cc
is Entrepreneurship in Society. This is a course that is offered
through the University
School of Human Ecology. of Wisconsin Madison
As we begin today, I'd like to I'm Jeanan Yasiri.
supporting this class: the UW eOffice of Corporate Relations,n
the UW College of Engineering for their technical support,
and the Ewing Marion Kauffman Foundation for their financial
support.
academic education in They arentrepreneurship.vancing
Additionally, we'd like to thank
Public Television and their University Place crew for taping
today's lecture.
our special guest today, I'm very pleased to introduce
of Electronic Theatre Controls, Fred Fosteor ETC.der and CEO
Fred and his brother, Bill, developed ETC more than three
decades ago in the mid-'70s when
University of Wisconsin. they were students here at the
had to be a better way to make a Their conviction was that there
they learned that there was. lighting control console, and
worldwide and very recently built a state-of-the-art 325,000
square foot headquarter building
It continues to serve as the hub in Middleton.
headquarters. Fred has performed virtually all
roles for the company from
engineer to industrial designer, original inventor and
marketing, chief operating tech support, salesman,
president and CEO. officer, and today, of course,
strategy and product development He focuses on ETC's global
of their internal ETC group, as well as the cohesiveness
as well as the external whiccommunity to ETC.bout
And he is a huge supporter of student interest which I'll hope
he'll let us know about as well.
He's received many, many honors, He is top in his industry.
Citation for significant including the USITT Special
of equipment, design, and cmanufacturing in the field ofnt
lighting technology for the performing arts, the 2007 Wally
Russell Lifetime Achievement
Gottelier Award, and he continues to be ranked in the
top 10 of the most powerful people in the industry by
Live Design magazine. He's particularly proud of the
recent Governor's Award for the Arts that was given
to ETC just this past fall. When I asked Fred, really just
several weeks ago, to come and
he'd like to title his talk, and speak with you all, I asked what
with a bit of a laugh, how he said, well, and he said it
and too stupid to quit." about "35 years at ETC,
that, but I know that you join And we know he's anything but
me in wel[APPLAUSE]d Foster.
Fred Foster: Hello there. Sure enough, I was a student
at the UW in 1975.
My father was a law professor, I grew up in Madison.
staff, so I'm a born and bred my university brat townie.mic
All of the way through high school I worked back stage.
I had to beg my way to get out
credit for a stage craft course of high sI never took.ing half a
And the started school at the university.
So ETC, Electronic Theatre
lighting equipment. CThe spotlights that are abovee
your head, the dimmers that control the intensity of those
spotlights, and the computerized
interface between the lighting control system that is the
trade, and all the technology desthat lights the stage.the
Typically what happens, when I
somebody and sit down next to somebody and you start talking
about what you do and I say well
lighting equipment, the typical reaction, almost universally, is
they tilt their head and they say, well, I guess someone has
to do it. You don't think there's a real
business here.
I am in the top 10 most important people in an ant hill.
But within my little ant hill, I
The company, 35 years of ETC is really kind of a surprise to me
because until I look at myself
19 years old and dropping out of in the mirror, I still think I'm
So how it all started. the university.
great lighting professor, a guy At tnamed Gilbert Hemsley.s a
One of the theatres in Vilas
He was a flamboyant, really exciting teacher and a really
good lighting designer. And it was one of those moments
at a university where he was a
great students. There were 160 students in first
semester lighting.
It was a really dynamic program. He had 15 graduate students.
or eight years he taught here, And the students for the seven
throughout the industry and hibecome famous televisionr
lighting designers, stage managers, opera lighting
designers.
successful. I was going to be the world's
greatest lighting designer. At 18, well now I'm pretty
arrogant, at 18 I was astoundingly arrogant.
I was going to be God's gift to the art of lighting design.
And I got into the university program here and I ran into
people who were so much better
standpoint that I ran for cover. than I was on an artistic
I can bore you to death with the My big problem was color.
pick a shirt that goes with a scienpair of trousers. can't
So that really undermined my
So I drifted into the abilittechnology.artist.
At the university in 1973 they
lighting console. This, for any chip heads in the
audience, is actually not a computer.
It was a state machine. And it was called Cue File.
It cost $150,000 in 1973 when it
Three big racks of electronics was installed.
big, and I thought it was really and a control panel about that
So I have a brother who is two cool.
He was studying physics at the years older than I am.
And I said, Bill, you got to UW.
And he came down and he looked come look at this thing.
and the technology. It wasn't integrated circuits,
it was discreet transistors,
direct quote was: "Gack, we can core do this for $5,000." his
So it sounded like a good idea.
