It’s not actuallyevery single day you meet a CEOidentified as “Punkass.” Particularly the one who operates a $200 million business.
The heavily tattooed, bandana-wearing CEO fits right in at TapouT, a 140-employee clothing company in Grand Terrace, Calif. thatprovides athletes andfans of mixed martial arts, a combat sport recognized for its brutality.
Aside from the name, exactly what makes Punkass and his co-founders differentis definitely thededicationthey made more than a decade ago with a sport that was then virtually unknown. They took a riskon a market that barely existed.
The risk? If the market did notgrow, TapouT might havenowhere to go. The reward? In the event the market boomed, they will be the first ones in.
Way back in 1997, TapouT’s three co-founders — Dan “Punkass” Caldwell, Charles “Mask” Lewis and Tim “Skyskrape” Katz — didn’t have college degrees and little money. Howeverthe 3 had been learning mixed martial arts and were passionate fans of the sport. They were certain that someday; the sport will beacknowledged — even appreciated — by the mainstream audience.
Therefore they took the kind of leapthat would make little sense to anyonehowever their fellow true believers: They maxed out their credit cardsto starta small operation marketing t-shirts at underground mixed martial arts tournaments.
Back then, mixed martial art was still a fledgling movement, well under the radar of other clothing companies. These days, it’s almost as main stream as boxing — and TapouT’s block-letter logo has become synonymous with the sport.
The company sponsors well-known fighters like Vladimir “The Janitor” Matyushenko and also Thiago “Pitbull” Alves. (Along with tattoos and bulging biceps, nicknames really are a must-have for experts of mixed martial arts). TapouT also sells clothing, mouth guards, nutritional supplements as well as otherlabeled goods online and at retail stores including Macy’s and Champs Sports.
All those t-shirts and nutritional vitaminsadd upfast. This past year, TapouT raked in $200 million in annualincome — more than 16 times its $12 million revenue in 2006.
Now how does TapouT keep the mixed martial arts market inside a headlock? Clients say it’s the early relationship the company developed with both fighters and followers.
“They’ve been right in the mix from the start,” says Andrew Lang, co-owner of Lightning MMA, a mixed martial arts gym in Laguna Hills, Calif. “Those three guys were at the events — they’ve this presence, this rapport with the fighters.”
While in the late ’90s, TapouT sponsored fledgling fighters for $300 a pop. Nowadays, sponsorships cost around $3,000 to $1 million.
“We use a full team working with our fighters as well as their managers 24/7,” says Punkass. “We’re concerned about their personal lives, also. How’s their newborn baby? How do they feel after having a fight?”
The goal is to get fighters to put on TapouT gear in and out of the ring. That, in return, has given the company mass appeal among followers — that comeprimarily from the sought-after 18- to 34-year-old male demographic.
“I have no idea who’s more fanatic, mixed martial arts people or NASCAR people,” says Marshal Cohen, chief industry analyst at the NPD Group, a market research firm. “But in both case, when you’re that fanatical there is atremendous allegiance to a brand, and it’s really all about the lifestyle. It’s similar to a club.”
To make certain that club grows; Punkass, Mask and Skyskrape brought a proficient entrepreneur, Marc Kreiner, on board in 2006. Kreiner got a varied background — he launched disco bands in the ’70s and more recently started an infomercial company — but he helped take TapouT products to over 20,000 outletsaround the world. He also inked a handful of licensing agreements, together with a line of TapouT-branded nutritional supplements with Champion Nutrition.
“We are licensing a nutrition line, energy drinks and TapouT gyms,” says Kreiner Marc, now the president and chairman of TapouT. “The motto is ‘Grow big or go back home.’”
However TapouT’s development had its low ebbs. during 2009, co-founder Mask — known for his bigidentity and signature face paint — died in a vehiclecrash. Kreiner, Punkass and Skrape were leveled from the loss of their friend and colleague. Most TapouT employees got commemorative tattoos in Mask’s honor using the word “believe.”
Punkass says that Mask’s death has been the company’s major challenge to date. But TapouT has other, less tragic troubles. While mixed martial arts has toned down the violence a bit in recent years — the rules, for example, do notallow biting and eye-gouging — some lingering controversy about the sport’s roughness can limit the growth of its fan base, which is TapouT’s main audience.
Some smaller companies also havejoined in the mixed martial arts apparelcompany, including Dethrone Royalty Clothing and Hitman Fight Gear. But once it comes to the competition, TapouT’s main threat is much bigger players, such as Nike and Adidas.
So could TapouT become the next sports apparel giant, akin to Under Armour?
It is unlikely, suggests Cohen, the NPD Group analyst. But for the moment, at least, the companydoesn’t have significant competitorscompetingfor a share of the same market, he notes. And there’sroom enoughto develop: The overall sports apparel market rakes in $12 billion per year in the United States alone.
As TapouT lends its name to increasingly more products, the businessrunsthe risk of diluting its brand and losing “street cred” having its loyal fan base. Yet Punkass isn’t worried about that.
“I don’t see ourselves making TapouT Ken and Barbie items anytime soon,” he states. “We won’t create a product unless it links to our core audience. We stay true to the brand.”