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The best podcast in cycling.
Please check out our other podcasts on your preferred podcast platform:
- Geek Warning - how bikes work and how to make them better
- Wheel Talk - all things women's cycling
- How the Race was Won - racing and tactical analysis
- The Rest Day with Jack Haig - insights from within the pro peloton
- Overnight Success - The founders and innovators in the cycling industry
Escape Collective is entirely member-funded. If you like this podcast please consider supporting us by becoming a member: https://escapecollective.com/member/
Jake Heilbron 0:03
I think figured out pretty quickly that Corona was not something that that Ken wanted to continue to invest in. And I know when he told people that and then we had the embarrassment at sea otter. A lot of people were feeling like, oh my goodness, this is the end of Kona.
I don't think anybody can really explain what happened. It certainly was very public. I don't think anything white that publicly embarrassing us up into a bike brand since Schwinn announced their bankruptcy in the middle of the captain show in 1990. To chalk one up for Kona as doing something special. As a joke, I was saying to people, Ken is going to sell Kona probably going to get a good owner who really cares about bikes. But the problem is like who would be crazy enough to want to buy a battered up old bike company right now. Like it's the worst possible time.
wade wallace 1:19
From escape collective, this is overnight success, the podcast about the entrepreneurs, the personalities, and the passionate people who make up the sport of cycling, and the stories behind the icons they've built. It's been said that Kona is the smallest biggest bike company in the world. They're best known as the quintessential North Shore bike brand. Yet the Global Head Office sits just down over the border in Ferndale, Washington. The quirky company stood out from the beginning with outrageous model names such as the stinky Deluxe, the sex one the sex to the jack shit, which place the well and truly as an alternative bicycle company. The business was founded by Dan Gearheart and Jacob Hellbrunn in Vancouver, BC, along with mountain bike Hall of Famer Joe Murray as a designer, with a rich history of iconic bikes and a factory race teams. This was all overshadowed by the recent events of their former owners, Kent outdoors, who were responsible for running Kony into the ground before the original founders bought back the company last month. Only a few weeks after Dan and Jake bought the company back, I sat down and spoke with Jacob Conas founding story that dates back 36 years to 1988 up to the sale of the business to a private equity backed company. And what happened that led them to buying Kona back
Hey, so yeah, like, take me back to you grew up in Toronto, and then you took a gap year and rode your bike. Tell me about that.
Jake Heilbron 2:59
Well, you know, this was the tennspeed boom days. Maybe not too many of your listeners are going to be familiar with that. You know, I bought a 10 speed bike so that I could ride to school. Yeah. And my school I was in Richmond Hill, Ontario, which is was a small town back then. And my school was in Thornhill. So it was like a I don't know 15 mile round trip and I bought a Peugeot 10 speed with drop bars and you know plastic simplex derailleurs and, you know, after I graduated from school, and that was when you have 13 years of school in Ontario. Yeah. So I decided I'm going to take a gap year I don't really know what I want to do and a friend of mine and I bought a couple of bikes down at Blue recycle in Toronto. I got bought a dog Galaxy he had a dogs realm rider. These are British bikes and they're still around. Yeah, so I got 1428 Straight five block with a 42 by 52 steel cotter pin stronglight crank and off we went with our little little pan your bags and racks and rode from Toronto across the Rockies to San Francisco down to Mexico or went as far south as Guadalajara rode back up through Brownsville, Texas, along the Gulf Coast to New Orleans and got there in time for the Mardi Gras. And then we rode back home eight month tour cheese. That's
wade wallace 4:32
amazing. And you got back to Toronto and then what brought you back to Vancouver to the other side again.
Jake Heilbron 4:38
Well, I heard you could ride your bike year round in Vancouver so you were caught by the bug after after eight months. I still riding like riding bikes. You know I that's why I think UPC and it was easy to get into college back in those days. You know, I just enrolled and studied some useless stuff and to put myself through school like I was saying in that little article I wrote or the law During the editor I wrote, you know, I was working in a bike shop Westpoint cycles at the corner of 10th. And Alma, just part time, and at the end of the school year, they offered me a full time job. And so I said, Yeah, I'm going to try that. You know, I originally my plan was do two years, go on a bike tour in Europe and keep exploring that kind of lifestyle. But yeah, I ended up in the bike shop, and I never got out of the black business.
wade wallace 5:27
And I read that you had a small ownership in Rocky Mountain during its early days. How did that come about? Rocky
Jake Heilbron 5:35
Mountain kind of evolved out of the West Point cycles store chain, it had five stores for in Vancouver and one in Edmonton. So you know, back in those days, bike shops sold, cheap 10 Speed bikes, or, you know, steel, three speed rallies. And that was about it. So one year, I flew over to Germany with my bike, went to the trade show in Cologne, and started finding some good stuff to sell in the shop, you know, lightweight equipment, decent clothing, just to kind of expand it and make it more interesting, really. So that was sort of the start of Rocky Mountain. And right around that time, and mountain biking was just getting off off the ground, right? We're talking early 80s, seven, late 70s, late 70s, late 70s, while Tom Ritchie and Gary Fisher were making these frames and selling Matta Gary Fisher's bike shop, and Fairfax, and at one point, a friend of mine who had a bike magazine in Vancouver, he's an engineer. And he gone down to San Francisco and he went to Gary Fisher's bike shop, bought himself a Ricci mountain bike, brought it back into the store and said, Hey, look what I got. And that's kind of kicked it off for me in terms of mountain biking.
wade wallace 6:53
Is that right? You'd your imagination just started. I don't know, going nuts with what you could do on a mountain bike, or what did you see in the mountain bike?
Jake Heilbron 7:02
Yeah, I mean, I was into road racing in those days. And cyclocross. So I kind of already had an affinity for dirt app, but our store we would take 10 speeds and we'd modify them and make them you know, more interesting because most people didn't want a drop bar bike with a narrow gear ratio and, you know, sort of sketchy brakes. So we would convert those bikes to flat bars and better saddles and, you know, different gearing and spent a lot of time messing around with bikes and turning them into something that people want it. So, you know, when when we saw a mountain bike for the first time, it said, this is actually what people want, you know, back then it was a fad. Because I right out people looked at Mountain bikes and said, Well, that's really stupid, right? Why would you want a big heavy bike? Yeah, right around the dirt. It's like that that's kind of that's like a BMX bike for kids. You know, for adults. It was a dumb idea, but it stuck. Obviously, you know, that kind of led to Rocky Mountain bicycles getting into mountain bikes. It was the first importer of Ricci bikes, or anywhere in the world outside of the United States. Then we developed our own brand, we had a little workshop that was making some road frames and some of the mountain bike frames that we had bought from somebody went bust. So there was one guy making road frames that we met Paul Brody has his own bike brand. And he was an artist, and tinkering around with with no gear. And Dan, my partner met him at the bike shop on in Vancouver on East Vancouver. And we convinced him to try making some mountain bike frames. So we got some tubing and he had some welding equipment, and he made up 10 The first 10 mountain bike frames for Rocky Mountain. Wow, that's kind of how we got Rocky Mountain start. Yeah, wow, like brand.
wade wallace 9:06
Now, there's a whole other story I got to do. That's that's, I got a huge affinity to Rocky Mountain as well. So what was your kind of role and responsibility within Rocky Mountain at this point,
Jake Heilbron 9:19
I was one of the founders. That was I was I was a partner in the bike shop chain. You know, after, you know, a few years working in the bike shop and said, Well, if you want me to stay here, you're gonna feel cut. Let me buy in to some of the action here. And so that kind of just evolved into Rocky Mountain and I was one of the founders of that company. And then it became its own bike brand. So I was only there in the early days. I left in 86
wade wallace 9:46
Yeah. How come you left? I really couldn't get along with
Jake Heilbron 9:49
my partner. He was supposed to be really good on the finance side and I was doing like the bikes and the creative product marketing side and it turned out he was really great. To find that stuff, he ended up selling it twice. And that rate owners now, you know, Rocky Mountain is a solid brand. They do great bikes, they've got a really good thing going and they've sort of now kind of expanded to be a great global brand tune, because before they were just Canadian brand and very focused on the Canadian market, so, you know, good on them for really making their way. Kelowna took a little bit different path, though.
wade wallace 10:26
So you you left in 86, you said, Where did you go, then? What did you do?
