Company is taking a run at the market
By Jeff CaplanStar-Telegram Staff Writer EL PASO -
This is one far-out place to find Dan Norton. This is the man who constructed Carl Lewis' shoes at Nike. Helped develop the HydroFlow system at Brooks. Worked at Asics and led adidas' advanced concepts team in Germany."Carl said something to me once: 'You design me a long-jump shoe that will help me jump higher, I can jump longer,' " Norton said. "I designed a shoe that he broke the indoor world record in the first time he used it. And now every shoe company in the world uses that."
For decades, a handful of established powers have dominated the running shoe industry, and Norton has long been a home-run hitter. But for Norton to be out here, in the northern Chihuahuan Desert on the edge of West Texas, well, he seemingly might as well be on Mars.
Yet, Norton chose this hitching post. He bought a house here, moved his wife and kids here, four hours away from just about anywhere. And he is busier than ever. Prototypes, drawings, concepts and all brands and styles of shoes crowd his desk in his square office inside the modest headquarters of a spunky startup called Spira Footwear. This evolving, 20-person company believes that it is, honest to goodness, on the cusp of rocking the running shoe world.
"This will probably be the year we quit being called a startup company," said Norton, Spira's vice president of product development. "This year they will see we're a player."
The next great running shoe company might well emerge from this border city of a more than a half-million people. The founders are Andy and David Krafsur, brothers who were raised in a Detroit suburb. They are building a brand based on their patented cushioning system that reduces a runner's energy loss through compact, metal wave springs embedded in the soles.
David, 40, an aerospace engineer and former All-America distance runner at Tennessee, almost accidentally forged the spring technology when he and colleague Francis LeVert were fiddling around after hours with ideas for a more shock-absorbent treadmill.
A trade publication at their small, high-tech company in Knoxville, Tenn., caught David's attention. A photograph showed a regular spring next to a wave spring. The caption noted that the wave spring could achieve the same deflection and force in one-third the space. Perhaps, David reasoned, the wave spring could provide the cushion feel, not as the inner workings of a treadmill, but rather inside running shoes.
He bought a pair of Reebok sneakers, slit the soles lengthwise as if filleting a fish, and inserted wave springs in the forefoot and the heel and sealed it with duct tape. On Jan. 1, 1999, David took the modified Reeboks for a test spin.
"My eyes popped out," he said. "This crazy idea works."
He mailed the shoes to his brother Andy, 43, a successful lawyer for 17 years in El Paso, where he started his own firm. Andy, who still holds the 1,500-meter record at tiny Albion (Mich.) College, slipped the shoes on and hit the basketball court in his back yard.
"Everything changed after we got that shoe," said Andy's wife, Holly Fields Krafsur.
Emboldened by David's WaveSpring design and Andy's clout and credibility in El Paso, the Krafsur brothers set out on a course they never dreamed, taking on the running shoe elite. No startup has sustained itself in that market since Nike struggled to its feet in the 1970s.
"I believe that we are fundamentally going to revolutionize the whole footwear industry," said Andy, Spira's president/CEO. "This is the metal ski and the aluminum baseball bat and the metal tennis racket and the metal driver all rolled into one and multiplied by a million, because it's a product that appeals to every single person on the planet."
Norton, who's seen it all from Air to Gel, moved to El Paso in July 2004. He is one of three superstar hires since June 2003 who have elevated Spira's stature. First was CFO Russell Gibson, a native of El Paso who had served as chief financial officer for several major corporations, most recently Helen of Troy. In July, Jim Jesserer left Skechers to become Spira's vice president of sales. He is based in Winston-Salem, N.C.
All three joined Spira at startup salaries and for a stake in the company.
"The springs offered something that was really the first true innovation that I saw in over 20 years, since basically Nike Air," Norton said. Jesserer, who's also been vice president of sales at Timberland, said: "I'm here to become a multimillionaire."
El Paso's investment
Increased prebookings project Spira's fourth-year sales between $8 million and $10 million, which would double last year's total and make 2005 the company's first profitable year. Spira's line of running and walking shoes are available in 500 stores nationwide, including 32 cities in Texas. Four years ago, Spira began in one El Paso store.
