FOUNDED: 1918 WEB ADDRESS: www.cswg.com

FINALIST: When Rick Cohen joined his family’s the large accounts it needed in order to grow, food wholesaling company in 1974, he saw and asked employees to take pay cuts to sup- that, although C&S Wholesale Grocers had port the strategy. become a supplier to sizable supermarket Cohen’s risks paid off. Since he took over New York, New Jersey, and New England. chains, its growth was stagnating. Cohen set leadership of C&S in 1984, the company has Cohen continues to push boundaries and out to change that with some risky proposals. opened 24 additional warehouse distribution innovate to improve the company’s perfor- He convinced his father, then CEO, to move centers along the East Coast, making it the mance. He built an incentive program that the company from Massachusetts to Vermont third largest wholesale grocery distributor in improved productivity and increased prof- to lower operating costs and provide better New England. C&S is the wholesale supplier itability for employees and the company. access to highways. The company built a to more than 1,700 locations in 12 states, and Sales over the last 16 years have increased at state-of-the-art warehouse to accommodate is a primary supplier to 27 military bases in a compound annual growth rate of 20%.

28 E NTREPRENEUR O F T HE Y EAR 2002 SERVICE

Bart Palmisano, Sr.

by Roger Morton Orthodontic Centers of Orthodontic America

Service Category Winner

TITLE: President, CEO CITY: Metairie, La. FOUNDED: 1985 WEB ADDRESS: www.ocai.com

29 SERVICE

aking the pain out of orthodontic practices is the tenet central to grades from A through F, and a grade point average. Grades are based on Bart Palmisano’s success with Orthodontic Centers of America. criteria such as increases in new patient contracts or collections. TA licensed attorney and Certified Public Accountant, The report goes to the practitioner as well as the staff, who can receive Palmisano’s idea was to create a company that would take over all incentive pay up to 10% of base pay, depending on the grade point aver- business aspects of a practice and let doctors focus their knowledge and age. Palmisano believes the staff helps drive a business but doesn’t training on what they know best: treating their patients. always understand the business aspects of their roles. “We explain what “When I was in accounting,” Palmisano says, “many of my clients were they need to do to pick grades up,” he says. “This way, all of us are doctors, as well as a variety of other health care pulling on the same end of the rope.” professionals. They could generate income, but just Orthodontic Centers of America is an unquestioned couldn’t keep very much of it.” So he teamed up with success—meeting or exceeding Wall Street’s earning long-time friend and client, Gasper Lazzara, Jr., expectations for the last 29 quarters. It had more than D.D.S. “He knew a lot of orthodontists,” explains $351 million in revenue for 2001, and for the past Palmisano. “I knew a lot about organization and five years has been among the top 5% of U.S. public business.” Their collaboration resulted in companies for earnings growth. The company has Orthodontic Centers of America (OCA). grown from 11 affiliated practices in 1989 to more OCA develops orthodontic centers and manages than 600, with 3,500 employees in 850 locations in the business functions for affiliated orthodontic 43 U.S. states and five countries, including Puerto practices, including handling money, paying bills, Rico, Mexico, Spain, and Japan. purchasing, and patient accounting and scheduling, Despite OCA’s phenomenal growth and perfor- as well as other services, such as advertising and marketing. The mance, Palmisano is not resting on his laurels. He is eager to move the retail-oriented approach provides economies of scale, convenience, company forward, envisioning huge growth potential domestically and and other incentives not possible with traditional practices, including internationally. “We have no competition, good cash flow, and a lot of an affordable payment plan with no down payment. experience,” he says. “It’s a matter of taking the company to the next As a rule, orthodontists get patient referrals from general dentists or level, and that’s what I want to see.” In fact, in November 2001 OCA other patients. Direct advertising reaches potential patients who know merged with OrthAlliance, Inc., a provider of management and con- they want the service with information on affordability and location. sulting services to more than 200 orthodontists and pediatric dentists. According to OCA statistics, in 2001 orthodontists affiliated with the Palmisano places great value on the entrepreneurial skills of individuals. company for one year averaged 569 new case starts. The 2000 national “You can’t operate international business by long distance,” says Palmisano. average per orthodontist was 219 new case starts. “You have to have good people on the ground and excellent information “I go by the theory that, like our customers, those in the health care systems to rely on to have a shot at success. The people we look at to profession are all good practitioners,” says Palmisano, “but they are handle business abroad need skills and maturity—not just a concept.” basically not business people. We’re able to give them simplified information, so they understand where they are all of the time. You can’t operate international busi- Simplicity is what they really want, a client desire I learned in my “ accounting practice.” ness by long distance. You have to have With a need to communicate with customers and maintain current data in one place, OCA relies heavily on technology. The Internet, good people on the ground and excellent with protected access, is key to OCA communications. The company information systems to rely on. … has developed proprietary systems and services, including an ” Internet-based patient scheduling and accounting software that Called on to lend advice to those who would be entrepreneurs, allows it to write checks, handle payroll and employee benefits, and Palmisano emphasizes a willingness to take risks and the need to do purchasing. And practitioners have immediate access to key per- understand the economics of a chosen business model. He speaks formance indicators such as production, revenues, and expenses. from the depth of his own experiences. “No one is able to generate information as efficiently and inexpensively “Look at the risk,” he says. “Put it on a spread sheet. Take time to put as we can,” Palmisano says. “We take the business burden off doctors by together a business plan. Be willing to eat up your savings, but don’t go telling them what they’re doing correctly and what they’re doing wrong.” into a lot of debt. Figure how to get the business to the point at which Rather than financial statements that can be cryptic and difficult to it’s generating cash flow. Grow at your own rate—it may take years. If understand, OCA distributes quarterly report cards to each practice, with you do that, then you’re going to be a success.”

