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Above: Cordon Baesel, a member of Luce, Forward, Hamilton & Scripps' action sports group, says he wants to share lessons learned from his failed snowboarding venture. "We want to help some of these folks grow and get financing," he said.

By Pat Broderick - Daily Journal Staff Writer

SAN DIEGO - Feel the adrenaline rush. The heart-pumping thrill of riding a wave, careening down an icy slope or skateboarding into bliss. You are a champ.
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So, how hard can it be to cash in on your passion? Transform your weekend hobby into a money-maker?

Ask Cordon Baesel, a real estate attorney in the San Diego office of Luce, Forward, Hamilton & Scripps, and a member of the firm's action sports group that he helped launch this summer. His own entrepreneurial foray in the action sports industry ultimately fizzled.

Now Baesel, and other attorneys with extensive sports backgrounds, say they have learned lessons that will help others trying to build a business out of their passion.

"I started snowboarding in the early '90s, and fell in love with it," Baesel said. "We raised money, had investors lined up and were hoping to crack into the market."

Then the dot.com bust happened.

"Everything was great, but we were always missing one zero," Baesel said. "It never really caught on. We were making snowboards to build a brand to sell shirts and [assessories] (sic)."

He said his business was geared to older men. "We wanted to give the dads their own identity. In reality, it took too much effort to learn how to do it."

Also, their timing was off.

"The snowboard industry was contracting in the mid-'90s, and all of these companies had built up, and we were a little late for that," he said.

Baesel says he hopes his personal experience as an entrepreneur, including his failures, will help others who either are starting a new action sports venture or believe they are ready to take their company to the next level. "We want to help some of these folks grow and get financing," he said. "A lot of these companies could get swallowed up."

Patent attorney James P. Cleary, a partner in the San Diego office of Mintz Levin, also has real-world experience to share with clients in the action sports industry.

A co-founder of San Diego-based AquaLogix, which makes aquatic exercise products, Cleary provides legal advice on the company's intellectual property.

Early on, he "did pretty much everything" - all the patent work, the business plan, helping to develop marketing [and] distribution."

"I went to trade shows, and jumped into the pool and did some demonstrations," Cleary recalled. "It's a great learning experience, better than an MBA."

A swimmer himself, Cleary says he doesn't limit himself when it comes to becoming immersed in a client's product. Named an outstanding cadet in physical fitness as an undergraduate at the U.S. Air Force Academy, he does it all.

"I have a skateboarding client in San Diego, Sector 9, so I've rolled around the big hills with skateboards," he said. "I have a surfing-oriented client, Kelly Slater, so I've been dumped in the ocean with a surfboard. I think this best defines [a lawyer] interested in action sports - that they are willing to get involved in whatever sport it is."

These days, Mintz Levin has assigned Cleary the task of developing a firmwide sports practice.

Cleary, who says he hopes to roll out the new practice next month, now is developing the business and marketing plan, and a budget, identifying attorneys who best would fit in, focusing on such diverse areas as IP, employment, commercial property and insurance.

"We'll be going to trade shows, giving talks," he said. "It's a pretty unique clientele - very youthful. It's tough to get in front of a group like that and talk about IP. They are more interested in how many flips they can make on a bicycle."

But Cleary is ready to plunge in.

"I pretty much have seen it all, from starting up a company, and what not to do," he said. "Luckily, nothing has gone belly up."

Both Mintz Levin and Luce Forward are among local firms that have linked up with San Diego-based CONNECT, a group that matches emerging companies with venture capitalists. CONNECT has launched its own Action & Sports Innovators program to help new athletic companies attract financing.

Jason Femrite, who specializes in corporate finance and mergers and acquisitions at Luce, is chairing ASI's capital forum committee, laying the groundwork for a summit in May 2009 to attract investors.

"A lot of these companies have a good design," he said. "But a huge number of them have trouble getting beyond the creative side and bringing the product to market. They need guidance, and that's the big strength of CONNECT."


Also serving on the capital forum committee is Taylor L. Stevens, a partner in Morrison & Foerster's corporate group in San Diego, and a seasoned surfer himself.

"As the market solidifies, we are identifying folks in San Diego who are interested in this area," he said.

In his own practice, Stevens says he doesn't take the traditional route of meeting potential clients on the golf course.

"This morning, we had a meeting in the water, and paddled out to meet some guys to talk about industry issues," he said. "Instead of spending five hours golfing, we surf, cook hotdogs and everyone goes back to work. It's a fantastic way to pursue business development opportunities around a shared passion."

Richard L. Kintz, who sits on ASI's board, is a partner in Sheppard Mullin Richter & Hampton's corporate practice group, the managing partner in the Del Mar Heights office, and a member of its sports industry team. He considers the action sports industry prime territory.

"We see it certainly as a growing business," Kintz said, noting that San Diego County, in particular, is a magnet for triathlon training.

"We think that getting a foot hold in action sports in Southern California is important, and we will get a lot of trademark work out of this," he said.

CONNECT, whose focus traditionally has been on technology and life sciences businesses, recognized the untapped potential of emerging sports businesses. "We quickly understood that this industry is starving for education and assistance," said Dea Simon, former ASI program manager, and a CONNECT consultant.

"There are a lot of grassroots movements, especially in the surf and skate culture, and business ideas started out of someone's garage. We want to supply them with mentoring, access to angels, private equity firms - building a network of all those people."

So much can go wrong.

"You can get too big too fast by selling to everybody, and can dilute your brand to the point that you're no longer cool," Baesel said. "If you're not careful in distribution agreements overseas, you can end up looking at somebody else making money in other countries."

And, he added, be sure to put everything in writing.

"It seems obvious, but when something gets successful, if it's not well documented, you can pay," Baesel said. "It is the one thing I was a stickler for with my partners, and they'd roll their eyes. In the end, when we had to dissolve the business, we had things well documented."

But businesses aren't always eager to find out that maybe they have dropped the ball.

"Sometimes they don't want to hear it," Baesel said. "But when you have a set of eyes from the outside, you can look at things more critically, and you may find the holes in it. It's better to advise them up front."

Not that all action sports entrepreneurs are eager to budget for legal counsel.

"They don't know what they don't know," said Luce client Mark Schmid, a founder and owner of Syndrome Distribution, a major skateboard manufacturer and distributor, and chief executive officer and founder of Sk8ology, a display system for showcasing skateboards on walls. "It's not an industry that actively seeks help. It's a fun industry, and a lot of people will be involved simply because they can be passionate about it. Perhaps this energy keeps them from seeking counsel and asking for help."

What is it that some entrepreneurs don't know that they don't know?

According to Baesel, among the questions that they should be asking is, what is your long-term goal, your exit strategy? Do you want to build a brand up to the point that you can sell it? Do you want to get financed by someone else, be a target for a takeover, or get bought out by your partners or initial investors?

And, protecting your trademark is vital, he added.

"You have to police it or lose it," Baesel said.

Kintz agreed. Trademarks make the brand, he said.

"You'll find in many ways that, when it comes time to sell your business, intellectual property amounts to as high as two-thirds the value of the company," Kintz said.

© 2008 Daily Journal Corporation. All rights reserved. Reprinted by Scoop ReprintSource 1.800.767.3263.