Just Managing: Second Chances

Few of us get the chance to go back and do things over, especially with the full knowledge of how to get it right next time. Steve Giordano was given that chance (OK, maybe it was thrust upon him), and he's taken every advantage of the opportunity.

Giordano is co-founder and CEO of Digital Now, a digital imaging company he launched four years ago after losing control of his former company, Floppy Shots, which was sold out from under him.

Giordano's first venture was a pure labor of love - two loves, in fact. In 1994, after taking early retirement from the armed forces, Giordano launched Floppy Shots, which combined his two great loves, photography and computers. Floppy Shots produced equipment that converted pictures into digital images through high-speed scanning. It then sold the enabling technology to photo shops that offered the service to individual consumers. Although successful, the business was fairly capital-intensive, and Giordano sought working capital.

The good news: Giordano landed venture money to fuel his growth. The bad news: He lost the company as a result.

According to Giordano, he came into work one morning in 1995 and discovered that his majority investor had sold the company. He tried to work out a compromise with his new bosses, but Giordano ended up walking out a mere two months later, intent on forming another company based on his same passions. Naturally, he and his former company became embroiled in a messy legal battle that eventually was settled in court.

Giordano learned a painful though powerful lesson from the experience: Without financial control, he could never have real control of any company.

By launching Digital Now, which uses the same digital-imaging technology as Floppy Shots, Giordano made sure to retain control. He became partners with IXLA, an Australian company that was an early investor, but he never ceded majority control.

He did however, share his power. The second time around, Giordano took pains to make all the employees owners of the company. The nine founding employees he took with him from Floppy Shots were given 20 percent of the equity to share among themselves, with the expectation that they would assume responsibility for the company just as owners would.

Finally, from a product perspective, Giordano made the decision to evolve the company's technology, which now focuses on online photo delivery for photo shops.

Yet one of the most interesting choices Giordano made recently was to go public - on the Australian Stock Exchange. The company wasn't large enough to go public on the American exchanges, and IXLA's ownership stake presented a rare opportunity to launch in the land Down Under.

"By going public on the Australian market, we could retain control of the company, stick to our original vision and still move forward with the company," Giordano says.

The move appears to have paid off. Digital Now has used some of the $30 million in IPO proceeds to purchase two major scanner manufacturers. As a result, the company has gone from $6 million in revenue in 1999 to a projected $20 million this year.

The moral of the story is not that everyone should rush to the other side of the globe for easy finance. Listing there was not a novelty tactic, but a clever use of existing resources. Most companies have more than one potential source of finance that could set them on the path to growth, and wise owners select the money that best lines up with their strategy. Sometimes that means angel money, sometimes that means VC funds, and sometimes it means bootstrapping like mad.

The moral is that you should maintain financial control of your company. Digital Now needed working capital to grow quickly because Giordano wanted to avoid losing control. He was fortunate enough to have access to a public market through his partnership with IXLA and resourceful enough to take advantage of it

Today, Digital Now finds itself competing in a much larger market. Giordano's original company was purchased by PictureVision, which has since been acquired by Kodak. He now finds himself going up against the photo giant - and is enjoying the challenge.

"It's always important to have competition pushing you along," he says. "It sharpens your skills."

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