We'd been looking for are a project to do together.
The other thing that fell into
things Gilbert would do, he would take us students out on
the road when he lit
And we would do anything from getting sandwiches for the
design team to assisting him on Broadway shows.
And I got to spend two weeks in my freshman year at the
Metropolitan Opera House
Now I don't really like opera, in New York.
They're amazing machines with 70 but I love opera houses.
art happen. eAnd so I fell in love with thes
Met, and the Met had yet to have
in it. a computerized lighting system
were going to build a $5,000 So part of our fantasy was we
board, and we were going to put lit into the Metropolitan Opera
House.
party at Gilbert's house. Gilbert's house is on Stockton
Court which is just that way, just off Monroe Street.
And his parties were great. You'd kind of get there anytime,
and you would leave sometime in the next three days.
I remember distinctly at one
that went up stairs when Dean Cronon and his wife, the dean of
Letters and Science, walked in. They took one look on the porch
where people were doing all sorts of interesting things and
went into the kitchen and hid.
at Gilbert's house. ButSometimes it would be Jackbe
O'Brien, a Broadway producer and
Sometimes it would be Sarah Caldwell, an opera producer.
It was just a really exciting time to be there.
And when you wanted an
to wait your turn. appointment with Gilbert you had
it was my brother Bill, myself, a high school friend named Gary
Buick and a friend from sailing named Jim Bradley.
And we went over to Gilbert's house to have a meeting with him
and say hey, Gilbert, we're going to build a Cue File.
So we waited until our time came.
It was about 11:00 o'clock. And the only other thing that
happened is you got to have a meeting with Gilbert wherever
there was a room or a quiet enough place to do it which
turned out to be his bedroom. Now at 18 years old, being
referred by Gilbert as a
was not a room I really desired to be in but I was surrounded by
a bunch of people so it was okay.
So the other rule at Gilbert's
house could participate in a house is that whoever was in the
So there were people sitting on the dressers, graduate students,
lighting designers, that sort of
And we said we're going to build thing.
yeah, sure. Well, that kind of -- us off,,
and we went away. It was Christmas Eve of 1975,
and we consider that our birth
So to finance the whole thing we date or inception date.
could. stole parts from anywhere we
company that you could order There was have electronics
electronics magazine called Poly from in the back of an
was if you brought a chip from Packs and we thought their motto
but at these prices who cares. them, sure some pins are missing
of spare parts magazines. So And there was one part weback
couldn't beg, borrow, or steal, and that was an 8-inch floppy
disk drive. It cost 1200 bucks.
So the four of us each had to come up with 300 bucks to fund
this one purchase.
quarter of the company, which at And for that $300, we each got a
and no organization. that point was just four people
were living in Afghanistan and But at that point, my parents
needed allowance, I'd have to go every time I needed money, I
law school and ask Gail to give to my fathme 50 pucks.ry at the
And she finally said she was
my mother said, well, you can give 50 bucks to Freddy anytime
he writes me a letter.
letter to Gail and hand her this So I would have to bring a
mother and hand me 50 bucks. letter that she would mail to my
that's what's up here. So my mother kept my letters and
financing. And what this is, is a first
The first goes on about how the Cue File seems to the working.
"Oh, that reminds me, the insurance came through
for $750."
the previous summer. I'd been in a car accident
That means we will be able to "Whmake the prototypeef.
with no financial help."
investors. So that was our angel
the car accident. TAnd that was where I got myin
300 bucks to do it. So a year and a day later,
Christmas day of 1976, we had built what we were called Mega
Cue.
You see it, three feet wide by It was in a box.
That's my charming back and side about a foot by a foot.
beard but I had hair. And so we had this thing, and we
took it back to Gilbert's house.
day, chances are it was the same There was a party on Christmas
dropped this thing down on the party, we came back and we
same people were there. And their general reaction was
oh, -- you've done it.
And we said we don't really know What are you going to do now?
we're going to get in it the but we're going to be rich,
So we then took it and its first Met.
down at the Memorial Union for use was at the Union Theatre
broadcast live on television, live on stereo radio because
they didn't have stereo television at the time, with a
live audience.
going to happen anywhere in the It was the fworld.ime this was
And Gilbert was so proud of this
the Metropolitan Opera come in that he had Clem D'Alessio from
done, his students had done. to see what his children had
through. And so the board made it
they did it. I was so terrible nervous when
blacked the theatre out three times before the performance but
luckily it made it through the
And then at the end of the night performance.
came back stage, they were still opening night, Clem D'Alessio
portly opera guild ladies were emptying out the audience, the
hands with the cast, and Clem D'Alessio came and he pushed one
button on the light board and the whole theatre blacked out.