30 E NTREPRENEUR O F T HE Y EAR 2002 SERVICE

RICHARD V. KEITH CENTER PARTNERS, INC. TITLE: Founder, CEO CITY: Fort Collins, Colo. FOUNDED: 1997 WEB ADDRESS: [email protected]

Within five years he had grown the business with high-level professional training and more than 1,600%, then sold it and set his state-of-the-art technology. sights on third-party call centers as the next What started with just 10 employees grew to big growth opportunity. FINALIST: Looking to escape the cold Maine 2,500 in five years and was profitable in only winters of his college days, Richard V. In 1997 Keith founded Center Partners to its second year. London-based WPP Group Keith headed to California and the first of provide companies with outsourced opera- plc bought Center Partners in 2001 and two highly successful ventures. A job with tions like customer service, technical sup- retained Keith as global CEO for worldwide a temporary employment agency allowed port, and help desks. Keith’s vision was call center enterprises. Post-merger, the new him to see the potential of the business, and bolstered by his understanding that call entity will employ about 4,000 people with in 1990, Keith moved to Colorado and center success is predicated on hiring revenues of $175 million, enabling it to pro- founded Apple One Employment Agency. well-qualified people and providing them vide seamless global customer care solutions.

ROBERT B. KNUTSON EDUCATION MANAGEMENT CORP. TITLE: Chairman, CEO CITY: Pittsburgh, Pa. FOUNDED: 1962 WEB ADDRESS: www.edumgt.com

FINALIST: Setting goals and achieving them school’s board of directors, and within a is what makes Robert Knutson tick. After year was offered an ownership position. working his way through college, he Now known as Education Management embarked on a career in investment bank- Corp. (EDMC), the single entity has grown of whom find employment within six ing, only to interrupt it to pursue his dream through the careful acquisition of smaller months of graduation. And EDMC main- to pilot a jet. Knutson served five years in schools to become one of the country’s tains an extensive database and contacts the U.S. Air Force flying jet fighters, before largest for-profit educational entities, with with potential employers to match gradu- rejoining banking, moving from financing an enrollment of 40,000 students on 40 ating students with current market needs. operations to mergers and acquisitions. primary campuses in 26 cities and revenues Knutson still isn’t finished setting goals. While working to help a client acquire the of $500.6 million for fiscal 2002. Over the next five years he plans to Art Institute of Pittsburgh, Knutson saw Knutson knows the value of focusing on increase enrollment to 80,000 and gener- the institution’s potential. He joined the customers—employers and students, 90% ate revenues in excess of $1 billion.

