Sports Business: Investments
L.T. JUST MIGHT SACK HIS SKEPTICS
Even before he hung up his cleats a year ago, Lawrence Taylor wanted to be more than a football legend. He wanted to be an entrepreneur. So the New York Giants linebacker formed All-Pro Products Inc. out of his New Jersey home in 1992. Its first game plan: to brew up a sports drink with big-city attitude, something Hoop Dreams-ters could chug in the playground after a hot three-on-three. But the Gatorade wannabe, dubbed Metro-Pro, fizzled fast.
With PepsiCo, Coca-Cola Co., and other beverage behemoths pouring megabucks into their own new sports swigs, Taylor and his team soon knew Metro-Pro didn't have a prayer. "Creating a niche for [Metro-Pro] would have taken more time and more money than we had," says All-Pro President and Chief Operating Officer Michael Stone, 54, a former management consultant and onetime COO of New Generation Foods Inc., a snackmaker in Oglesby, Ill. All-Pro lost more than $500,000 on the drink before bagging Metro-Pro in 1993.
EASY SELL. Then, Taylor met Arden Strasser, 32, a University of Rochester-trained optics whiz and top engineer at Virtual Reality Inc., a Pleasantville (N.Y.) technology company in need of funding. L.T. decided to stake his company's future on an unpaved lane of the I-way, paying $350,000 plus royalties for a license to use VRI's technology to make a game system. Needing more dough than he was willing to cough up himself, Taylor took All-Pro public in November, 1993, raising $4.5 million in an initial public offering. Speculators gobbled up 1 million shares overnight in what looked like little more than a gamble on L.T.'s name and the buzz of virtual reality. Offered at 5, the NASDAQ-listed stock quickly soared to 141/4-- though All-Pro had no earnings, no product, and a retired football star at the helm. And it never crashed. On Jan. 17, the stock was trading at 95/8, giving All-Pro a market value of $24.2 million.
Now, after more than two years and $2 million in development costs, the All-Pro team believes its just unveiled 7th Sense system will justify shareholders' faith. Retailing for less than $400, it will hit stores in the Northeast on May 1 and those in the rest of the U.S. in time for Christmas. "Everybody thought we were some kind of scam," concedes Taylor, All-Pro's chairman, CEO, and, with a 40% stake, No.1 shareholder. But, he predicts, "we're going to be a major player" in virtual-reality games.
Designed to be hooked up to an IBM-compatible PC, the 7th Sense system is contained in a lightweight plastic headset that works with a number of games, including--natch--football. Using 7th Sense with a flight-simulator game allows players to "see" out the left side of the plane when they turn their heads left, see the tail of the plane when they look over their shoulder, and see clouds when they look up.
At the time of the IPO, All-Pro appeared less like a public corporation than an extension of Taylor's ego. Managed out of a spare room in his Upper Saddle River (N.J.) home, it had just one full-time employee. Its board included two other former pro football players, Paul Davis and George Martin, who has since resigned. Now headquartered in Tarrytown, N.Y., All-Pro employs 20 people and recently added a former Sega Enterprises Ltd. executive, engineer Mark Williams, to its board. In August, it gobbled up New York-based Containair Systems Corp., a cardboard-box company, for $700,000 in cash. The subsidiary is expected to generate about $2.5 million in sales in fiscal 1995, providing much needed cash flow for All-Pro.
BLITZ-WARY. By going after the 36 million at-home PC users instead of creating a TV-based or stand-alone system, All-Pro avoids banging heads with home-entertainment giants such as Nintendo and Sega--for a while. Stone knows those two heavyweights can't be far behind. "I figure we have a window of maybe 18 to 24 months," he says. This year, All-Pro expects to ship at least 50,000 units to such retailers as CompUSA, J&R Computer World, and Nobody Beats the Wiz.
Should 7th Sense flop, skeptics who derided All-Pro's 1993 offering as yet another example of IPO fever will probably be crowing. And while Taylor insists that he would go forward and find another product, All-Pro's ability to raise money would be diminished. But if 7th Sense becomes something more than a virtual success, L.T.'s post-NFL earnings could make the millions he got slamming heads to the turf seem like chump change.By Keith Dunnavant in Tarrytown, N.Y., and Carl Desens in New York