It was a great moment.
So we had a product and we We didn't get the order.
And Gilbert knew a company didn't know what to do with it.
There's a phrase, a generic phrase for a spotlight called a
Klieg light and that comes from the Kliegl Brothers Universal
Electric Lighting Company established in 1895.
And Kliegl was the top company
And we thought Gilbert had in the business.
show in Washington, DC, to sell arour idea to Kliegl, and thende
Kliegl, with a big enough name, would put it into the Met.
So Bill and I loaded Mega Cue into what can best be described
as a baby coffin. Something about that big, made
out the plywood.
The trade show was at the L'Enfant Plaza Hotel, which is
just off the mall.
Flossier than we'd ever stayed Really flossy hotel.
we actually shared the hotel in, and we couldn't afford it so
design student of Gilbert's as room with a struggling lighting
And the first night we were there, we took it out, we set it
up in our hotel room, it all
amazing, and we went to the wKliegl hospitality suite
figuring this was going to be the beginning of our riches.
We walked into the suite and we saw presented a great big
machine that did exactly what ours did.
Our dreams of riches just blew
And he were kind of despondent. So we stayed around and drank
their booze.
drinking through this story. There's a recurring theme of
We stumbled back to our room. We were despondent.
We got up for breakfast, went to
afford the breakfast in the hotel, and we went down to the
trade show floor. It was a tiny, tiny, little
trade show. We figured we would approach
companies one at a time.
company we could find, a company And we started with the smallest
And we walked in and we said we have a light board to show.
And we met a really nice man
looked at our board and he said nwow that's really amazing bute
our company is too small to be
But he took us out to dinner and successful with it.
that was nice. gave us some encouragement and
earnest to try and sell the The next dboard.started in
We went down to the show and
manufacturers that were worth talking to and we, now I don't
think, well, I will admit I have
tricks but I think it was a lot no directlike this.e turning
We went down to the trade show
board to show you in our hotel floor and said we got a light
And the company, the John, would room, come up at 10:00 o'clock.
We'd let them in. We'd show them the light board.
They'd be done. We'd empty the ashtrays as they
left and the next company would come in and look.
And the inevitable happened when
the other company was going out onand they hid their faces.nd
They wanted to deny they were looking at the product.
So at the end of the this opportunity, we had two nibbles.
One was a company from Belgium. The other was a company from
California. But nobody signed a check for a
million dollars.
baby casket. So we put the thing back in its
number eight pan head screws. IWe didn't have power0
screwdrivers at that time so we screwed it back in its box.
We were too poor to get a bellman to carry it down stairs
so we beefed it down the freight
And Bill and I were sitting on elevator.
hotel, waiting for the shuttle this plywood box in this flossy
from Colortran, the company from to the airport when somebody
hey, I want you to show this to Calone of my colleagues.said
And I was tired and I grumbled, sure if you get a bellman to
take it up to your room, we'll
Thinking that would be too rich for their blood.
So they paid a bellman a buck to
unscrewed all the screws and carry it up stairs and we
box, I remembered I'd thrown my dirty underwear in on top of it.
[LAUGHTER]
It turns out we got the order. Class, class.
became Channel Track. And if you look at the picture,
we produced the face panel, the bottom half of the face plate.
Sold them an 8-inch floppy disk drive and a processor board that
had a 4 megahertz Z-80
16 kilobytes of dynamic ram. microprocessor on it with
kilobytes. Not megabytes, not gigabytes,
$5,000, just like Bill said we And we sold them that for
Now they put a thousand dollar could.
their customers for $30,000. box around it and sold it to
We didn't think that was We were -- off.
But we were a complete joke as a particularly fair.
Three out of four of us were company.
all of the time sailing. Hoofers, sailors, and we spent
basement of my apartment on Mound Street, we moved into my
brother's bedroom at my parent's
And this shows, in the blue shirt on the bottom corner,
that's me, my brother with kind of the interesting page boy.
He later just finished his term as a US Congressman from
Illinois. And Jimmy Bradley, one of the
other partners. And we were working in my
parent's house. We were building maybe two of
these things month. We were still going to school at
this point. And Ken Vannice, who worked for
Colortran, tells a story of calling up because we were late
on shipping a product and saying
phone because we were hiding that, and my mother answered the
mother said oh, Ken I'm so from him, and he said that my
boys to come in from sailing and terribly sorry, I'll get the
light board by Friday. I'll make sure they send you a
But we weren't paying ourselves Really at this point.right?