31 SUPPORTER OF ENTREPRENEURSHIP

William Bynum

by Danielle Dayen Enterprise Corporation of Delta Corporation the Enterprise

Supporter of Entrepreneurship Category Winner

TITLE: Chief Executive Officer CITY: Jackson, Miss. FOUNDED: 1994 WEB ADDRESS: www.ecd.org

32 E NTREPRENEUR O F T HE Y EAR 2002 SUPPORTER OF ENTREPRENEURSHIP

illiam Bynum has made a career out of providing entrepre- In addition to capital, ECD works to bring valuable development neurs with the tools and support they need to make their programs and tools into the Delta region. FastTrac, a national Wdreams come true. After graduating from college, Bynum program introduced to ECD by the Ewing Marion Kauffman decided to get some experience in the working world before going Foundation, helps entrepreneurs learn to use low-cost marketing on to law school. He took a job in his native North Carolina with an strategies, develop financing strategies, hire personnel, and manage organization that was working to promote employee ownership as an cash flow. The Delta Employment Enhancement Project (DEEP) alternative to the plant closings that were happening in the late 1980s. promotes public programs and incentives that benefit low- and mod- It was a fateful decision. erate-income workers and their employers. Delta BusinessLINC “I found that many times the people we worked facilitates mentoring, buyer-supplier, and other with—rural workers, minorities, and women—did a business relationships between large corporations good job developing business plans, but would be and smaller Delta firms. Over 1,000 entrepreneurs turned down for financing by traditional financial have benefited from these programs. institutions,” Bynum says. “So we started our own Another important area of ECD’s work is its credit union and received a lot of support from strategic investments in companies that can make socially responsible investors. Soon we had more a substantial impact in the Delta region. A recent money than employee-owned businesses, and we investment in a high-speed telecom company that started to loan money to businesses that support eco- traditionally targeted urban markets is already nomic development in underserved communities.” making a difference in a region where two-thirds of That experience was the end of Bynum’s law career the ZIP Codes don’t have an Internet service and the beginning of a lifetime of helping under- provider. “We try to leverage resources and show served, financially disadvantaged communities and what can happen if strategic investments are made in their people by promoting entrepreneurship. In 1994, while working key areas,” Bynum says. “We have to work to close the gap between for another organization doing rural development in North Carolina, this region and the rest of the country.” a friend told Bynum about Enterprise Corporation of the Delta. The company had recently secured a seed grant and was looking for “Entrepreneurs need capital, tools, and someone with Bynum’s qualifications and experience to get the organization off the ground. support systems.” In the Delta region of Arkansas, Louisiana, and Mississippi, Bynum In addition, 2001 saw the announcement of the Emerging Markets found the same sort of hardworking people in need of a little assistance Partnership, a comprehensive effort to stimulate economic develop- that he’d known in North Carolina. The challenge of developing solu- ment in the Delta supported by all three state governors and the leader- tions in one of the most economically distressed regions in the coun- ship of Fannie Mae, Entergy (the area’s electrical utility), and the W.K. try—Arkansas, Louisiana, and Mississippi consistently rank lowest Kellogg Foundation. Managed by ECD, the partnership will carry out among the states on most socioeconomic indicators and the Delta gen- development strategies targeting six primary areas: child care, enter- erally ranks at the bottom of such indicators within each state—was prise development, health care, telecommunications, workforce devel- one he couldn’t pass up. opment, and housing. ECD projects that the partnership will generate $500 million in new investments in the Delta over a five-year period. With only a conceptual design and skeleton for ECD, Bynum brought together a staff of talented individuals with private sector and banking “It’s pretty amazing what people can do when they have the tools,” experience, many of whom were Delta natives who had moved away in says Bynum. “Entrepreneurs need capital, tools, and support sys- search of better job opportunities. ECD gave them the chance to come tems. We provide those resources, and they have shown time and home and make a positive impact in their own community. time again that they can compete with companies anywhere. That’s what keeps me motivated.” Today, ECD has closed an important financial gap in the Delta region, helping to deploy capital more efficiently. “We do our business in a ECD is in the process of reshaping itself to take on a broader role in the way that is complementary to what banks do,” says Bynum. “Banks are Delta and in the three states overall. “All the things we do emanate some of our primary investors and partners, and we feel that ECD is an from ECD’s strength as a provider of development finance,” says important part of the financial continuum in the region.” Since 1995, Bynum. “As long as we continue to build from that strength, we have a ECD has closed 171 loans totaling more than $27 million, leveraged bright future. My objective is to build the premier development finan- $33 million in additional financing from other sources, and made cial institution in the country. This region needs it, deserves it, and nearly 40% of its loans to minority- and women-owned businesses. we’re blessed to have partners who help us.”

