by Ed Stack
I read that and felt a chill go up my spine. It was exactly what Gramp would say. I found myself thinking: Gramp is trying to tell me something. I took the letter down to our head of marketing and told him, “Let’s find a way to make this happen.”
We’ve sponsored the Dick’s Open for thirteen years now. The tournament has raised millions of dollars for Broome County charities. When I attend the tournament—which is held on a course where Gramp and I often played—I always make it a point to thank the army of volunteers who make it possible, and many respond with some variation on, “Are you kidding? I take my vacation to do this every year. I wouldn’t miss it.” Some of those volunteers have been out there working the tournament for a quarter century, dating way back to the B.C. Open days.
It’s clearly important to my hometown. I feel good that we do it. But the fact is that the credit doesn’t belong to me. It was all Gramp’s doing.
CHAPTER 10 “DID YOU EVER THINK ABOUT CHANGING THE NAME?”
From time to time in those first years of growth we’d hear from venture capitalists who wanted to invest in the company. We weren’t interested. We didn’t need their help. We were doing just fine on our own; we could plan and finance our growth ourselves and didn’t want anyone looking over our shoulders. We were feeling pretty confident.
But over time, as they kept calling, we came to see that if we wanted to grow faster, we could use the extra equity and the stronger balance sheet they’d bring. I thought we’d benefit from their real-world experience with other, bigger retailers, too. We had a few stores turning a nice profit, but we were still, with the exception of Bill Colombo, the same green kids who’d started together in Binghamton. With the know-how of more worldly partners, we could accelerate our plans for growing Dick’s and defend ourselves against a bigger player moving in to swallow us up.
The investors who came calling were interested in the flip side of the relationship. Venture capitalists invest in a company to make money, of course, and they do it by helping that company grow, in the process becoming more valuable—in which case the value of their stake balloons with the business. They typically seek a fairly short-term partnership. After securing a nice return for their own investors, they’ll either cash out or help take the company public, which carries the prospect of further boosting the value of their shares.
So if we accepted outside investors, theoretically both sides stood to benefit. And to tell you the truth, I was also coming to believe that an infusion of new voices in the company could only help the Stack family, because we weren’t getting along particularly well. My siblings were unhappy that I was in charge. My dad was ticked off at the pace of our expansion and doing his best to rile up my brothers and sisters.
Things came to a head when we experienced a short-term cash crunch and I clamped down on any buying until it passed. I told our buyers that I would have to sign off on every purchase order. My brother Marty had worked as an assistant manager in Syracuse and was now a buyer for the company. He wasn’t happy about having to report to anyone, especially me, and forged my signature to a number of purchase orders. I asked him to leave the company. When my dad heard the news, he stopped talking to me for more than a year.
The upshot is that in 1991 we were more receptive to the idea of outside investors than we’d been in the past, and one day I got a call from Michael Barach, of Bessemer Venture Partners. He asked if he could talk to me about investing in Dick’s. I said that I’d be happy to listen.
We had dinner. Some people in life you feel good about instantly, and Barach and I hit it off. He was a few years younger than me, intense and a little awkward, and a very smart guy: he’d gone to Amherst, where he’d graduated summa cum laude with a history degree, and had a joint law degree and MBA from Harvard. His dad had run U.S. Shoe Corporation, and Barach had himself worked in retail for six years; he’d both succeeded and failed at it, so he understood the opportunities and pitfalls.
We talked about what kind of investment he’d want to make. We didn’t want to take quite as much money as he wanted to put in, but he spoke with my siblings and a couple of them sold some stock. He came aboard as a venture partner for about 10 percent of the company.
This was in the summer. Barach broached the idea of bringing in a couple of other venture groups, as well, and introduced me to Jerry Gallagher from Oak Investment Partners. Gallagher had worked in retail for two decades, including ten years at Dayton-Hudson, better known today as Target. He was a lanky navy submarine veteran about thirteen years older than me, and he’d already invested in, and helped grow, Office Depot and PetSmart, among other companies.