Jake Heilbron 10:31
I worked for Comrade chi for a while. I'll relay down in down in the peninsula. And I learned a lot. And for a very short time, I was working at Marine bikes in their early days. And that's where I met Joe Murray. So Joe's not a household name anymore, but like back then he was the mountain biker, right. He's one of the inaugural members of the mountain bike Hall of Fame. He won the US National Championships several times in a row. He was winning all the races, because he's from marine marine was the hotbed the centre of mountain biking. Yeah, at one point is that to Joe, let's get out of here. My friend, Dan gharar, has just started his his own bike company up in Vancouver. He's repping some other brands, he was doing Brody and Berlin bikes. And he was actually the distributor of Moran in Canada. Yeah. And I said, Let's go join Dan and start our own bike company. Right? We can do better than this. Yeah, that's kind of been my mantra, right? If I look at something, I say, Well, you know, this is pretty good. But there are these are the flaws. And this is how we can do it better. And that was kind of the approach. And so we went up to Vancouver. We hooked up with Dan and we started Kona in 88.
wade wallace 11:55
And mountain biking was no longer in your eyes a fad. This was something that was here to stay. Is that safe to say?
Jake Heilbron 12:02
When we started Kona, you couldn't sell anything other than a mountain bike. Yeah, right. Right. I mean, that was back when people were getting rid of the rode bikes. There really wasn't anything exciting or new happening and rode bikes, you know, it was all that grass was stuff that was really cool and amazing from the 60s and 70s. But there wasn't really anything new. And mountain biking was the thing. So we started a mountain bike company.
wade wallace 12:33
How did you meet Dan?
Jake Heilbron 12:36
He's from St. Louis. Yeah, we've got very similar backgrounds. He did graduate from college, though. There. He's got you know that one leg up on him. But he was working in a bike shop, you know, as a teenager and through college, a one bikes. It's changed his name, but the store is still there. Yeah. And he was bike touring in the Rockies, and he met a woman. And she was from Vancouver. And so he pursued her there and convinced her to marry him. And he walked into the bike shop at West Point one day and said, I need a job. I'm a bike mechanic. And that's sort of evolved over time he ended up managing one of the stores. That's the bikes on Broadway store. And right above the store, we had a little warehouse space. And that's where Rocky Mountain actually got started. And East Vancouver, yeah. Okay. Over time, we moved Rocky Mountain down to the flats in Richmond, British Columbia. And Dan was the first sales manager. He had an old Volkswagen, he drove it all over Western Canada setting up setting up new customers. So that was kind of, you know, the early days, Dan and I working together.
wade wallace 13:54
So you so you, you and Joe go in, say Dan, let's let's cut a stain on your renew your new bike company? Is that kind of what what did he say? How did that conversation sort of progress and take shape?
Jake Heilbron 14:08
I think Dan and I always had in the back of our minds that we wanted to have her own bike company. Yeah. You know, he was doing his thing with Rocky Mountain for a while. And then he started his own thing with the company they called the bicycle group in Canada. But I think always in our mind, we wanted to do our own bikes. Again, it's that thought like we can do better. Yeah, and you know, back in those days, when you were importing bikes, there were a lot of flaws and bikes. You know, this is back in the days when you still had ball bearings and you know, adjustable cups and cones and things like that. And bikes were coming out of factories with essentially no grease. The wheels weren't properly tensioned, the frames weren't necessarily straight. So there were a lot of flaws in the manufacturing process and and then the design of mountain bikes back in those days, you had a lot of road companies, you know, they would just take a conventional Double Diamond frame with a parallel top tube, and slap some 26 inch wheels on it and call it a mountain bike. And so our idea was, you really need to get specific as to what a mountain bike does. And with Joe, we developed, you know, the original Conas, which were sloping top two bikes, that was a novel idea back then, with a really small triangle, you know, a bottom bracket that was higher than a conventional road bike for Clarence. And, you know, a fork that was straight instead of a curved fork, because a curved fork was what he used on a road bike back in those days. So we brought some new ideas to mountain biking, and kind of ran with it.
wade wallace 15:52
So what did each of you bring to the table that, you know, you and Joe, maybe it could have just done your own thing? Why did you go to Dan and say, let's all do this together? And what did you see in all three of you that, you know, added value and sort of complemented each other? What did you each bring to the table? Well,
Jake Heilbron 16:14
this is there, the business side of it. And Joe was not a business partner in the company. He was key, obviously, because he number one was well known. And number two had a really good feel for design. He was capable and doing drawings of bikes. See, actually, this is goes back to the days when you're still engineers still drew things with a pencil on a drafting board. So he could do that. I think, between Dan and I, we were friends. Yeah, you know, and we had a love of bikes. We rode bikes together. And so just kind of immersed in the whole cycling world, really, what was what it was all about. With Rocky Mountain, there were three partners involved. And this is the one of the things that made it made me leads, because there was an unequal situation. And so what we started Kona, as is, we're going to be 5050 in this thing, so we always have to agree, we cannot do anything unless we both agree. And that is really the way it worked. We never had a contract between ourselves, it was just kind of an understanding of this is how we're going to work. I never went to business school, I just kind of figured out how to do things along the way. Dan had a degree in economics, but he was a shit disturber in school, and he will admit it freely. So you know, it's not like he was, you know, set out to become, you know, a businessman or a captain of industry or anything like that. And I was the same I was I was a mechanic with grease under my fingernails, that kind of seat of the pants way of doing things is really what pushed us forwards. And again, having that similar mindset about how to do things, even though we were kind of making it up on the fly, is what worked for us.
wade wallace 18:07
Did you have a business plan or anything like that, that was scribbled onto plain paper, or you just did what felt right. It
Jake Heilbron 18:14
was organic, all the way. Just like getting a job in a bike shop and then becoming a mechanic and staying on. It evolved that way. You know, it's kind of the way the bicycle industry is. And I don't think I'm uncommon that way. You fall in fall into it, and you stay in it. You know, in the early years, there was no such thing as an engineer that understood bicycles. Right? It was sort of the other way around. You had engineers who tried to learn how to be in the bicycle business. But generally, your engineers learn from the seat of their pants and the great example is our first engineer. Doug LeFevre, also known as Dr. Do or daily. And, you know, we we named all our commuter bikes after Doug. He was one of the founders of the deep Cove bike shop. Deep Cove BC. So that's where Cove bikes came out. Yeah. Right. And, you know, the North Shore, as you know, became a hotbed for a mountain bike and hence still is Yeah, so Dewey, had founded this bike shop. He wasn't working in the bike shop. After we had started Kona, he was cutting grass. He was like a gardener. And he'd never went to college. He'd never turned on a computer. And we said, okay, okay, do we, we'd like you to be a product manager and draw pictures of bikes. And so he just figured it out. Got a Mac PC, we loaded a CAD programme on his computer and he taught himself how to do CAD drawings of bicycle frames.
wade wallace 19:55
What did you see in him that made the leap in your head? that he could do this.