33 SUPPORTER OF ENTREPRENEURSHIP

DR. GYAN R. PARIDA SILICON ALLEY ENTREPRENEURS CLUB TITLE: Founder, President CITY: New Brunswick, N.J. FOUNDED: 1999 WEB ADDRESS: www.saeclub.com

Started in 1999 as an online discussion to swap their services for advertising and forum, Silicon Alley Entrepreneurs Club promotion through SAEC events. (SAEC) quickly grew to 250 members, This unique strategy covers more than 70% of FINALIST: As a first time entrepreneur attracting dozens of would-be CEOs to its the group’s operating expenses; the other 30% attempting to establish an Internet ven- monthly events. When the market crashed are covered by similar strategies, enabling ture, Gyan Parida found that the right in 2000, SAEC did not give up on new SAEC to continue to provide high-quality ser- advice and guidance wasn’t available at ventures or entrepreneurs. Parida vices to its members at no cost. Today SAEC any price. So he decided to start his own expanded the club’s mission and devel- has more than 4,000 members and is hoping to community of entrepreneurs to support oped a system to provide a variety of free expand to other hubs of technological innova- each other and, most importantly, provide support services to entrepreneurs of early- tion once its programs have been fully refined everything for free. stage start-ups by getting local businesses and tested in New York City.

BRIEN BIONDI YOUNG ENTREPRENEURS’ ORGANIZATION TITLE: Chief Executive Officer CITY: Alexandria, Va. FOUNDED: 1987 WEB ADDRESS: www.yeo.org

FINALIST: During the five years Brien seminars, multi-day international confer- Biondi has led the Young Entrepreneurs’ ences, and an interactive Web site. Organization, YEO has evolved from a pre- Under Biondi’s direction, YEO has dominantly North American-based group expanded into Europe, India, and the Middle But the most far-reaching and future-oriented with 1,200 members to a global organization East, launched powerful alliances with other innovations Biondi has prompted are the with more than 4,500 members in nearly 40 organizations that champion entrepreneur- unprecedented tools for communications, countries. The leading peer-to-peer global ship, and standardized and expanded key data management, and benchmarking against resource, network, and community for YEO programs, such as the forums—now other companies in similar industries young entrepreneurs, YEO offers a variety considered the number one benefit of mem- available on the organization’s interactive of training and experiences to its members, bership. In addition, Biondi understands the database, YEOnet, ensuring that its mem- including confidential member-to-member expanded role entrepreneurs play in the bers have the resources to turn their ideas forums where new ideas can be tested and world today and has incorporated social into reality. explored, local chapter meetings, focused philanthropy programs into YEO’s offerings.

