Spartan Race and its founder Joe De Sena are once again featured in an article by Forbes. For the first time the story of Spartan Race’s path to it’s current success within the obstacle race industry isn’t told as a straight line up . We followed up with Joe with some questions of our own (after the article) to help set the record straight on what that path really looked like.
This article originally appeared in Forbes
Why Spartan Race Teaches Us That Success In Business Is All About Perseverance
This can’t be happening… again.
These words rang like a bell inside the mind of Joe De Sena in early 2011, as he began to come to terms with what seemed like the inevitable – the failure of yet another one of his ambitious business ideas. Spartan Race, the mass market adventure racing series De Sena had created just a year earlier had turned into a logistical and business nightmare. With races all across the world, each requiring their own set of venue negotiations, marketing, and haggling with local governments for permits, De Sena had simply underestimated the human and financial resources necessary to survive long enough to see the company turn a profit. With more than $300,000 a month in expenses now being financed by his credit cards and employees resigning left and right because there was no money left to pay them, the future of a once promising venture seemed unnervingly bleak.
Yet De Sena was no stranger to adversity. The Queens, New York native made it big when he bootstrapped one of the city’s most successful pool cleaning and construction companies in college, and eventually found his way to Wall Street and the world of private equity. To escape from the stresses of banking, he found adventure racing – week long slogs through rivers, over mountains and across deserts. The brutal conditions pushed De Sena to both his physical and psychological limits, and proved to him again and again that he was capable of so much more than he could ever have believed.
What started as a hobby soon became an obsession. In 2000, during the height of the dot com bubble, the domain Peak.com became available, spurring De Sena to drop seven figures to purchase it in the hopes of creating an online community for all things adventure racing. Intended to be a hub for people interested in traveling the world, scaling Mount Everest, traversing the Sahara, and undertaking any number of other physical challenges, De Sena was certain that Peak.com would attract those that shared his passion for the extreme.
He was wrong.
Some 8 years and 2 million dollars later, De Sena finally accepted the fact that extreme adventure racing wasn’t a scalable business. There just weren’t enough people interested in pushing themselves 350 miles or more through the world’s toughest terrain, much less enough to form a profitable online community. It turns out that sometimes passion doesn’t make good business.
Around the same time, in late 2009, De Sena came up with another idea – creating a military style obstacle racing series that was marketable to the everyday consumer instead only die-hard adventurers. In fact, he had discussed this idea with many friends, including his long-time assistant, Jaloyn Fockler, but he had become so obsessed with making Peak.com a success that he simply couldn’t face the brutal facts, nor see the forest for the trees. Moreover, he was financially over leveraged, his credibility among investors was all but shot and the country was knee deep in one of the worst recessions in a century. There was simply no way he could start another business.
“I really struggled during those few months,” remembers De Sena. I knew I was on to something, that an adventure race for the masses was really at the essence of why I had started Peak.com so many years before. But I also knew that after my failures, I would never find a sane investor to put up their money to finance another racing project run by me. So after much deliberation, I did what any serial entrepreneur would do – I ended up going for it and funded everything through personal credit cards and loans. It was an insane and stupid idea; everyone around me thought I was committing financial suicide. But I also knew that I couldn’t live with the failure of Peak, I had to give it another go.”
De Sena began reaching out to former friends, colleagues and relatives to recruit them into joining his new venture. While he received quite a bit of rejection, many were swept up by his excitement and vision for what would eventually become Spartan Race. Yet the majority of them knew that there was little guarantee of success, and many joined with the promise that they would be paid little to be part of De Sena’s vision.
According to Selica Sevigny, one of the company’s first employees, “When Joe mentioned he was brewing a new race concept and starting a new company, I knew then and there I wanted to be part of the pioneering team, the founding few. We left our jobs, sold everything we owned, and believed 110% in the project—or what I referred to as ‘the mission.’ Everyone thought we lost our minds, especially when I told them we would get paid little for the work. It would essentially be a work-for-stay-and-food deal. The only way we could earn a living was once the events were profitable, which took some time. We made the decision to work crazy hours every day for many years to make Spartan a success.”
Organizing events, finding locations, negotiating venues, and finding volunteers was a much bigger job than De Sena and his small staff initially anticipated. The excitement of building a new business blinded them from the truth of what it was really going to take to succeed. When the reality set in that a new business, in a new industry, with this much work might take years to turn a profit, the tension became palpable.
“I can’t tell you how many people I begged to run Spartan during those turbulent times,” recalls De Sena. “Andy Weinberg, who, was supposed to have moved to Vermont years prior to help me with Peak races in Vermont, my brother in law, who started and then stopped….Sean McGuire, who helped put on the first 7 events and then quit….Sean’s business partner, who dropped after the first event…. Selica, who ran with international and got us on the ground with very little resources. I thought I had hit rock bottom a year and a half earlier with Peak, but now I was dragging my friends and family down with me.”
Spartan Race was on life support. The business had quickly required three hundred thousand dollars a month in “fuel” or marketing spending in order to reach people and get them to races. This simply wasn’t sustainable even for someone who spent twenty years building a construction company and on Wall Street.
Out of money and with his staff down to a skeleton crew, De Sena made a desperate call to some former colleagues on Wall Street seeking financial help. Miraculously, he was able to raise enough money to keep the doors open and float the company for a few more months. It would require taking all of his remaining senior employees down to a meager monthly compensation, including the CEO and COO, but De Sena was able to convince the majority of them to stay on, if only for a little bit longer.