Jake Heilbron 20:02
Please, the bike person is totally immersed in bikes. Before he worked for Kona, he would go down to Southern California and visit the Koch brothers or koskie brothers who were in Tiburon, and Moran, and buy some frames and parts and bring him back and have them for his bike shop, which was the first mountain bike only store in Canada in 1980. You know, that store was kind of foundational, really. And so I had met Doug, when I was at the bike shop, and we would go riding mountain bikes in the university and Outlands. And on the main on the south shore, and we he'd take us over to the north shore where our eyes were open, because the trails were just unbelievable. And so again, we had an affinity there. Yeah. But yeah, he's just self taught. Really smart. And, you know, there's, there's lots of examples of people like that who have joined the company over the years, some of the early ones. Yeah, there's Dick Cox. And to the people who know dick or Richard, as his parents called him. You know, as a really key person in the whole world of Kona probably has sold more Kona bikes than anybody else ever has. But he was also working as a gardener. He'd never worked in a bike shop. Never worked for a bike company. And he came in for an interview. Because all the real bike people I knew, turned me down. They said, You know, you got a weird little bike company here. Why would I work for you? Right? You can't pay me enough. So Dick came in for an interview because doing said hey, I know this guy probably work in sales for you. Get comes in rides, right? And his bike comes in and says, I need where's your bathroom? I need to use toilet comes back down five minutes later and says, Where's all your cleaning equipment? goes? I just took a dump a flush the toilet and their shit all over the floor. So he got hired immediately? Of course. Yeah. But again, he had like no experience doing what he does now. But he is like a legendary person in the world is gonna,
wade wallace 22:18
when you say he got hired, of course. What was the of course part about that he went to go and clean up his mess or? Yeah,
Jake Heilbron 22:26
exactly. Anyone who is willing to admit their faults and clean up after themselves, it's got to be a keeper. The bicycle industry. And the bicycle world still is very character driven and personal driven. It's person to person, you know, you can add machines don't repair bikes, you know, maybe it'll get to the point where robots can assemble bikes, they can weld frames now, or parts of frames, they can paint frames now, but it's still very personal. You know, and this is the thing that the previous owners ran into, I think they wanted to have a business as a little more turnkey, that wasn't as quirky as Kona is, that is more the term I guess, is transactional. Computers talking to computers, and all of a sudden out the other end, you get a bike? Well, it doesn't work like that. Not yet.
wade wallace 23:19
So it really it really sounds like you hired on culture and you know, people first rather than competencies, competencies can be learned. Is that kind of your approach to hiring back then?
Jake Heilbron 23:33
When you're small, you can get away with it.
Unknown Speaker 23:38
Right? Yeah, yeah, people will,
Jake Heilbron 23:40
will let you make mistakes, they'll they'll kind of work with you. And, you know, back then, because mountain biking was still kind of new. There were so many flawed products out there. And we made it our share of the I mean, there was a bike one year, a lava dome, which was just full, fully rigid, hardtail mountain bike, and it had some rims made by son who's fairly reputable brand now, but they had started a factory in China and all the rims collapsed. They were just so poorly made. And there was a brake company called DICOM, who was really well known for making great brakes, but the brakes that we put on that bike barely worked, we had a bottom bracket cable guide was welding on the wrong place. We had to get all those fixed. So when we shipped the bike to a customer, they had to rebuild the wheels. They had to instal a new cable guide, set up all the gearing again, and instal different brakes. You know, if you did that today, to a bike shop, they would just say, Oh, no, I'm sending everything back. You guys have screwed up. Forget it, but you can get away with it back then. So all those mistakes we made that cuz we were small didn't kill us. Right, right. We just got going. How did you
wade wallace 25:05
get the money to start making your first bikes or sourcing the parts for your first bikes? And then hiring people? Did you guys have savings? Did you go to friends and family? How did that work at the beginning?
Jake Heilbron 25:20
Yeah, we had a little bit of money saved up to get it started finding that that point. We had no history so we couldn't get a bank loan. We were just cheapskates. You know, did everything really cheap. My first desk was a piece of plywood and six concrete box, as that's why I'm the chairman of the board. But yeah, it was just small hand to mouth. And again, the really great thing or piece of luck we had was that as soon as the container of bikes came in bike shops were waiting for those bikes. They couldn't wait to get them. So they came in Dan and I would spend all night unloading a container and making all the invoices and doing the packing lists and shipping labels and the next morning and they would all be gone
wade wallace 26:12
resourcing all these from different suppliers and then assembling them in would it be Vancouver or would it be in in Washington?
Jake Heilbron 26:20
Yeah, we started in Vancouver. We were in the old meatpacking district in Vancouver. Yeah. Yaletown, which is very trendy now, if you ever go there, part of it was kind of a custom thing, where we would have frames that we would had imported from Taiwan, from the frame makers over there. We would we had a paint shop enrichment that Paul Brody ran and he would custom paint them for us, we had parts kits that we would, we will be counting washers and screws and brake pads and stuff like that, and assembling kits and putting them together with the custom frames. And so that was part of it, too, that it was kind of have a little bit of a unique twist on on some of it. And then the rest were standard models that were you know, more budget priced. And, you know, coming in a container from the factory.
wade wallace 27:17
When you say custom, and you know, select based on parts and what you want, and that that, to me sounds like it's probably good for cash flow. So you don't have to carry a bunch of inventory, you you know exactly what you need order it. Was that a big part of getting off the ground and doing custom orders? Or was that not the intent at all? You
Jake Heilbron 27:39
know, I think that was to try to do something special or unique. Working for Tom Ritchie, I had learned how he did that. So I applied a lot of the systems he had in place, and he was doing pretty much the same thing. And I think that still carries on with some brands are used to even with Santa Cruz, at least until quite recently. They were doing kits. And that's the way it worked. And I think for a bike shop, that sort of a fun thing, custom build, and maybe tweaking the bike a little bit. You know, that's, that's one of the most fun things about running a bike shop is, is turning a bike into something that's really unique for the rider, rather than something that's just off the shelf.