34 E NTREPRENEUR O F T HE Y EAR 2002 TECHNOLOGY/COMMUNICATIONS

F. Neal Hunter

by Lindsey Siegle Cree, Inc.

Technology/Communications Category Winner

TITLE: Executive Chairman CITY: Durham, N.C. FOUNDED: 1987 WEB ADDRESS: www.cree.com

35 TECHNOLOGY/COMMUNICATIONS

hile Cree Inc. is a company that has always sought the By not buying into the hot trend, Cree looks to be coming out both a bright lights, Neal Hunter has remained hard at work short-term and long-term winner. “We really solidified our balance Wmaking sure it would be much more than a flash in the pan. sheet for what we thought at that time was maybe five to seven years,” Hunter is one of six scientists at North Carolina State University who Hunter says. “Now it looks like it’s even longer.” founded Cree in 1987, and he’s been a key leader throughout the many While other companies soon found themselves cutting staff to survive in challenges of the company’s first 15 years. the face of falling sales and mounting inventories, Hunter was leading Cree Cree was launched around the idea of developing silicon into a period of heavy investment in research and carbide as a viable alternative to other semiconductor development. “Because we did all that R&D, we’re materials for light emitting diodes (LEDs) and other light- essentially sold out of our products and we’re adding ing applications. Today it is the world leader in developing employees,” says Hunter. “That particular strategy has and manufacturing semiconductor materials and electronic worked very well for us in taking care of our people. devices made from silicon carbide. Cree LEDs have found We understand that they are a very important asset.” their way into everything from consumer and automotive The deterioration in the economy that took place electronics to traffic lights, where they are a low-power, in 2001 was a disaster for many technology com- long-life replacement for conventional light bulbs. panies, but Cree saw its fiscal 2001 revenues “It was always about being tenacious and conserving jump roughly 64%, from $108 million to more cash,” says Hunter of his business philosophy. than $177 million. The acquisition of Goleta, “Obviously, you have to fund and pick among critical Calif.-based Nitres Inc., and Ultra RF Inc., a R&D projects, but at the end of the day, if you don’t Sunnyvale, Calif., company, contributed about have the cash you aren’t going anywhere.” 25% to that growth, but both acquisitions were made at almost negli- gible cost, according to Hunter, who notes that the acquisitions were At the end of the day, if you don’t primarily done with Cree stock. “ “What our financing did for us was, when our stock valuations came down have the cash you aren’t going with the rest of the market, we then went in and bought stock back at a much lower price than we did those acquisitions for,” Hunter explains. “We essen- anywhere.” tially removed the dilution we had as a result of those stock offerings earlier.” When the market downturn hit, Cree announced plans to buy back as Bottom-line discipline was essential to Cree’s success, because, for all the many as 7 million shares of its stock, and by February of this year had promise of silicon carbide as a semiconductor, the inordinate difficulty in purchased more than 2.5 million shares at prices far below what they handling the material assured the company a difficult development were able to issue shares for not long before. process. Hunter and his colleagues persevered, however, eventually taking The downturn in the high-tech sector in 2002 did affect the bottom line the company public in 1993. Cree has since become the top producer of for Cree, but the company faired far better than most and is forecasting silicon carbide and silicon carbide products in the United States. significant growth in the coming year based on early sales reports that As has been well documented, the late 1990s were a heady time for show earnings increasing by 20 percent over the first quarter of 2001. high-tech companies, and Hunter acknowledges it was difficult not to While it started with light, Cree was never blind to the other advan- stray from his core philosophy in a time of easy money. Many CEOs, tages silicon carbide possesses as a semiconductor. Ultra RF, now particularly of new start-ups, thought that the ready supply of cash known as Cree Microwave, has helped the company exploit silicon would always be there. Others took the opportunity to cash out and let carbide’s natural advantages for a variety of wide-bandwidth radio someone else worry about developing the business they started. communications and cellular infrastructure applications. Compared Hunter did neither. He took the boom—in hindsight a bubble—not as an with other semiconductors, such as silicon and gallium arsenide, opportunity that wouldn’t go away, or as a chance to feather his own nest, silicon carbide has higher thermal conductivity and can operate at but as a unique circumstance to position the company for the future. higher voltages and with higher power density. “We did a [secondary stock] offering in January of 2000 right at nearly Cree has even found a market for its silicon carbide products outside of $300 million,” Hunter explains. “We did that to the exclusion of being high-tech applications providing raw bulk crystals that are cut and mar- able to trade. Obviously we had to sign lock-up agreements during that keted as moissanite, an artificial diamond. “It allows us to get better deal so at the time when our stock price was highest all the directors economies of scale in our crystal growth operations,” Hunter says. “It’s and officers locked themselves out of being able to trade for a six- another great application for our product. We’re always churning ideas on month period and did what was right for the company.” how can we get silicon carbide out there in larger volume applications.”

