Our November issue delves deep into the archives of Sector 9, a company founded by four twenty somethings out of a backyard in Southern California. Nearly 18 years later, the crew continues to immerse themselves in the every day lifestyle that drove them to found the skateboard brand and continues to build on the heritage it has created in its warehouse headquarters just outside of downtown San Diego.
TransWorld Business stopped by to get the grand tour and chat with founders Steve Lake, EG Fratantaro, Dennis Telfer, and Dave Klimkiewicz. Sit back as they take you for a stroll down memory lane, depicting exactly how they went from a small, grassroots start-up back in the early 90s, to helping longboards become one of the most successful categories in the action sports market today. From its early marketing tactics to its acquisition by Billabong, get the Sector 9 story right here.
How did Sector 9 get its start?
Lake: It started in the backyard—in Denis’ backyard— until we got evicted.
Telfer: [There was] a dispute over a payment, he didn’t really want us to leave. In the end he wanted us to stay.
EG: Dennis’ house was the epicenter, right around North Bird Rock. [There was] a mini ramp, ping pong, pool table, the bigggest beer recycling center. It had a shaping bay, and five or six guys living there on La Jolla Boulevard, two houses off from where the businesses end. The house still looks the same.
Telfer: I had a snowboard skateboard that I got from a guy. It was an old Sims snowboard, about four feet. It had the nose cut off and had a big crazy kicktail on it, and big wheels. It rode really well— super fun. And it got stolen one day.
Lake: While he was riding that board, we [Lake and Klimkiewicz] were out riding the hills in La Jolla on our regular boards that we would ride on the mini ramp – pretty much nightly – it was a pretty big crew of us and this guy was riding his snowboard which was pretty much like butter on the pavement.
Telfer: So that got stolen and my roommate had an old board he made in wood shop in 7th or 8th grade. I used that as inspiration to make a board from scraps I had laying around, leftover from the mini ramp. I cut those up with the shaping tools and glassed them. Had enough for two— someone wanted to buy the other one and that was it.
Lake: It was pretty apparent when you see someone riding in the neighborhood, no one was going as fast on their tiny wheels, so when we’d ride by super fast it was kind of a head turner back then, you see that more now days but not back then.Whenever you go anywhere riding one everyone would always ask where you got it and where they could get one.
Telfer: I was over his house one night after that drinking beers and shooting pool, and tossed the idea around and it was a handshake over a beer and pool. And here we are. Who would of thought?
Lake: We started making them in the backyard for people and charging $25 a piece. We started making them for friends, then friends’ friends and then friends’ friends’ friends and it just started snowballing and before we knew it, we were in my garage making ten or twenty boards at a time, which with our archaic tools back then that was a pretty big feat. At the time, we were still in college doing this most of the time, and then graduating college and trying to figure out what the next step is. Next thing we we are sneaking into the ASR trade show and making some fake business cards, seeing what everyone else is doing and no one was doing anything similar to what we were doing. We decided to make a go of it. Dennis and I talked to my parents to see if they would loan us $10,000, because we thought that was a ton of money to help us start this company. They told us, “Give us a business plan,” so we had to go back – this was pre-computer – so we literally wrote up a busines plan with a typewriter and submitted it to my parents, who grilled us for what felt like an eternity, and eventually agreed to loan us $10,000. We set our sites on next ASR tradeshow and made maybe a dozen samples, with taped off pin striping on skateboards.
We went to our first trade show and by the time we got there we were $2,000 in the hole and out of money. We talked to some guy who wanted to buy 100 boards and pre-paid the order. We took that money, left the trade show, and went and bought the materials to make a couple hundred boards. We took that money and funded the production and shipped all the orders out to everyone COD and that was the seed money that started Sector 9. We moved into a little 1000-square-foot warehouse shortly there after.
EG: There are so many little parts. It would be a thousand page book. We really started not knowing anything. It wasn’t like Steve worked at DC shoes, or Dennis worked at TransWorld, or I worked for anyone, we just kinda learned it as we went along.