wade wallace 28:23
Yeah, yeah. And when you started importing, like complete bikes and containers full of things and add like that, that starts to take a lot of cash and credit and whatever facility How did you manage that in the early days? Were you just growing off retained profits? Or were there bank loans and credit loans that were needed? Or what was that start of that sort of this is
Jake Heilbron 28:50
where again, comes in because he's really good at Sweet doc talking bankers. Ne Ne Ne understands their language and combined with a good pitch and a relatively good understanding of how business works. I think you can you can kind of get into having a line of credit or a relationship with a banker. I mean, the bank that we started with, and Canada in 1989, we're still with that bank. Wow. So we stayed with the same bank that whole time. And this is, again, something that has been part of our DNA is that we don't really flip around very much. They're the first factory that assembled our bikes for us in Taiwan and 1988 is still making bikes for Kona. In 2024, they do great work, but they also understand us and we understand that. So that kind of relationship where you know how to work with each other is really important. So Oh, and the same thing is with this the second main factory in Taiwan, we've been using them working with them since 1994. So longevity in a relationship is really, I think, key. It may not work for everybody, but it certainly worked for us. How
wade wallace 30:17
did you get on to the first factory in Taiwan? Back in the early 90s or 80s? Like, you would have had to go over there. There's no doing what we're doing now on Zoom. How do you How did you get hooked up with him originally,
Jake Heilbron 30:29
early 1988, dan bought a suit, got on a plane, and he flew to Taipei. I think back in those days, you can go straight to Taipei. I think you went through Narita in Japan, he had one introduction with a fork maker who made the first Kona fork that straight, rigid fork that Joe Murray designed called the project two, and we still make that fork. So we call it project two, because that was our second project. The first project was Joe's design of a sloping top two mountain bike frame and that fork company, the owner said, go see these guys in Taipei. They're going to be a great partner for you. They're my friends. And so that's really how it started. That's how Dan picked that factory. He visited a few others, but he went with that one. And it turned out to be a great choice. Yeah. Wow. I want to tell you one more story about Vancouver, please, about that original building. This is a good one. And it's actually very timely. Because we were in that building. It's like an old warehouse building with a freight elevator where you're, you know, got the pull down doors, all big wood timbers, and on the night of chanin square. So this is 1989 1990. Sorry, I get a phone call at three in the morning from the alarm company says the alarms going off. Okay. So I jumped in my old Volkswagen Rabbit. And as I'm pulling out, and I'm living kind of a little bit outside of the downtown area, a fire truck goes by. And it like right away, I knew something was bad was really happening. So I followed the fire truck all the way to our building, and it's like, engulfed in flames. No, it's an eight alarm fire. There's fire trucks everywhere, shooting water at the building. Like it's it, it's gone. I mean, it didn't burn to the ground. But no one was allowed to go into that building. And all their stuffs in there, right? I mean, we have insurance. And that's the first thing the banker calls and say, Hey, I just looked at your insurance policy. It looks like you're okay. And we see Thank you, Sandy. We're standing there looking at the building and one of our competitors walks by and he's laughing, right? Like he thinks we're toast. So two nights later, we get my Volkswagen Transporter, we put a ladder on the roof and bring your friend and a couple of hockey bags. We're going into the building, right? So our friend distracts a security guard, we climb up the ladder, we go into the window, and we'd like load my our laptops and whatever other things like I think data can't be front derailleur, that for some reason, I was holding on to it through a bunch of stuff in the bag. The security guard finally figured out what's going on. He pulled the ladder away, called the cops. And then the cop came. They put the ladder back up. We climbed down the ladder with our hockey bags on our shoulders. We tell them who we are. Don't show him any idea at all. And he says okay, yeah, you guys go. You're okay. But yeah, everything that was in the building was a total write off. But the good thing is, and I'm going back to how good Dan was at the whole foundational structure aspect is we had everything backed up on floppy disks. So the whole business like all the counts, and everything is on floppy disks. We've got post dated checks from our customers. We've got a container of bikes coming in and a couple of weeks. And we got to place in another warehouse district of Vancouver and carried on.
wade wallace 34:22
This was late 80s, kind of right at the beginning.
Jake Heilbron 34:25
1990. So every year we celebrate the fire party right at the beginning of June. But I think it's you know, it's again, it's like you just don't give up. You keep going. And this is something that my cycling coach always used to say, keep going. The pain is worth it. Which I've always taken to heart. Yeah.
wade wallace 34:49
Did you think at that moment that it was all gone that you'd lost everything or were you quite confidence that you were going to ride past the pain during the fire?
Jake Heilbron 34:58
We had these safeguards in place, right in case something catastrophic was going to happen. And this is I think, if you look at business, there's going to be all kinds of flaws, right? You're going to make so many mistakes. It's not funny. I don't think it matters how trained you are. Because business is always changing. It's never the same from one year to the next or one decade to the next, or however far you want to look. But you can't have major flaws. If you have major flaws that are baked into your business, whether it's you know, how have boring money at an interest rates, that's unrealistic, whether it's not having the right insurance, this is boring stuff, right? Not having a trademark in a in a country where you want to be able to sell your bikes, things like that are significant flaws. And you'd have to just watch that you don't have major flaws. Right? You don't want your bike to break halfway through a race if you don't have a follow car with, with spare bike on the roof. Yeah. That's my approach to it anyway. Yeah, no, we never thought we were going to fail. We just. And the other thing, too, is we just don't want to let people down. Right? We had people counting on us, you know, not that many employees. But we had all these bike shops counting us to deliver the bikes. We had the factories counting us to be able to take delivery the bikes that we'd ordered in a number of other things. family too. Yeah, it's just not wanting to let people down has been a big motivator for me at least Yeah, yeah. It's a big weight on the shoulders, isn't it? You have to look at the process. Sorry to bring out one of our bikes names, but it is about the process, right? It's doing all the little things, right? Making sure you take care of people, making sure you take care of the details. And then things come together if you do it right.
wade wallace 37:05
How did you guys settle on the name corner? What was that sort of process and conversation and other story? Yeah. Tell me about that.
Jake Heilbron 37:15
Volcanic theme. That was the concept. And we had actually decided that we wanted to call the bikes cascade through, they actually made a few bikes that were that had cascade on the down to. And then we got a phone call from West Coast cycles in Los Angeles area. And they owned the trademark rights to the name cascade. It was a bike model, they'd add on the Shiki. Back in the day, and they weren't using it, which is why it tripped us up. And so they said, Well, you know, we'll sell you the name for 3000 bucks. And we said, we don't have 3000 bucks to spend. So we'll just come up with another name. Yeah. And I went to the dictionary, and I found all the names that started with a hard C or A k, that had a volcanic reference down and I took a look at it and said, Yeah, we like Hawaii. We're big on that place. So we're gonna call it Kona. Is that simple? Had
wade wallace 38:20
you been to Hawaii? A few times? Was it a quite close connection? Or? Yeah,
Jake Heilbron 38:25
yeah. I mean, you live on the West Coast. You're gonna go to a we're probably going to get away. Yeah, yeah. Yeah. I mean, it's hard not to love the islands. Right. And Dan has a place on Maui.
wade wallace 38:46
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It seems like mid 90s Steve P run a downhill race on a hey, hey, Ty frame is that is my timing. Yeah, heart to heart. Parkdale. hardtail.
Jake Heilbron 39:51
Hey, with probably had like 80 mil of travel in the fork.
wade wallace 39:55
How did that come about? Well,
Jake Heilbron 39:58
one of the things that we built the business was on was having distributors. international distributor. So, you know 9090, I go to the trade show again in Cologne and set up a booth. And there's a little bit more to the story than that. But we met a lot of people who were in Europe and this was very early days for mountain bikes in Europe. They weren't yet the dominant athletes in mountain biking, they were a great road race. But we just met a lot of people that were interested in mountain bikes and people came to the booth. And somehow I managed to convince them to give us a shot. Some people I had known from earlier businesses in rocky or Richie or Moran. And at that point, 80% of all the bikes that we were making at the factory, were going to these international distributors. And so that was a source of revenue where we didn't need the money. They financed the bikes themselves, we got a little royalty out of it. And that's how we built up the business. Right.
wade wallace 41:06
A gentleman named Jimbo Holstrom, I have in my notes, was the one who founded Kona Europe. Is that correct?
Jake Heilbron 41:12
Yeah. We met Jimbo in 92. He was working for the our Swiss distributor. We talked a lot to him over the years. And in 95, we said okay, it's time for us to set up our own show in Europe, you know, because we had some distributors come and go, the one in Germany went bust, the one in France shut down. So he said let's set up our own show in Europe. And we knew Jimbo from his from his time with the Swiss distributor. And he helped us set that up. So he was our partner in Europe. And you know, first it was in Germany. And then he said, Hey, guys, let's move it to Monaco. And he's really smart guy. He doesn't like paying tax. So we had a place in Monaco, he had some experience being in Monaco. So we set up, set up shop there and he built the European operation.
wade wallace 42:10
So this was a subsidiary of Kona nada district distribution agreement. This was Yeah, right.