Barach also introduced me to Janet Hickey, of the Sprout Group, the venture capitalist firm of Donaldson, Lufkin & Jenrette of New York. We did a walk-through of our store in Buffalo. At the time, the Sports Authority was a rising power among sporting goods retailers, the darling of Wall Street, and as we toured the store Hickey asked, “Do you do everyday low prices, or are you promotional?”
“Promotional,” I answered.
“I don’t know if that will work,” she said. “Sports Authority does everyday low prices.”
We walked around a bit more and she asked, “Do you use central distribution or do you drop-ship to your stores?”
“We use central distribution,” I told her.
“I don’t think that works,” she said. “The Sports Authority drop-ships to its stores.”
As we walked on, she ticked off a number of other facets of our operation that she didn’t like, all the while comparing us with the Sports Authority. No problem, I thought. She won’t invest. So what? I liked how we compared with the Sports Authority, which ran warehouse-format stores and carried lower-end products.
Both Gallagher and Hickey decided not to jump into an investment until they saw how we did during the holidays. Venture capitalists have a reputation as risk takers, but they’re really pretty risk-averse. They do a lot of research to guarantee themselves the highest chance of success. Fortunately, business late that year was terrific, and Gallagher, now very close to investing, came to see me in the course of doing his due diligence. He was a Princeton grad and a bit of a blue blood, and I found him a little pompous. Really smart, too, which I liked.
We went to dinner at the Vestal Steakhouse and afterward went to our new store up the street. In place of our old 7,500-square-foot operation, expanded from that tiny, 2,800-square-foot store my dad bought in 1971, we now had a 50,000-square-foot prototype for all the new Dick’s stores we’d be building over the next couple of years.
Like its predecessors, this new Dick’s was set up as an assortment of specialty shops under one roof, each with staff grounded in that department’s sport and merchandise. It was a cold winter’s night, and as we got out of the car the sign over our door glowed ten feet high: Dick’s Sporting Goods. Jerry looked at the sign, then over at me. “Did you ever think about changing the name?”
I knew immediately what he was getting at—we’d heard it all before—but I decided to make him spell it out. “No, Jerry. I never did.”
“Well, I was talking to my assistant,” he said, “and she asked me, ‘Did they ever think about changing the name?’ ”
I waited for him to go on. He did: “I talked to my wife, and she thought the same thing.”
“Jerry, I don’t understand,” I replied. “I mean, it’s Dick’s Sporting Goods. That’s what we are—we’re a sporting goods retailer.” I was starting to enjoy watching him squirm.
“Well,” he said, “maybe Dick’s isn’t the best name.”
He looked uncomfortable, as if he was worried he might have to explain what dick means. I let him wonder. I kept my mouth shut. “I mean, you know, Dick’s,” he said. “Like, guys’ anatomy.”
I looked over at him. “Jerry, that is what my grandmother named my father,” I said, my tone indignant. “My grandmother was one of the sweetest and nicest people I ever met. My father started this business. The name of t
he company is Dick’s Sporting Goods.”
The subject did not come up again.
* * *
I was eager to have Jerry Gallagher as an investor. He impressed me. I’d done my research, and everything I’d heard about him had been glowing. I wasn’t nearly so excited by the idea of having Janet Hickey aboard, and I said so to Barach and Gallagher, both. Barach said he didn’t care one way or another, but Gallagher insisted that she had to be part of the deal. “I want her in,” he told me. “I’m not saying I won’t invest if she isn’t part of this, but I might have to revisit whether I want to invest.” When I asked why, he explained: “I really want some people with some dry powder around the table, in case we get into trouble.”
At the time, I didn’t think we’d be getting into trouble and didn’t see what would be so great about having the Sprout Group at the table, dry powder or no. But he was persuasive, so I decided I’d try again to build a bridge with Janet. She made arrangements to fly into Binghamton, and I picked her up at the airport.