Telfer: I worked at Sports Chalet, dude. [Laughs]
EG: I worked at Trader Joes and Steve worked at Chiles. We took our own personal money and invested it in it too, besides the $10,000 that was invested. I specifically remember going to get some Kryptonic wheels with Steve and it was $200. I was like, “Okay I’m pretty much broke until the next paycheck now.” And those wheels went on like eight boards and then we were out of money again. When you look back on it, it’s pretty humbling. I remember walking into shops and them being like “Can we get net 30?” to me. I didn’t even know what net 30 was, dude. It’s crazy, it was pre-internet. Everything was hand written.
When do you think things started taking off? When you moved into your first actual headquarters?
Lake: It’s a fact that even when we moved into our first little factory – we never made money or paid ourselves for our next three years. It’s not like we were killing it or anything. We were all working second jobs to pay bills at home and keep the lights on. We took everything that did come into the company and put it back into the company to buy more materials so we could continue to feed this snowball that was accumulating more and more snow everyday.
Why do you think your boards were met with such opposition at first?
Lake: They were so different. It was so opposite of what was going on at the time. Skateboarding had come to a point where it was all focused on street skating. Boards were narrower than they’d ever been, wheels were smaller than they’d ever been. And here come these scraggly surf bros walking in with these big long boards,and big soft wheels and big long trucks and it seemed so out of context from what was actually happening at that time that people had a hard time envisioning it actually working.
When do you think you started to gain acceptance within the industry?
Lake: I think we have yet to gain acceptance in the skateboard industry. It’s resistant acceptance. People are entitled to their opinoins and there is a large contingency in the industry that still don’t view this side of the market as skateboards. And that’s fine with us. We never cared when we started and we don’t really care today if they don’t view this as a skateboard. To us its mostly a piece of wood with four wheels attached to two trucks that people are carving down the street. It’s just a different type of skateboard. Today there is a lot in the skateboard world who are making similar types of products as us, out of necessity not out of desire. There is respect. I believe that a lot of the industry has a respect for what Sector 9 has accomplished.
Telfer: Mostly because we did it the hard way, and most of the guys you see in skateboarding that have been around have done it the hard way.
Lake: We are like salmon swimming up stream, and now the stream is behind us instead of in front of us. They can respect that – anyone can respect that. They don’t necessarily like it – I wouldn’t either if I were in their shoes. Our intention was never to see a certain side of skateboarding grow at a different rate than the other side of skateboarding.
We wanted skateboards to be under anyone’s feet who wanted to ride them and to make it fun for everybody, and I think that’s what bigger softer wheels, and wider trucks that turn smoothly allow. It’s so simple yet it was so difficult for people to conceive. I think one of the things that our side of skateboarding brings to the more mainstream side of skateboarding is there is a lot of kids today who otherwise would never have stepped on a skateboard to skate transition or street, that are getting on a longboard realizing that skateboarding is fun and then looking at the guys in the park and looking at the guys on the street and going, ‘ wow I wanna do that too,’ and so they are moving off their longboard and transitioning down to the park and the mini ramps. So I think there is a cycle that is happening but it’s going in an opposite direction than the skateboard market is moving.
Think about how long it took the industry to see this side of the market happening. They didn’t see the longboard market coming up as fast as it came up on them, and so likewise, it’s difficult to see what we see. We do see kids come here, get a longboard and before you know it they are dropping into the bowl at the skatepark so it is moving in the other direction, too.
At the end of the day you want to be happy and look forward to going to work. We get up and get to work with our very best of friends. They say don’t work with your friends, but I think if you have a mutual respect for everyone, and everyone tries their best, that is recipe for success.
So how did the boards start getting noticed at retail?
Telfer: We figured out it was a real hands-on thing. We would do demo boards at shops. That’s when we figured out that when people ride them they get stoked, and the shop guys get stoked, and then it started moving. We needed people that could see the passion and it wasn’t just your average people, we needed to find people like us who really dug it.