Jake Heilbron 42:16
Yeah. The three of us own that part. Yeah, equally. And this is one of these unequal things, but it worked out. Okay. Because again, like minded people who don't need a complicated arrangement to do business with each other, it worked and Dan and I kept the North American part of it, because we'd expanded into the United States. By the end, we set up our own shop just across the border in Whatcom. County. But it made sense to to move into Europe and set up our own show there and overtime, as distributors kind of fell by the wayside. We would take over that the distribution in that country and kind of built it up. So it became a really key place for Kona, as mountain biking started to take off in Europe. And especially in the UK. We had a really great representative in the UK who were they were really into it. They were they were the ones who found steepy and got them on a Hey. And over the years, they helped us get some really terrific athletes. Tracy Mosley is another one who was at downhiller for us in the Fabian Burrell days, she won a bunch of World Cups on Kona, this is where we're making real downhill bikes.
wade wallace 43:36
Yeah. Not the hardtail downhill.
Jake Heilbron 43:38
Not these pretend downhill bikes. So yeah, the we've always had a great connection to the UK. And I think part of it is a lot of terrain is similar. I mean, they don't have the super long climbs, like you get in BC, but that wet, rooty, rocky kind of mud terrain. That's very similar to what we ride on in the Pacific Northwest. And so there was a really good affinity there. In the UK. When
wade wallace 44:13
was the free wide mountain bike scene starting to really pick up with would that have been late mid late 90s? And did CONUS sort of you guys were on the bleeding edge of that, like, how did that all come about? And what kind of ride Did you guys have on that with identifying this market and being in the middle of it? Tell me about that time. Part
Jake Heilbron 44:37
of it has to do with a key person in the company. Patti, wait, okay. And Patti is from Wyoming but he was working in the bicycle industry. He was actually criterium racing, but he was also into motocross racing. And he started working for us in the tight in our little titanium era that we have had, but he was polishing titanium frames then he went to work for somebody else. And then he came back and was working in sales. And then he left again. And then he came back as a product manager. And because of his background in motocross and competition, he helped, along with Dewey developed our first dual suspension, long travel heavy duty downhill bike near his racing the Mammoth Lakes kamikaze and doing a World Cup advanced back in the early days. And so that was like, single chain ring. Whatever the number of gears were on that free Willie had back in those days seven or eight, hooked up with a really good downhiller from Spain with our Spanish distributor, a guy called Tommy Misser, who won some World Cups. Yeah, that's when we started developing our own dual suspension design. Because we were a little late to the party with dual suspension. We dabbled with a few designs, they weren't really working out. Finally, we settled on this swing link for a bar system that is kind of common now for on a dual suspension. And then one day, you know, we're talking to to Jimbo. And he says, Hey, could you put a triple chain ring on that stab downhill bike. And so patty and Dewey kind of trying to figure out how to do it and they figured it out. And that was basically that step bike, we put a triple chainring on it. And that was the first stinky. Yeah, in the late 90s 98. And I remember it really clearly because that's when Ross rebel Yachty won the Dual Slalom snowboard race. In Japan.
wade wallace 46:50
Yeah. I haven't heard that name in ages. Yes.
Jake Heilbron 46:53
And, you know, it's the whole secondhand smoke story. And Ross contacts us and say, Hey, I hear you got some downhill bikes. And like, No, we got the stinkies here. And that was like the first. Well, long travel five inches front and rear. Yeah. And that was the stinky five. So it was early days for free ride, but also, you know, again, being in this area, where you've got steep climbs and descents. And, you know, back then it was hair raising. And it's even before all the woodwork started to being built on all those trails, you know, what became known as North Shore style trails or North shell right North Shore riding. So the bikes really fit that type of, of riding because before people were writing, dual suspension bikes with not much travel, breaking them. I mean, just breaking everything, including their bones. And the bikes just weren't really cutting it as far as the terrain was concerned. So the bikes really made sense to us.
wade wallace 47:59
And the triple was that because of the short, sharp inclines and people weren't doing shuttle runs at the time. Was that the rationale behind it? Yes, it seems crazy right now triple. Why would you why would anyone want to triple but it made sense back then with the way the gearing was? And yeah, the way they rode, you
Jake Heilbron 48:17
know, again, it was people would look at those early freeride bikes, and they're like 40 pounds, 45 pounds, they're heavy. Yes, they're as heavy as an E bike today. And they looked at them and said, like, these are the stupidest things ever. It's kind of like back in the early mountain biking days, right? The bike didn't make sense to so many people. But it made sense to us because of where we were and the kind of extreme conditions that we wrote in, you know, the rest is kind of part of mountain biking history, the North Shore became a centre or mountain biking for a while. And it's a hotbed. And that really ramped up our business in a big way.
wade wallace 48:58
That's where you started to see significant growth. Is that kind of what you're saying? Or
Jake Heilbron 49:03
well at 1.1 model, the stinky whereas 10% of our total sales, is that right? We
wade wallace 49:10
couldn't make enough of them. How many models would you have at that time?
Jake Heilbron 49:13
Oh, I think we might add 30 You know, we always like to have a wider range of bikes we didn't like to get too stuck too much in a niche. Even though people thought Kona was a niche bike brands, you know, because we made heavy duty bikes that didn't break very easily. We we built bikes that were kind of around that original design of being long and tight, perform as well as anybody would in those days but kind of conservative streak we have as you don't want a major flaw. You don't want somebody riding your bike and breaking it and getting severely hurt or die. Right that again, it's like don't want to let people down Don't you know want to want to be somebody that you can rely on when when You're thinking about her bike
wade wallace 50:03
through this growth spurts, or part of growth with the North Shore scene exploding? Was that a challenge to keep up with demand of bikes and cash flow? And all that? Or was this just bootstrapped in lines of credit? And you were able to easily do this and sales were propping the company up quite organically? Is that the situation you're in? Or is it not that simple,
Jake Heilbron 50:29
it's always been organic. And with, we've never really tried to push the growth of the business, we'd like we'd like small companies. I mean, I know that there are people who were in the business that wanted to push it and said, Hey, we can do a lot more, we can grow a lot more, or let's let's do bikes like this, let's add more people doing that. But you know, there's a certain size where a company gets to, and then you have to take it to another level. And we resisted that.
wade wallace 51:01
How did you anticipate without the experience, you know, or to resist that? Like, how did why did you resist that? Because I think it's in many people, quite anyone with any, not anyone, but like ambitious people who do what you've done often want to get and see how far they can go? How, what is it in you guys that resisted that and said that that's not such a good thing for what we want? Right?
Jake Heilbron 51:27
Yeah. No, we never really were keen on taking over the world. I think, I don't know if it has something to do with being from the Netherlands originally, right? It's a small country, small is beautiful. That all that whole philosophy of being Canadian too, you know, you don't necessarily want to be the noisiest kid in the in the sandbox, we
wade wallace 51:53
love being second best. or fourth or fourth,
Jake Heilbron 51:57
that's that's the Canadian metal. You know, and nothing wrong with being in fourth place. And so yeah, I mean, if you look at some of the companies that started a little bit before us or after us, they're much bigger than calling out. Yeah. They wanted to do it, and they knew how to do it. And I think maybe it's that we just didn't really know how to do it. And secondly, we didn't really want to you
wade wallace 52:22
and Dan must have needed to be quite aligned on that. Because, you know, culturally, American Canadians are generally a bit different that way. Was that something you guys were always on the same page
Jake Heilbron 52:35
with? More or less? Yeah, yeah. I mean, it's, I think, if you look at what you do for your work on life, and it's quite a significant amount of your time, you know, our PTO always has been, let's enjoy it. Right. And that allowed us to do quirky things that maybe even held the company back. You know, we had some marketing ideas that were riffs and goofy, and people said, like, really, you want to call your bike stinky? That's the worst name ever for a bike? And
wade wallace 53:11
why did you choose things like that? What What was the rationale, just fun or a way of standing out?