We were just barely able to make
Then what happened is after the first year of the contract, we
had sold them maybe 30 boards,
too much of the money, and we went back and we did something
in the contract negotiations
I don't think it was ethical. But we went back and we said
we're not going to continue this
$60,000 of development costs contract unless you give us
or ask for beforehand. that we didn't think to mention
blackmailing them. This is changing the deal and
product. They had invested a lot in the
thought it was righteous. And so we had a problem with our
contract. The contract was written in a
way that allowed Colortran to order as many boards for
immediate delivery and if we
days they could take the didn't deliver them within 30
Well, so in the middle of these communications, and this is
before faxes or email, we got a telex with an order for 30 of
them for immediate delivery.
our heads, but they cocked the They not only aimed the gun at
So we flew, Jimmy Bradley and I flew out to Burbank where they
were and we showed up at the
I had this kind of nice, it was Saturday Night Fever days so I
had this polyester white suit with flared pants, Frye cowboy
boots.
And we went into a Colortran's I was really sporting.
It turns out the president of Colortran, this guy named Ken, I
won't say his last name because he doesn't come out well in this
story.
MBA, he was captain of But Ken was not only a Harvard
at Harvard. He was chiseled handsome with
ice blue cold eyes, shark's eyes.
And he walked into the
across from us and dropped a conference room and sat down
the desk and he said you know I can take your company away from
you.
were kind of loggerheads at this Jimmy Bradley, and Jimmy and I
thing and he didn't know what he point, and Jimmy said a great
He said go ahead, I've always wanted to go sailing in the
Mediterranean.
on it. And for some reason I picked up
We're not paying ourselves And I said yeah you know what?
We're not making any money. I can make a hundred thousand
dollars a year being a stagehand
Broadway. rSo go ahead, do this.n
And it was amazing. He looked like all the blood
drained out of his face.
And Jimmy and I are looking at He got up and he left the room.
happened. Five minutes later he came back
in with the contract signed with
on the table said sign it, the $60,000 in it, threw it down
And we did. We had no idea what happened.
We got back on the airplane,
Chicago, and we simply started a red eye special from LAX to
[LAUGHTER] drinking.
1975 you could legally drink I do want to point out that in
And somewhere over the Rockies if you weren't 21 years old.
was his Harvard business school training taught him that if you
threaten a small business man with driving him out of business
he's going to capitulate. And what Jimmy had done by
saying I'd rather go sailing was
And he did not know how to work outside of his box.
He didn't know how to process it.
The blood draining out of his face was exactly that.
He didn't know what to do.
them without us. He knew that they couldn't make
business move. But it was not an intentional
examples of being too stupid to And that's quit.f the first
So we moved from my brother's bedroom at my parent's house on
Lake Mendota drive down to a
This is my brother. At this point he graduated from
the university with a degree in physics.
I dropped out.
become a sophomore. I was in theatre and I was
working.
hard to graduate I found. So And so he was off going tore
graduate school in Harvard
He eventually got his PhD in studying physics.
He took his girl friend, Annie, with him.
And Annie was a pharmacist and
at a hospital and said, Bill teach me how to program.
So he did.
considered employee number two And to this day, Annie is
one, I got the first paycheck, because I was employee number
employee who got a paycheck. she's the longest standing
finally got divorced several And when my brother and Annie
[LAUGHTER] years ago, we kept her.
She's fantastic. And she still works for us.
we got a contract to do a variation of the Channel Track
that would track the progress of
Disneyland. And we called it Mickey Track,
cleverly. And it was a great time except
my brother was supposed to write
school, he didn't get a line of code written before we got out
there.
write all the code. So I spent two weeks back stage
at Disneyland.
I've got another recurring thing I blacked Disneyland out twice.
the world I've blacked out. Turns out they don't really like
it when you black the park out
oops. whBut through that, two thingst
were happening. Colortran was getting pretty
tired of working with us, and we
working with Colortran. And then we got another contract
from Disney to develop a larger parade control system for Epcot.
They were just doing the final
Florida. design of the Epcot park down in
a contract to develop a theatre Andlighting board for Disney.ng
With us, Disney was working two ways.
For the parade control system where they paid for all of our
development they owned all of the idea.
They didn't want to be solely responsible for the evolution
and maintenance of the light
enough order that we would build board so they offered us a large
but then we could sell it to a product to their specification
amortize the development costs other people so they could
customers and they wouldn't have in the future over more
So that was six consoles for to pay the whole thing.