Lake: I think one of the key turning points for us, was when we took it from more than just one or two boards in a shop. We thought we can’t just put our boards alongside everyone else’s skateboards and expect to be different. We are different, and how do we make ourselves more different. We didn’t profess to be the best skateboard makers at the very beginning and we made lots of mistakes. We’d take those mistakes and turn them into racks that would hold six boards. Inexpensive, but still looked pretty cool.
The minute we started separating ourselves and putting six boards, 12 boards, 24 boards in one location, the more presence we had and the more success we had. I think it’s just a psychological thing with someone who walks into a retail store. Their eyes are drawn to it. Today you’ll see a whole different world. You’ll see a Sector 9 rack and a whole bunch of other competitors who have basically taken that same formula to create the competition for us. And it works, so I would do the same thing if I were them, that was kind of a turning point for us to say okay now we are separate and now let’s do everything we can. [We] literally could look down the coast and be like this board isn’t selling here, let’s get that board out of there and put one in that is selling. We just partnered with our retailers and I think we have arguably some of the strongest relationships in the industry. Because we weren’t a big customer for them. We started as this little small thing they thought they’d try and now we’ve grown into a decent part of their skate business. I think we’ve gained a lot of loyalty by that.
How much of your manufacturing today is done here versus overseas?
Seventy to 80 percent of our products are made in America. Bamboo is made in China. We import some bamboo veneers and make Arbor skateboards with bamboo, but it’s not cost effective to bring it all in and make them here. All our wheels are made here in America, too.
Out of necessity, 80 percent of our trucks are made in China and 20 percent in the US. We just invested in a bunch of new tooling to fix that. Within the next couple of months, that will change to 80 percent America, 20 percent China, but we are going to do everything we can to keep it here. The things we’ve sent over there have been out of necessity more than anything to keep up with our growth. That’s GullWing that we acquired – they were one of our suppliers – and we acquired them seven years ago. Again it was out of necessity to have some control over the growth of our brand and the quality of our product. We realized that our abilities were hamstrung by our suppliers ability to rise to the next level with us so we brought them along with us.
How many people work for the company?
In North America, as a company we are about 100. In the core offices, I know there are 27. There are a few guys down there that have been there for ten years, and the same with the wood shop. A couple have been with us since we first hired anybody outside of our core group to help manufacture, and they are still here working.
Which brings us to the question of, how and why did you decide to sell the company?
EG: We never started this company to sell it.
Lake: If we would have started the company to sell it and make money, we never would have made any money. When you do start a business with nothing and you grow it into something, all you’ve really done is dug a gigantic hole. A business that is growing like this (vertically), all you’re really doing is digging a deeper hole.
Telfer: Which can sometimes keep you up at night.
Lake: We survived 9/11 from a business perspective, but anyone who ran a business after September 11 would agree there were very difficult decisions that sat on the table. Retail came to a screeching halt; retailers couldn’t pay their bills. We vowed after that the we would not become as vulnerable as we were there. As our business grew we realized that achieving the level of financing we needed to keep our business growing was going to be very difficult and in the best interest of everybody, if we could find the right partner to let it go to – we would be able to take care of all the people who helped us get here financially, and it would help us continue to grow the business to see what we could really achieve in the future.
With Billabong, they were and remain the perfect partner in that area for us. They acquire brands that have strong leadership, that have strong vision, that are market leaders, and they allow us to drive the ship. They don’t come in here and profess to know what we do or do what we do better. They say we trust you guys’ leadership. There are benchmarks, and we have to run the business right. There is a tremendous amount of respect between the Billabong leadership and the leadership in our company.
Telfer: We weren’t just looking to sell to someone and run off into the sunset. We were looking for a strategic partnership with someone and they [Billabong] professed to be that in those meetings. They’ve stuck with it and followed through with everything they said.
Lake: It’s been a combination of 100 people’s efforts—none of this would have happened without all of their efforts. It’s changed the history of skateboarding, apparently. It’s great; We are proud of that.