Jake Heilbron 53:18
You know, I guess, when you're small, you have to make more noise in a way, right? You have to do things that let you be noticed. So you could do more colourful bikes? Or do you do bikes that no one else is doing? So it's kind of a contrarian thing to if everybody is doing things a certain way, there must be something wrong with it. Right? I've always thought that way. And maybe it's the culture that we come from, in our youth is that it was a very contrary in culture of the 60s and 70s, right. That's kind of rebelled against the man kind of thing. So yeah, we'd never never really wanted to be big. It just wasn't part of who we were.
wade wallace 54:15
I've got really fond memories. This is my heyday of mountain biking. I was always a cross country racer. We would race on the Sundays and the downhills would race on the Saturdays and keep us up all night and stuff. That was my fondest memories. And I was living in Canada back then. And I remember just you guys had really iconic factory teams with with, you know, Ryan Travon, Jeff Kaboosh, when you Sims, a Peter wedge, even rolling green later, and that, tell me about that period. And kind of that felt like, at least to me, the height of mountain biking, would was that the heights in terms of where you stand and your experience and what did that mountain bike team like what did that look like? What did the investment in it? What did running it take away from or add to? I'm curious about that time.
Jake Heilbron 55:09
I think if you look at that period kind of the run up to the 96 Olympics in Atlanta, where where you had the first mountain bike competition in the Olympics. Up until that point, cross country, mountain biking was a little bit more intimate or a core kind of event. There was no service or the athletes, you know, originally you were supposed to start and finish on the same bike. And if you had the mechanical, you fixed it yourself. So that's like the original philosophy of what mountain bike cross country racing was all about. And that is something that resonated for us. You know, it started changing and we tried to change with it. We added some, you know, really excellent athletes to the team. There was Leslie Tomlinson racing for us. Dave Wiens raised us race for us for a while, an old friend, who actually went back to the Joe Murray days max Jones, race for us. And then of course, all those, you know, famous Canadians. I mean, you go back to Kirk Moll day who was Canadian American, rolling green, of course, like you mentioned Peter wedge, he won the Canadian cyclocross championships seven times when you Sims you won several times yourself. Yeah. So yeah, we did have a lot of fun with that cross country team. And we were, you know, making a shot at having a team that could compete in World Cup events, and they were not necessarily winning. I mean, you could even go back to Ryder Hesjedal and race for us for a couple of years. Yeah. But again, we were almost like a farm team. To tell you the truth. Once an athlete got to a certain point. And the company came along, like Trek was specialised and said, you know, here's more money, we would say, take the money, you know, your career as an athlete is only so long. You go for it, and you achieve whatever you can, as an athlete, so there were never any hard feelings that people left, because they could get more money. You know, we were just kind of start all over again and find younger riders who were newer to the sport, it didn't cost as much money to have so that we could afford to do it.
wade wallace 57:38
What are the were the team's drain on the business at all? Or did you see a bump in sales because of being in that highly competitive space?
Jake Heilbron 57:48
That's the other part of your question is, does sponsoring an athlete help you sell more bikes? I think it definitely gives you credibility as a brand. We would joke that, you know, when an athlete wins a race on your bike, it shows that they didn't lose because they're on the bike. Right? The bike didn't keep them from winning, the athlete wins. It's not the bike. The credibility is important too. And some of the feedback you get from athletes are is helpful. Not always because you're not selling necessarily selling bikes to a sponsored athletes, you're selling it to someone who is, you know, an enthusiast, but not necessarily, you know, a highly serious competitor wants to go on and, and be a pro pro athlete. But it never got to the point where we couldn't afford it. It was always within that kind of number that made sense. That was a percentage of total sales that was affordable. Yeah,
wade wallace 58:53
it sounds like your whole philosophy on growth is on retain profits. Spend what you can afford and grow organically. And that's worked out quite well for you. Is that Is that a fair statement?
Jake Heilbron 59:06
We just kept putting the money back into the business. So we could develop more bikes have some fun, huh? Right. I mean, we have distributors in 20 countries we, you know, three years ago when we sold we had 1000 bike shops in North America in Europe. So that's a great opportunity to travel around and go riding with people or have them come to you and hang out and ride with them and party a little bit. Again, it's it's part of that enjoyment of your work. That's so important. Not like your work is your is necessarily the your only part of your life. But again, if you're going to do it, you might as well enjoy doing so, I know you keep drawing me back into all the numbers and I can read a balance sheet. You know, I can do a cash flow. You know, I understand how to read a bank facility statement and all that kinda stuff. But that's that's the boring part. Yeah, yeah, right, yeah, gotta do it, you got to have an insurance policy, you got to have your trademarks. You know, you got to have a deal with your Steamship Company and your customs broker and all those boring things that have to be there as the foundation of your business, but the other side, you know, making bikes, figuring out how to make them coming up with new ideas, getting people to blossom with their creativity and create new ways of making bikes that are adapting to where the sport is going. And, you know, doing some funny things with your marketing, like that's, that's the fun part of the business. And that's the part that I think anybody who's in it really cherishes being part of?
wade wallace 1:00:48
Well, you're very understated Jake, because I can only imagine the complexity and I enormous, just just challenges of running a business with you know, 20 distributors, and dozens of employees and you know, global and everything you have to deal with. With that. So well done. I mean, you make it sound very easy, but I know it wouldn't be.
Jumping ahead to COVID that I probably missed, well, I've missed 20 years of stories there. But I did read a quote by you. And I don't want to throw anything back in your face or anything like that. But I just want to take you back to the time and I read a quote in bicycle retailer that you said about strong government advocacy, or strong government advocacy, industry support indicate this bike boom will have a much longer trajectory than the 10 speed boom in the 70s. And the mountain bike boom in the 80s. Take me back to the the COVID boom. And was this something that you thought that was different from any other trajectory and cycling that you've seen? And were you in hindsight, guilty of being misled by that? Well, the pandemic
Jake Heilbron 1:02:17
boom was certainly the biggest boom, that I've ever experienced in the bike business, you know, we've had, we had the 10 speed there, and we had the mountain bike boom, we had the free ride, boom, we had any bike boom, at a gravel boom. But those are all small compared to what happened in the pandemic, pandemic. Yeah, everything sold, no one had anything left in their warehouse, even the bikes that were 10 years old, were gone. And a lot of people took up cycling, or renewed their interest in cycling. And I don't think they've lost their interest in cycling. If we look at the participation numbers that various organisations provide in North America and Europe, there's still a lot of participation in cycling, it's still pretty hot. The change is that they're not buying as many bikes, the mountain of inventory that existed at the end of the boom, so late 22 was enormous. And when it shifted, it shifted so fast, that businesses could not adjust quickly enough. And it was like one day, couldn't make enough bikes a month later. Stop full stop, right? We don't need any more bikes, people have started stopped coming in their bike into the bike shop. And I think part of the issue was that during the pandemic, it was very difficult to develop new products, right, the whole supply chain thing just slowed everything down. I mean, even just making your bikes that you've been making all along was hard, because of the demands on on the entire system and the rising costs of everything. So this is the thing that I think is slow down the industry. Because when you've got too much inventory, it's costing you money. Everybody that's holding the bag is not making money. So you it's really hard to invest in new developments, which is what the sport needs. The sport is not static, it's always changing. So there really hasn't been a lot of new bikes, new products in the last three, four years. So if you're an enthusiast, and you've got a great bike, and the only option for you is just to buy another one that's pretty much the same as what you've already got. You probably won't know probably just keep fixing up your bike. Maybe you'll buy a new fork or new paragraphs or battles. And you'll wait. You'll wait for something better to come along. I don't blame people for that. So that's, that's where we're at right now, we still have a massive amount of inventory. And it's hurt a lot of companies that are suppliers brands, especially complete bike brands, it's hurt a lot of factories. What amazes me is that so few people have gone bust. Everybody's hanging in there, right? They just love it too much to give up. Right? They just keep going because the pain is worth it. With
wade wallace 1:05:34
some you're disciplined organic growth up until the point of COVID. Did you make any mistakes in hindsight with whether we're getting excited or just trying to keep up with this newfound demand? Were there any things in hindsight that you could have done differently? That? I don't know? Maybe not even in hindsight, but with the choices in front of you right, then and there?
