AND 1 Scores Big

Left to Right: Ray Moseley, Jay Coen Gilbert, Tom Austin, a cardboard Larry Johnson, Bart Houlahan, Guy Harkless and Seth Berger (holding a ball)

“One reason our product sells so successfully is because we are not only close to our customers, we are our customers,” says Seth Berger, WG’93, who is one of those entrepreneurs fortunate enough to be able to combine his passion with his business.

The passion is basketball, which he played at Penn as an undergraduate and still plays three days a week and on Saturdays. The business is AND 1, a basketball apparel company that racked up sales of $6 million in 1995 and projects $10 million in 1996.

The company’s “trash” line of clothing — tee shirts, sweatshirts, shorts and hats, as well as off-the-court casual wear — is adorned with a company logo known as “The Player.” Explains Berger: “He’s the raceless, faceless embodiment of every basketball player. He’s big, strong, fast, and has a mouth to go along with his game.”

AND 1’s products are in national retail outlets across the country, including Foot Locker, Champs and Foot Action, as well as regional outlets and small independents. Penn’s basketball team converted to AND 1 in February. And Berger expects that within a year or two the company will be marketing “The Player” in video games, comic books, cartoons and toys.

The idea for AND 1 — a name that refers to a player who has made a basket and also gets one free throw because he has been fouled — came from Berger, childhood friend Jay Gilbert and Tom Austin, W’93, whom Berger met on the basketball court at Penn. The group spent an initial $30,000 to support themselves while they researched the market and then raised an additional $50,000 from friends and family to finance inventory.

“The most exciting part about our company is that we are learning as we go along,” says Berger. “When we started, none of us had any retail or business experience. We have grown the company by bringing in very bright people who have backgrounds that are in some way applicable to what we are doing. But we haven’t brought in anyone from industry.”

It’s an interesting strategy that seems to be working. AND 1, based in Wynnewood, Pa., has 12 full-time people and 30 sales reps around the country. Pro basketball players have worn AND 1 apparel on national TV, and the company has signed Larry Johnson of the Charlotte Hornets, to an endorsement contract. AND 1 ads have appeared in national magazines like Sports Illustrated, Slam and The Source, and on cable T.V.

“We have invested a lot in advertising and promotion and we hired six new people in the last six months,” says Berger. “My feeling is the brands that survive are the ones that emphasize marketing.” The company also has donated a minimum of five percent of its profits every year to educational and sports organizations.

Berger grew up in New York City and spent two years between college and graduate school in Washington D.C. as a legislative director for Harold Ford, Democrat from Tennessee. Moseley worked in investment banking at Smith Barney in California for three years before joining AND 1 a year ago.

Right now, “the hardest part about running AND 1 is managing its growth,” says Berger, who is getting married in June to Christelle Williams, W’89, a Reebok marketing rep. “We have to keep bringing smart people into the company, but also making sure that as a unit we work together. Finance has to know what marketing is doing and what sales is doing. There are a lot of days when you turn your head and say, ‘Wait a minute. When did that happen?’”

Does he worry that AND 1 apparel will eventually lose its appeal in today’s fickle marketplace? “Companies are hot and then they’re not. I know that,” Berger says. “So you’ve got to make sure that you are set up to survive those tough times because they do occur. We are a basketball company and basketball is the most popular sport in the country. As long as we understand our consumer, we’ll be successful.”

PIX Links Brokers to Buyers

The inspiration for starting Property Information Exchange (PIX), Inc., says founder Philip Wharton, “was seeing the inefficiency in the investment property market. I was working at the time for The Yarmouth Group, which invests pension funds in real estate. Here was one example of a firm that had been out of the market, raised some new capital and wanted to change its investment strategy. It seemed that it should be easier and more efficient for someone with capital to find properties. I couldn’t figure out why that service didn’t exist.”

Wharton (left) and Rossi

Now it does. Wharton, along with a former colleague at Yarmouth, started Property Information Exchange, Inc. (PIX) in February 1994. The company tracks the investment interests of hundreds of buyers nationally and internationally and connects them with investment properties listed for sale that match their criteria. PIX helps listing brokers present properties to buyers in the market and helps to screen properties for those buyers.

In lay terms, says Fred Rossi, one of the regional partners in PIX, “we are a dating service for investment grade properties. We match the property with the buyers and we charge a fee for the service as opposed to a commission, as a broker would. In addition, our investor clients pay an annual fee to access our information.”

It works this way: “A Boston investor who is already on our system and who had received our monthly summary report of assets for sale called me recently and said he had just gotten a $60 million equity allocation for buying triple-net leased properties with a tenant credit rating of triple B or less,” says Rossi. “Traditionally he has been a multifamily investor. So we changed his criteria and he can now access a different part of our database. A lot of brokers know about this investor but don’t know he has these new funds to invest.”