I am not a good poker player when it comes to people I don’t care for—they pick up on it fast. The fact is, I didn’t like Janet. She seemed arrogant to me. She clearly loved the Sports Authority and didn’t think much of what we were doing. I wondered why she was even interested in us at all. So it wasn’t surprising when, as we walked out of the Binghamton airport, she asked: “You don’t like me very much, do you?”
I was straight with her: “No, Janet, I really don’t.” After a long moment of awkward silence I asked, “Do you still want to go to the store?”
“Yes,” she said.
Our afternoon spent talking about the business did nothing to change my feelings about allowing Sprout into the deal. It would not have broken my heart if Hickey had decided to pass.
It turned out that both Gallagher and Hickey bought in. Altogether, the venture capitalists invested about $6 million. Everyone was happy, maybe my siblings more than anyone—they got a chunk of the incoming money by selling some of their shares. Selling stock wasn’t an option for me. I didn’t want to give up any shares, anyway, though I could have used the money: eight years after taking control, I was going to work in the family business every day but had no money in the bank. But our new friends wanted to keep me hungry. They had no use for a complacent CEO.
The most immediate change their arrival brought to Dick’s might have been the professionalization of our board. Until now, I’d been guided by the advisory group I put together in 1984. The venture capitalists wanted a board of big-box-retail executives, an experienced group who’d done what we were hoping to do. Of the board’s seven seats, our partners would fill two and I’d have five—and I’d have the power to remove and replace any one of my designees whenever I wanted.
Barach and Gallagher themselves took their two places on the panel. Jerry quickly grew into the role of lead director, years before that term became commonplace. He was the liaison between the venture group and me. He said to me once, “You need to understand that not all venture capital money is the same shade of green.” By that he meant that some investors will introduce you to others who can help you and take a real hand in getting you through tough times. That’s the kind of director Jerry Gallagher was. He was in it for more than just a check. The color of his money was definitely different from that of the other early investors.
To my board seats, I named Sam Parker, the CEO of PetSmart, and Dave Fuente, CEO of Office Depot, both of whom had worked with Gallagher in the past; I’d met both and liked them, especially Fuente. I also named Walter Rossi, who’d been vice chairman of the apparel giant Phillips–Van Heusen and CEO of Mervyn’s, a California-based department store chain. Larry Schorr, our Binghamton attorney, who’d helped get us through every major transaction thus far, including helping to broker this venture capital buy-in, was the only old face that remained from our original board, besides mine.
I remember how promising the whole arrangement seemed, with these experienced hands now guiding us. I felt that we were bound for glory. And in fact, the new board turned out to be a great help to Dick’s. But I wonder whether, had I known then what I know now, I’d have welcomed our new venture partners into our lives.
It’s a tough call, in the case of some of them. They unquestionably made us a tougher, more capable, smarter company. But that came at a steep price. I was to lose a lot of sleep in the years ahead.
* * *
It was at the same time they came aboard, in 1992—eight years after my dad left the company—that we started talking about moving Dick’s out of the Southern Tier. One of the reasons it came up was that Denise and I wanted to get out of Binghamton. Aside from the time I’d spent at St. John Fisher, I’d lived there my entire life, and I was ready for a change. Denise couldn’t wait to leave. And I’d made that promise to her years before, that someday we’d live in a big city.
Our marriage had seen plenty of challenges since. From the outside, little hinted that all wasn’t right. We’d had four children—Brian, a year after Michael; Katie, three years after Brian; and Maggie, a year after Katie. The kids were beautiful, smart, and healthy. Both Denise and I loved being parents and threw ourselves into the roles. She and I were each other’s best friend. Even so, we were drifting apart.