Jake Heilbron 1:06:00
Yeah, I don't know if, and I've thought about this quite a lot. I don't know if there was this winning strategy. During the pandemic, certainly, you could win during the pandemic. If you weren't careful, I think you would have created a little bit of a chest of money set aside for whenever that boom was going to add. That might have been one strategy. And some companies did that. But they still have experienced massive drops and sales. The, you know, buying a whole bunch of bike shops, like some of the big brands did was one strategy. And I'm not sure if that really is successful in the short term, it might turn out to be really successful in the long term. But not participating in the boom, would have made you miss that. You know, if you said, okay, you know what, this isn't gonna last very long. We're just not going to order anything for a while. And we'll wait for all the prices to stabilise and then we'll go back. And so you would have sat out for a couple of years. So you would have lost out there, that might have been a big mistake. In hindsight,
wade wallace 1:07:17
what was your thinking with how long this might last internally? Well,
Jake Heilbron 1:07:21
we knew was going to end and to be able to keep making bikes, you had to get in the queue. And so you're relying on all your suppliers to deliver things in a reasonable fashion. Not all of them can even tell you where they're going to make stuff. But they just kept taking orders. But there was a window of cancellations. There was the opportunity to say, Okay, actually, we're no when the pandemic stops, or slows down, we're just going to cut. And I'm sure a lot of brands and Cohn it wasn't, wasn't that unusual is cancelled a lot. And in spite of the massive cancellations that were going on, as the boom was ending, there still was too much inventory. And so I don't know if there was a strategy maybe in you know, in a couple of years, we'll find out who the winners are. Yeah. But right now, I can't see what it was. You know, when we had the last downturn 2010 The strategy for the big players was to give really loan payment terms to their customers, to their dealer customers, okay? Six 910 months,
wade wallace 1:08:43
what was that downturn due to? That was like an
Jake Heilbron 1:08:46
economic downturn. They're just sort of a general economic global meltdown, so to speak, in financial markets that affected everything. And so that's when it was possible to slow your business down. And that's what we did back then. You know, we saw that, oh, gosh, you know, we've got too many bikes, we're just going to have to cut to the chase really quick, lower the prices, move the inventory, clean it up. It's great for consumers, probably great for bike shops, too, but not great for the brands. And just kind of start over again. And that too, was a period where Kona was struggling a little bit with product development. And we'd been a bit stagnant in the mid 2000s. Kind of we just thought, Well, hey, this freeride booms gonna last forever. We're so far ahead of everybody that they'll never catch up. And we were a little complacent. We got we got that wrong. And then all of a sudden, it became so easy for people to imitate you or make something that's a little bit better. Then what you're doing. And we didn't add enough or invest enough in our product team at that time, right. And so then we started trying to catch up, but we were behind the curve. And it really wasn't until about 2014 2015, when we came out with the first range of process that we started to catch up again. So it took basically, almost 10 years to kind of take the hit, and then build it back up again. So, you know, when you take a long view of business, you can do that.
wade wallace 1:10:45
January 2022, was announced that you sold the business to Kent outdoors. Tell me about the conversations and process that lead up to that, how did it come about?
Jake Heilbron 1:10:56
Well, it's something we'd never done before. I've never sold a business before, either at Dan or Jimbo. So it it took some time to figure us figure out how to do it. And because it was the pandemic, boom, everybody was really horny for bikes. Like lot of different scenarios were presented to us billionaire, you know, a strategic partner who has 10 other brands, a straight private equity firm who just wants
wade wallace 1:11:24
to make a play. These are different options that you're talking about, or those were some of the options
Jake Heilbron 1:11:28
that were presented to us. All right, because people will like us if they were already for buy companies. It was like a super cool thing.
wade wallace 1:11:36
Investors were approaching you guys, unsolicited. Yeah, yeah. Right, right.
Jake Heilbron 1:11:40
We're getting on we're not going to be doing this forever, unless we live forever. And so it just seemed like the right time to actually listen to those opportunities. And so the when this was presented to us with Kenton, they wanted to turn their watersports business into an outdoors company, actually just a private equity firm behind it had just bought Kent and they were going to buy a boat, the stand up paddleboard company, and they wanted to buy us and we met the CEO. That's Ken Mitel, who is still in the bicycle business. And I think he's was a mountain biker. I think he loved cycling, and perhaps was kind of a guiding force and in cat wanting to acquire Conan. And we met him and felt that there was an affinity there. And so that that's really what tipped us over and doing the deal with Kent. If it wasn't for the hangover of the pandemic, I think Kent could have been much more successful with Kona. Than then what happened, I think, because of the complexity, the business, it just unsettled them. And when all outdoor businesses were under a lot of pressure. And because Kona, again, is had that quirkiness that didn't exactly fit with a little bit more corporate structure of Kent. I think that's probably in the end, what made them decide that it just wasn't a good fit for them.
wade wallace 1:13:19
How was the culture between the two businesses because it definitely sounds like Kona had a very unique small business, maybe culture of, you know, very, very unique and what was what was the culture of Kent outdoors, being larger with
Jake Heilbron 1:13:37
the original culture of cat was kind of scrappy, like, like Kona, you know, very entrepreneurial. And over the years, the founders of cat added businesses to their roster. So I think the intent was that you could take all these companies together and find some synergies, you know, whether its freight programme or insurance programme, centralise some functions, but maintain character of all the parks of it. So, I think as that structure was getting built, perhaps there were a few bumps in the road. I think people were actually at Cornell looking forward to the structure supporting the business and allowing it to get to another level that Dan and Jake and Jimbo were never going to take. Because Kona, certainly, at that point, had the potential to become a bigger player in the business. It didn't work out that way. Unfortunately, it's become smaller. It's, you know, kind of back to where it was in its more quirky iteration 10 or 15 years ago in terms of size. So that's where we are today. I think there are definitely a lot of challenges in rebuilding the company after the hit that it's taken. Recently, it's really been more the last year and a half. But if you look at the support that exists for the company, because of the relationships from all those years, and you know, all the great stories people have, you know, you read a lot of people saying, well, I had a cornerback, and when I was 10, or 20. And, you know, they remember that with with some fondness. So, there are people cheering for the company and the brand. And that I think, is going to carry us for a little while. And then we have to make sure that we don't let anybody down.
wade wallace 1:15:59
You said, uh, you know, we are the smallest big business and one of the smallest big businesses in the world or something like that, to that effect it.