To say that building Spartan was a labor of love, is putting it mildly. It had been an all-out war for De Sena and his staff. Brutal hours, often with little pay, and the constant threat of bankruptcy hung over their heads like a guillotine. And even after the struggle of 2011, Spartan Race writhed financially until investor group Raptor Group Holdings stepped in and put the company on firm footing. Even then, it took another year before Spartan was on solid ground. Staff turnover, the revamping of the marketing department and even finding office space, all took huge amounts of time and effort.
M+A In Spartan Up! you talk about principles for living the best, most successful life. I believe one of the ways you mention how people sabotage their path to success is by spending more than they have. Yet in the Forbes article your story includes financing operations with a huge chunk of credit card debt ($300,000 a month). As an entrepreneur myself, I know what it means to bet it all, and then some, on my vision. When do you think it is foolish to go all in and bet what you don’t have? Have you reached the mile stone where you can say that worked out and was not a bad move – or is that yet to be seen?
Joe D. I have lost more money during failures than anyone should have. What I meant by not sabotaging success was that people will spend too much money on silly things. You should work out of a garage, find a team that is willing to believe in the mission, and work for below market rates in the beginning with the hope of getting a job or gaining success in the future. Many of the folks that stayed on from the early days of Spartan when it was looking bleak, are now rewarded by having very secure jobs and being part of the “team”.
I think many people are so interested in what they can get today, how they can get paid now…that they don’t think long term…which is usually what will bring a lot of success in their lives, and in our case change a lot of lives.
The 300,000.00 a month on credit cards was just foolish but (and I know there shouldn’t be a “but”) I was so against the wall at that point- the world had ended (financial markets) and anyone in the financial business (me) got crushed. Most of my life savings was wrapped up in Spartan, and it was not working. My goal at that point was to change peoples lives on a mass scale. To do that, this business had to work before I ran out of money…the day I hit my breaking point, (well there were many) I remember asking all my friends around Spartan to invest and no one wanted to- it was fun, it showed promise, but it was a big risk and as I said most people don’t want the risk of long term rewards. If my old Wall Street friends had not invested in this business, we would have been bust.
M+A In an earlier Forbes article (September 2013) it states Spartan hadn’t broken a profit yet. One of the popular rumors I’ve heard out there is that you guys hadn’t actually touched the investment money from Raptor. So what’s the real deal? Are you guys actually killing it? Has Spartan passed Tough Mudder in revenue?
Joe D. Unfortunately we have not passed Tough Mudder. Many people don’t understand the event business. In the event business you are collecting revenues today to put on races in the future…so you are essentially using future revenues to pay today’s bills. Raptor provided us the protection to make sure we were on a good financial footing should an event day come and we needed funding to put on that event, luckily we have almost caught up to a healthy cash flow cycle.
M+A What do you think is the current state of the obstacle race market? Still room for growth or do you think it might have reached a plateau – and if so, how does that affect Spartan’s strategy?
Joe D. We are a sport and a lifestyle. My motto in life is to go big or go home. I think as I said earlier MOST people in life want money today and they make their decisions this way. My goal is to get us solidified as a sport, get into the Olympics, and be an incredible lifestyle company- its a long term vision. That might take another 5 years; as of now it’s still keep expenses to a minimum until we are rock solid so we can get through any softness in the market. Softness is going to come and their will be many companies that go out of business. We want to be one of the companies remaining on a solid foundation.
M+A How much influence does Reebok have over Spartan Race through its sponsorship? Will we see Spartan Pro Team members having to wear Reebok shoes (like how athletes were mandated to at the CrossFit Games)? Have you had to push back on anything?
Joe D. Spartan pro team sponsored athletes will wear Reebok gear for sure as they are helping support the team. We hope someday Reebok could help us with all elites competing in this sport. We have put so much money over the years into the program as we really want amazing athletes to come out of the woodwork from other sports.
M+A Was there anything you had to push back on from Reebok though? I think that would make for a good behind the curtains bit.
Joe D. Reebok has been incredible to work with. They are super responsive, super respectful and have supported us through the early years. We will remember that they stepped up with help when we needed it and bet on us. Not a lot of people in the early days are willing to bet on you when your weak and you have to remember the ones that do.
M+A How does Spartan Race stay unbiased towards the results of their pro-team members? I really appreciate that Spartan Race and other start up organizations following your lead have invested in athletes but it could be compared to the NFL having their own team go against the regular teams. Are there any plans on promoting the athletes who beat Spartan Race’s squad?
Joe D. We are very unbiased…ask them…they hate us many days because we are so unbiased. 🙂
M+A Is Peak Races done as of this summer? Will anybody take over production of the Death Race?
Joe D. I certainly hope not. I have done lots of media strategy over the years to grow Peak and the Death Race (hint hint). That has all been an attempt to grow the customer base. Peak has been a massive financial loser to me and my family but their are so many good reasons to keep it going. I believe the events are just too difficult for most, so the pool of participants to draw from is small. Stay tuned, I think the policy will be, if I have the money each year to put on the Death Race, we will go another year! The goal for the Peak races in Pittsfiled, Vermont has always been to support the town and local businesses. If Peak and the Death Race goes away, that would hurt Pittsfield, so my hope is that I can turn it.
M+A You’re a really competitive dude. When’s your next non business challenge where you go up against others? Have you ever competed in the CEO Challenge?
Joe D. I have for many years…but I am a slow poke! Once I can get off email and business and get back to having fun especially with my kids I will be ready to go. For now I can crush you in a typing contest…see who can send more emails in a minute? I sit on my butt ALOT each day…this was NOT the plan!
M+A You, Will Dean and Don Mann are each walking along a dark alley. Your alleys intersect and you all cross paths at the same time. What happens next?
Joe D. I’d shake their hands, throw on a headlamp, and head with my computer to wherever I could get to a table to finish sending emails for the day!