36 E NTREPRENEUR O F T HE Y EAR 2002 TECHNOLOGY/COMMUNICATIONS

VICTOR TSAO LINKSYS TITLE: President, CEO CITY: Irvine, Calif. FOUNDED: 1988 WEB ADDRESS:www.linksys.com

direct mail and catalogs from a tiny suite partners’ locations. The Linksys staff taught in Irvine’s business district. Within two personnel at CompUSA, Office Depot, years Linksys products were on the Staples, Best Buy, and Office Max stores shelves of major retailers. how to set up home and office networks. FINALIST: For Victor Tsao, doing business is all about sharing. He built Linksys with But Linksys was competing with some very The relationship it built with retailers allowed the vision of enabling people to more big players. Instead of going head-to-head Linksys to become a recognized brand name easily communicate, create, and share with them, Tsao targeted the then-tiny retail in network products. Since 1996, Linksys has ideas and knowledge. Six months after market. And that’s where sharing really paid been the No. 1 retail chain supplier of com- Tsao and his wife, Janie, launched off for Tsao. He treated retailers as partners, puter peripheral and networking products, Linksys in their garage, they were selling not customers, and sent his entire sales team and growth is now rapidly spreading through networking systems and print servers via of five to each and every one of his retail other distribution channels as well.

SHAULA YEMINI SYSTEM MANAGEMENT ARTS (SMARTS) TITLE: Founder, President CITY: White Plains, N.Y. FOUNDED: 1993 WEB ADDRESS:www.smarts.com

FINALIST: When it comes to identifying Yemini launched her company, with support and correcting network problems, more from her brother, without sales or marketing and more companies are turning to a experience and the knowledge that the first SMARTS solution. SMARTS is System sale was nowhere in sight. It took four and a two years, SMARTS has experienced Management Arts, founded by Shaula half years, during which she ran through tremendous growth. Sales increased more Yemini. Through her work in IBM’s $6 million in investments, to bring a product than 75% from 1999 to 2000 and nearly distributed systems software technology to market, but when she did, Yemini was able 100% the following year. Today SMARTS department, Yemini envisioned the emer- to create a sizable revenue stream that allowed develops, sells, and supports a full suite of gence of true distributed systems and her to obtain the necessary additional funding infrastructure management solutions that understood that proper management and for the company’s growth. are relied upon by hundreds of industry- maintenance of such systems would be While most technology companies have leading companies, including many of the integral to their success. been happy to maintain sales over the last Fortune 1000.

37 E RNST & YOUNG LLP www.ey.com

© 2002 Ernst & Young LLP. All Rights Reserved. Ernst & Young is a registered trademark. SCORE No. GG0209

SCORE Retrieval File No. XX0000