Managing its growth will be essential in the critical years ahead: Will Spira continue to reinvest cash flow into company needs such as marketing and promotion? Will it resist its desire to produce basketball and casual lines until its flagship running shoes grow legs? The greatest risk is expanding too quickly, which would, for instance, burn cash flow on increased salaries or untimely projects.
El Paso is rooting for the home team. Of 250 investors who enabled the company to launch, 200 are El Paso-area residents with some connection to Andy Krafsur and his family. "I made a joke to Andy that I can't wait to see his new executive offices with the 64,000-square-foot gym for his employees," said Richard Dayoub, president of El Paso's Chamber of Commerce and a Spira investor. "But if you think forward five, six, eight years from now, and this has grown to the point they want it to be, what will it mean to our economy? Hundreds, maybe thousands of jobs, good-paying jobs that add to your economic base."
Andy Krafsur moved to El Paso in 1985 to take an internship after law school at Wake Forest. He then met his wife Holly, an El Paso native who handles Spira's marketing and public relations. They have three children, age 10 and under, and live in a spacious, rustic home on the range.
Andy frequently evokes Nike as a model, not so much as a guide for his company but rather a blueprint for his city. Many El Paso residents, he said, believe their unique geographical plot is misunderstood, cast off as a low-wage workplace with little muscle to support big business. Andy believes as Spira grows, it can heighten El Paso's image, even rebrand the city the way Nike's rise helped propel Portland, Ore., into one of the country's most vibrant cities.
"There's a lot of opportunity here, but it's had some challenges. We've lost a lot of corporate headquarters," Andy said. "The effort around here is we always have to attract industry to come to El Paso. Well, I don't agree. The strategy is to grow your own, because nobody wants to come to a place that can't grow its own excitement and its own reason for being."
Spira's relatively quick growth is hopeful, but it is miles from going the distance, and disaster always lurks. A production problem at its plant in China last year set off a credibility setback among some retailers and sacked five consecutive months of profitability.
"Quite clearly, if we have another quality issue, we're done," Andy said. "Believe me, if we fail, it will be devastating for us personally. Everybody we know has invested."
Chasing the market
UT-El Paso track coach Bob Kitchens is a big Spira fan, and an investor. His athletes train in Spira shoes because he believes the WaveSpring system works as advertised: reduces stress on joints, decreases the chance of injury, and allows for quicker recovery.
But specialty running shoe stores, the bread-and-butter of the industry, have proven a tougher sell. Store owners are reluctant to dedicate dollars and shelf space to a new product when Asics and New Balance and Nike sell just fine. Runners, too, are typically stubborn to change.
"They are a legitimate company with a legitimate technology that I think is going to stick around," said Ray Fredericksen, who operates Sports Biomechanics Inc., in East Lansing, Mich., and is director of Runner's World magazine's shoe lab. "Runners are becoming more aware and more willing to try Spira. Quite honestly, when I did the first round of wear testing, I had trouble getting wear-testers to try Spira. They had never heard of it."
Fredericksen's latest round of testing tabbed Spira's Genesis II running shoe (list price $130) as "Best Update" in the magazine's annual spring shoe review, which generates credibility within the industry and publicity among consumers. It is, however, no guarantee that retailers will restructure their budgets.
"A new shoe that wins ['Best Update'] probably means it needed improvement," said Sherri Ruibal, owner of Run On! running shoe store in Fort Worth. Ruibal, a runner herself, said she is skeptical that Spira's spring technology is little more than the latest gimmick. She said she didn't care for the shoes when she tested them and customers have not asked for them, so why carry them?
Roger Soler, owner of three specialty running shoe stores in San Antonio and one in Corpus Christi, said he carries Spira as a service to his customers.
"We've sold quite a few and quite a few customers come back for a second and third pair," Soler said. "It's not a shoe that goes out like hotcakes, but there's a few people who think they're the best shoes they've ever had."