Jake Heilbron 1:16:08
I can't remember the order or the biggest small bite companies small bike buy. Yeah, I like it, whatever well
wade wallace 1:16:14
is. Did the COVID, boom, the approach for investment? Did it start to raise new ambitions in that regard? To grow and take it to another level, like you mentioned? Or were you quite happy with where it was? And, you know, you know, everyone has their own life span of running a business? Were you kind of looking to take a step back? And was that what were those things that made the decision to sell to Kent,
Jake Heilbron 1:16:43
I personally wasn't that keen to retire. I like working. I like the people I work with. I like our customers. I love the sport. I mean, I like to tell people, I was born on a bike. Because the first thing I remember is sitting in a basket on my mom's bike in the Netherlands riding down to the beach. And I've never stopped being on bikes. So again, it's that affinity for cycling. Maybe it's a little boring, but that's kind of who I am. But yeah, I stayed on in the business I was on all the way until cancelled it in a diminished role, because they didn't want my help. And you know, Dan, and Jimbo, they didn't really want their help either. But what I really wanted to see Kona do was get to the other side, in order to get to the other side of this hangover, which is been so damaging for the industry of cycling. And it's going to get there. And it was one of the motivating factors to jump back in. And do the buyback.
wade wallace 1:17:47
How did it feel working in a diminished role after 30? Whatever years of running the company, how did that feel?
Jake Heilbron 1:17:56
Well, for about two hours, during the last two and a half years, I started thinking I could probably get used to the idea of retirement. But that test, yeah. You know, I'm, I just like to put my shoulder into things and make things happen. But like I was saying the motivating factor here is, is to make things right. Or to make things right for the company, the brand, the employees, all the dealers, the suppliers, and a lot of people are in our place. We've kept almost everybody on in North America, nobody got a pay cut. We brought some of the people back in who left or got let go, that were actually a key part of the business and will be a key part of the business and putting it back together. Again, the head of our marketing team, the head of our IT department, some key sales people. One of the key product managers, so there's that people got hurt a little bit. Maybe, you know, I think it was a tough period for for many. And I think the fans perhaps who were on the inside and watching it closely. You know, we're we're a little sad. And that's why they're happy now and being supportive. And again, I feel like we can give them reason for being supportive and wanting us to succeed. I feel like we can do it. And certainly whoever is still in the business is quite dedicated to kind of join in right in there with Dan and I and put on our shoulders into it and making it a really healthy business again,
wade wallace 1:19:57
what was the process of buying the business back like, you know, I read that Ken Mitel, the CEO CEO left in 2023. And I imagine, I think they had struggles finding leadership. After that. did things change quite a bit after that, and then after Ken left, when
Jake Heilbron 1:20:19
we got when Kent got to the third CEO, and the fifth CFO, is when I think some stability started coming in, right, Lee bielicki, who's the CEO now is a very straight shooter, when he had his first town hall with all of the Kanto employees two months ago, he really didn't pull any punches, but he's not a mean guy. He's just a straight ahead business person who has a lot of knowledge and experience. And he, I think, figured out pretty quickly that Corona was not something that that Kant wanted to continue to invest in. And I know when he told people that and then we had the embarrassment at sea otter. A lot of people were feeling like, oh my goodness, this is the end of Kona.
wade wallace 1:21:12
That embarrassment at sea otter Jake is referring to is something most of you listening will have fresh memories of. The sea otter Classic is North America's largest industry and consumer gathering that kicks off the season each April. On the eve of the event reports were coming out that the CEO of canned outdoors, called all the employees and told them to break down the display and not have a presence at the Expo. It led to mass confusion, adding credence to the rumours that kohner was in deep financial trouble because of the after effects of the pandemic and mismanagement.
Jake Heilbron 1:21:47
I don't think anybody can really explain what happened. It certainly was very public, I don't think anything white that publicly embarrassing has happened to a bike brand since Schwinn announced their bankruptcy in the middle of the cap does show in 1992. So here, I've got chalk one up for Kona as doing something special. But as a joke, I was saying to people, Ken is going to sell Kona probably going to get a good owner who really cares about bikes. But the problem is like who would be crazy enough to want to buy a battered up old bike company right now? Like it's the worst possible time? That's a bit of a joke.
wade wallace 1:22:36
I've seen the irony. Obviously,
Jake Heilbron 1:22:38
we were already talking to the folks that can't about possibly buying it back. Because we were probably the only ones who would be crazy enough to do something like that. Was
wade wallace 1:22:50
that thought crossing your mind before the townhall with a new CEO? Or was that kind of when you found out that they're looking at selling Kona? Yeah, I
Jake Heilbron 1:23:02
mean, I started thinking they probably would want to sell it when Lee took over it but then when he finally did announce to the staff and the industry that they they wanted to find an owner or wind it up. That's when things started happening really fast. And they happen super fast. Two weeks as a matter of fact from political events after closing
wade wallace 1:23:35
and how did you go about what were your first phone calls? How did you go about buying this back selling a business is difficult buying a business is also difficult and you said you had done neither really
Jake Heilbron 1:23:48
have either or experience in business. And
wade wallace 1:23:50
you've done it in two weeks? How what was that process like for you?
Jake Heilbron 1:23:53
Well, again, is that boring stuff, you know, lawyers, accountants, bankers, finding
wade wallace 1:23:58
millions of dollars, I'm guessing the
Jake Heilbron 1:24:01
biggest part was making sure that we were going to be able to take care of the suppliers and getting their support. That was the big one. That was really important. But we had people who had helped us with the sale and we got them to help us again. Yeah, it's not like we were planning to buy it back when we sold it like I said, I was just wanting to see it through and get going it to the other side of the of the bust, Dan and Jimbo, we're happy to move on and let a new generation take it on you know, the thought there was gonna was going to be a bigger and stronger and better buy company.
wade wallace 1:24:38
What are what are some misgivings that have happened over the past couple years that you feel you need to correct? Maybe two customers, suppliers, dealers, any of your stakeholders?
Jake Heilbron 1:24:50
Well, right now, there is a lack of supply. There really hasn't been in refreshed inventory in staple products. For some time, but also that is customer service product, warranty parts and frames, right. And so that has led some people doubt, that's something that needs to be rectified pretty quickly. And that's what we're working on. The one thing that were a little concerned about, and we haven't kind of come to terms with it is all the bikes in the direct to consumer programme that were sent to consumers in boxes. And they were not reassembled. So we are concerned about people's safety. And so we're putting a programme together to make sure that everybody, you know, has a safe buy, regardless of where they bought it from. But yeah, it's the customer service aspect, on the warranty side, but also the sales side. And then there's all the product here that was never launched. So we're finally going to be able to get around to launching it, we want to hurry up and get those bikes out there. And again, that's the supplier side, the factories that have all these parts that I feel bad about that they're kind of holding the bag, really. So we want to take care of them. We want to take care of our customers are taken care of anybody that owns a call that needs help with it.
wade wallace 1:26:16
But a huge challenge in front of you. How did how does that feel like the things you're speaking about? seem like they're pretty big is it? Have you ever been busier?
Jake Heilbron 1:26:26
Well, I was kind of slacking off. Didn't really have a lot to do. I was taking care of international distributors. I was still on the trademark and Industry Reports. And but you know, that became less and less needed over the last period. Yeah. I like the people I work with. We're going to just dig into it and get it done. That's that Canadian thing right? Get her done.
wade wallace 1:27:00
That's Jake Hill. Braun telling us his founding story and what lies ahead for Kona 3.0. Judging by the cycling community's reaction from the events at sea otter, and the news of Jake and Dan buying the business back, there's a lot of people cheering for them. Kona is a big part of mountain bike culture and history. And there's still a lot of people out there who still care about them. There's some big challenges ahead for Dan and Jake, but if there's anyone who can turn their company around, it's them. Until next time, this is Wade Wallace from escape collective and I hope you enjoyed this episode of overnight success.
Transcribed by https://otter.ai