Still, I was true to my word, and it was time to get out of town. There was a strategic argument for a move, too. We had a hard time attracting talent to Binghamton, the kind of top talent we’d need to further grow the business. We had a few recruits in to talk with us, and they tended to love Dick’s but balk at moving to our humble little city. On one occasion, we were trying to recruit a chief financial officer, and a guy from Frank’s Nursery came in to discuss the job. We liked him a lot. He liked us. It seemed that we were about to make an important hire.
We were so close that he made another trip into town with his wife and daughter. We had them over to the house for a little social hour with Bill and Sheila Colombo. Afterward, his daughter stayed with our kids and we all went out to dinner and had a wonderful time. They seemed excited to come to Binghamton. Then the sun came up. They went out looking at houses and the shopping in town, and his wife announced that she wouldn’t move to Binghamton. He told me he couldn’t take the job. “Is there any reasonable salary and equity that I can offer you,” I asked, “that would make you change your mind?”
“There’s not,” he said. “My wife said that if I wanted the job, I could go to Binghamton, but that she and my daughter wouldn’t be coming.”
It was an aha moment. All doubt had been removed: we had to look for a new home. Boston was our first choice. Denise had gone to Boston College and had grown up in western Massachusetts, and I’d come to love the place. But a survey of real estate prices nixed the idea—we couldn’t find a place to put the company, and housing would be beyond the reach of the staff we wanted to bring with us. Raising all those salaries so that our folks could replicate the homes they’d had in Binghamton was too big a hit. We just couldn’t do it.
We looked at Hartford. Denise and I even found a house there that we absolutely loved. We couldn’t find reasonably priced office space for the company, though, which forced us to move on. We thought seriously about Philadelphia, but in the midst of our explorations there, the evening news ran a story declaring Philly to be the murder capital of the United States. We had small children, and Denise laid down the law: “We are not going to Philadelphia.”
Pittsburgh had been on our radar screen, too. After we opened the Erie store, we eyed Pittsburgh as the first big city we’d move into, and in the course of researching the market we saw that it had a lot to offer. It was in the geographic center of the area we thought we’d be expanding into next, with avid hunting and fishing populations, great sports traditions, lots of kids. It had a terrific airport, built as the central hub for USAir, which would make it easy for us to get out to see our vendors and easy for them to come to us. Its cost of living seemed a bargain compared to Boston. Not least,
it had a Midwest feel to it. People there were warm and friendly.
Pittsburgh had something else going for it, too: the change of seasons. It was well south of Binghamton, but it shared similar weather, which in our business made it familiar territory. A close friend who handled our Nike account, Ed Haberle, pushed Pittsburgh relentlessly. He’d grown up there, and no one loved the city more—given the choice, Habes would have rather been mayor of “the Burgh” than CEO of Nike. If a story about Pittsburgh appeared in the paper, he’d clip it and send it to me. Eventually, he showed us around, then sealed the deal with a dinner up on Mount Washington, overlooking the city.
So early in 1994 we decided on Pittsburgh and started packing up our headquarters. We had fifty-one people working in the office in Conklin and invited all of them to make the move. One was Tommy McCauliff, who was part of our store operations group. He was pretty typical of the Dick’s team at the time—he’d grown up near Fairview Park and had spent his whole life on the East Side of Binghamton. He’d also just married, and both he and his wife were worried about leaving town. “Tommy,” I said, “why don’t you and Mary go to Pittsburgh for the weekend? We’ll pay for it. Go there, look around, and let me know what you think. We’d really love for you to join us.”
We hadn’t yet inked an office lease or committed ourselves publicly. The following Monday I saw Tommy in the office. “How did you like Pittsburgh?” I asked him.
“We loved it,” he said. “I bought a house.”
Pittsburgh had that kind of effect. Ultimately, forty-nine of our fifty-one office folks agreed to make the move, which excited all of us. We’d have a familiar team to join our exploration of this strange, new place and friends with whom to share our discoveries. The two folks who didn’t want to move would remain at our distribution center, which stayed put in Conklin.