The Big Feet Store, which specializes in big sizes, is the only Fort Worth store to carry Spira, and does so in all sizes because of solid sales, store manager G.L. Potts said. North Texas, Andy Krafsur said, has been especially difficult to crack, which keeps Spira constantly at the drawing board to improve imperfections such as the complaints Ruibal pointed out: The shoes are too heavy and too stiff.
David Krafsur, Spira's vice president of engineering, works full time out of his home in Loveland, Colo., where he lives with his wife, Greta, and three young children, pursuing ways to reduce the weight of the springs. In El Paso, Norton is working on flexibility in the forefoot and overall fit.
"What these people have to understand is that we started as an innovative company, and we are going to improve as an innovative company," David Krafsur said. "These people that are skeptical -- boy, this product is going to rapidly change -- and what they see next year is going to be very different from what they see this year."
The secondary market
Dr. Dan Kanell is an orthopedic surgeon in Fort Lauderdale, Fla., and is the team doctor for the Miami Dolphins and Florida Marlins. He had not heard of Spira until a patient with arthritic knees read about Spira on the Internet, bought a pair and reported reduced pain.
"I prescribed them to a few other patients, cautiously, initially because I was a little bit of a skeptic," Kanell said. "Then other patients would tell me how much they like them. I have a lot of arthritis in my knee, so I got some for myself. I noticed a tremendous improvement, particularly when I had to do a lot of walking, so it kind of confirmed what my patients had told me."
Where Spira has been shut out of many specialty running shoe stores, its walking shoes have made major inroads at stores such as Foot Solutions and Foot Efx, stores that outfit people with particular foot ailments or those who spend much of their day on their feet.
Nurses, mail carriers and factory workers have become repeat customers at Team Nashville, a specialty running shoe store in Nashville, Tenn., owner Terry Coker said. Foot Efx owner Byron LeBow is so convinced of Spira's technology that he is also its largest investor.
"My personal opinion is if they just focus on the running market, then they'll probably be just another casualty," Foot Solutions founder and CEO Raymond Margiano said. "They would be very wise to consider to continue working among the market venues that we bring: comfort, health and wellness."
But it's the running shoe market that drives the Krafsur brothers and will ultimately determine Spira's success.
"We might be beyond the startup phase if we started in just the health category," David Krafsur said. "The running has taken a lot of time, a lot of effort and a lot of resources. I think it's going to pay off. I've always thought it was a great running technology and I would have been sad, myself personally as a runner, to see us just as a health shoe."
IN THE KNOW
Ruled out ... for now
If you happen to win the next Boston Marathon in a pair of Spira running shoes and the shoe police meet you at the finish line, be prepared to be disqualified.
Spira shoes are banned from any event sanctioned by USA Track and Field or the International Association of Athletics Federation.
IAAF Rule 143.2, regarding proper competition footwear, states:
"Shoes must not be constructed as to give an athlete any additional assistance, and no spring or device of any kind may be incorporated in the shoes."
Spira company president Andy Krafsur says the rule is outdated, and that Spira, when the time is right, will appeal. He said Spira shoes are an innovation similar to the metal driver or metal ski, among others.
"Take the pole vault," Krafsur said. "When this rule was adopted on the springs, the vaulters were jumping with a bamboo pole or a steel pole. Today, you've got these really flexible fiberglass poles and they slingshot people, they changed the rules of the game. It's the same idea. You're still doing the work wearing the shoe."
-- Jeff Caplan
A spring in their step
Independent testing at Sports Biomechanics Inc., in East Lansing, Mich., has shown that Spira's WaveSpring cushioning system returns 87 to 96 percent energy, more than any other brand of running shoe, allowing runners to run longer, recover more quickly and potentially experience fewer injuries.
The company has two patents covering its WaveSpring technology, and three more are in the process, which should keep copy cats at bay.
In its fourth year on the market, Spira is projecting $8 million to $10 million in sales for 2005.
"We are on the radar," Spira president Andy Krafsur said.
SOURCE: Spira
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