PIX has doubled in size during the last year, with more than 500 investor clients (20 percent of those international), listings for approximately 350 properties worth more than $2 billion, and hundreds of brokers who use PIX listings (for which they pay a marketing fee) to supplement their own information. Headquarters is in Manhattan, with regional offices in Boston, Miami (covering Latin America), Dallas, Chicago, Portland (Oregon) and London, and a joint venture in Buenos Aires. Mary Bechler, WG’89, works for the company as a marketing consultant.

Buyers are required to have a minimum of $10 million of capital available for real estate, or have closed a $1 million property. Most of the properties listed are in the range of $5 to $50 million.

The company is expanding on several fronts and recently initiated discussions with potential investors to help fund that growth. “We have become a distribution network for the investment business,” says Wharton. “That means that clients are asking us to add on different products and services, including mortgages notes, corporate leaseback properties and so forth. Our challenge now is to prioritize these opportunities and not dilute our efforts.”

PIX also has a website on the Internet. “We are encouraging investors, who generally aren’t computer oriented, to access our information there,” says Wharton. “The whole Internet phenomenon has been very good for small independent firms like us. It gives us a presence inexpensively and it’s a way to send information around the world.”

Starting PIX, he adds, “has been a roller coaster. You either like that or you don’t. For the past two years I have been using every resource, trying to tap into every skill I’ve ever learned, calling everybody I’ve ever met. We’re firing on all fronts.”

It’s Prime Time for AGC China

After he graduated from Yale in 1986, Drew Nuland taught English to medical students in China’s Hunan Province. At Wharton’s Joseph H. Lauder Institute of Management and International Studies, he specialized in East Asian studies and Chinese. From 1992 to 1994, he was manager of new product development for the Shanghai office of Bristol-Myers Squibb.

Today he and a partner are starting up a broad-based entertainment initiative in Beijing that will focus on national syndication of TV shows, artist management, musical recordings and media brokerage.

The new business is called Avant-Garde Communications China, (AGC China) and it will include, in addition to the entertainment company in Beijing, a production company in Shanghai. It will be structured as a subsidiary of the family-owned Avant-Garde Communications Group (AGCG) in Los Angeles, whose chairman is Nuland’s partner in AGC China.

AGCG already has a joint venture in Shanghai called SOSA TV, which currently offers a top-rated prime time weekly variety show called “Pacific Abroad” and a daily music magazine program on cable television in Shanghai.

Nuland’s new venture will use the SOSA TV production team to start producing its own shows in Mandarin, to be aired towards the end of this year.

The idea of an entertainment company in China may sound risky to some, but Nuland, who grew up in Hamden, Conn., is optimistic. “We have learned over the past year how to be very careful,” he says. “We stay away from subjects we know the government does not want broadcast, like any discussion of government relations, politics, military issues or conflicts between China and other countries. That is why we have developed entertainment-oriented shows.”

Even that area isn’t completely predictable, Nuland acknowledges. “China recently restricted the right to show two American singers – Madonna and Michael Jackson – on Chinese TV. Before we heard about the restriction, we included a Madonna video in one of our music magazine episodes. Within four minutes of its airing, we got calls from the government, the television station and some of our Chinese partners.”

Those partners, he adds, are crucial to doing business in China. “You need very strong, very reliable long-term insiders who work with you,” says Nuland, who speaks Mandarin and understands Shanghainese. “I couldn’t do this on my own. Deals and contracts in CHina are based more on relationships, trust and good faith than on any legal ties.”

Funding for the new venture comes from two sources: One is the parent company, AGCG, which has been subsidizing most of the development costs for SOSA TV.

The other source is venture capital targeted to specific projects. “We recently got venture money for a show we will launch on national TV in July called ‘Chinese Legacies,’ a series of 104 documentaries on great figures in the overseas Chinese community.”

Nuland is part of another entrepreneurial venture as well – a rural development project that involves agricultural juice processing using China’s huge fruit crops.

The idea originated in an independent study project Nuland did with a Chinese professor at Wharton. “Distribution systems are so bad in fruit-producing parts of China that a huge part of every crop rots on the ground,” says Nuland. “I spent a semester putting together a strategic plan for sourcing, manufacturing and marketing frozen concentrate in China.

“The later, when I was working at Bristol Myers, by some great stroke of luck, Michael Guss [W’81] sent a fax out of the blue and asked if I knew anyone who was knowledgeable about juice processing in China. I faxed him back: Dear Mike. I think your search is over.’” Since then, Nuland has joined forces with Guss’s business, Centergy Food Products, Ltd., a Hong Kong trading company that is expanding into sourcing and manufacturing.

“Production on our first juice blending plant, located in Shenzhen, will be underway by November,” says Nuland. “A second plant will develop lemon products in Sichuan, a province in central China, by the end of 1997. The company’s objective is to provide world quality orange and lemon products that can be sold either in China or abroad.

“Through my entertainment company, and also through the development of juice blending plants,” says Nuland, “I hope to give the Chinese population a window on the rest of the world.”