Quite frankly you could roll a $18,000 a piece.
highway in Middleton and I'd go penny dchasing after.eltline
So this was a big order,
like that. $180,000, $160,000, something
board, and somewhere along the So we started developing that
a letter, our bookkeeper was a line, in March of 1980, this is
Electronics next door. shipping clerk at Gilson Medical
letter he wrote to the IRS. The red part is: "In December of
1979 it became apparent that we would have an income tax
liability for the first time."
It goes on to say that we didn't Hey, we were making a profit.
they send us a proper form have the right form, and if
It says, "I can assure that this we'll fill it in.
become much more organized." will not happen again as we've
particular thing has happened, Well, I don't think that
more organized for quite a but I wouldn't say we were much
So this is a board we did for Disney for Florida.
And this is a letter that my
my grandfather Pop. mAnd it says, "Fred is doingto
okay, though it seems he's seems
problems at ETC and problems of overwhecash flow.rsonnel
A big inventory to make the Disney boards but no money
coming in...
the book keeper/treasurer, went to the bank and borrowed
$50,000 which is something."
money. In my family that was a lot of
they say that's the American way "Sounds pretty gutsy, but as
So this was our second round of doing business."
Of course, I didn't know what venture capital was, I didn't
know any of this stuff. But this $50,000 allowed us to
do this.
to sell this product to We made a Colortran.ed attempt
They didn't want to buy it, and we didn't really want to sell it
to them.
selling the first products as So in aETC products.started
So in 1982, ETC was about six people.
We hired our first woman, one of
walls around the toilet in our our girlfriends so we had to put
Pretty classy operation. garage.
just made the computerized And the problem we had is we
of a lighting system. cWe didn't make the spotlights,t
we didn't make the dimmers. At that point there were four
companies in the country, Kliegl, that I mentioned
earlier, a company called Strand
Electro Controls, and a company called Colortran, who made
entire lighting systems.
television studio or lecture So when they built a theatre or
source provider. hall they could be the sole
albeit we thought the heart of But we only made one part of it,
So we really couldn't compete for a lot of the business.
And our strategy was to work
just made dimmers. with two small companies that
Tiatronics in San Luis Obispo, One was a company called
And the other was a company called Lighting Methods in
Rochester, New York.
were those four big companies Ifand they were doing betweenere
$10 and $30 million a year of business at that time.
And then were a whole bunch of
initials, Electronic Theatre companies, largely known by our
Inc, LMI; and we called Contourselves alphabet soup.ods
So in the alphabet soup we
companies. teamed up with these two
our product and put our consoles They were going to distribute
entire systems. It worked really well when theye
could sell their dimmers, but they weren't that excited about
just selling our consoles.
yet. So it wasn't a great solution
started opening up our own And what we then did is ETC
the large part, and selling dedirectly to the theatricalor
dealer who then sold to the theatre.
And so we can work to promote just our console sales.
That worked all right.
We were, by 1988, we were up to about $2 million in sales
almost. And the problem was that the big
companies had a perfect argument
Why would you want to buy a lighting system from ETC and LMI
because when the lights blink these two little companies are
going to point fingers at each
But we make the whole thing, we can service the whole thing.
Really good argument. And that's actually why one of
the strongest ethics in ETC at
service. this point is our dedication to
have a situation where the We realize that we could never
solve the problem. lights blinked and we couldn't
closely with these two companies So we started working very
support either company or any combination of the companies
could support the systems.
still kind of hitting a ceiling that we couldn't get through.
There were some other things
industry. Strand Lighting bought Electro
Control so now there was strand,
guys. KlieThen Kliegl went out ofe big
business, and so now there were only two companies that were
full range companies. So in about 1988 we started
talking to Lighting Methods to
companies together. Lighting Methods in Rochester,
New York, was started almost on the same day as ETC started by
two kids going to school at the Rochester Institute of
Technology. And they started making dimmers.
So I called Al up and I said Al I think we should put our
companies together. And we talked about it.
We got all the way to a letter
It fell apart because neither of of intent and it fell apart.
that the other person would run us could the company.ld agree
The whole thing about mergers of
Chrysler tried to talk about, there is no such thing as a
merger of equals. Somebody always eats the other
company.
fell apart. AnAnd at the same time, withe
Kliegl going out of business, both of our businesses jumped up
a little bit. We said nah, we don't need this
right now.
point we actually moved into a About a year later, oh, at this
One of our patrons and actually the largest shareholder in our
company is a guy named Bobby
Bobby Gilson owns a company called Gilson Inc.
that makes medical electronics
His father started the company, and he has been a huge help to
many companies getting going. I would go in on the weekend and
use his machine shop, and I would tear apart production
setups. I would break the machinery.
His shop foreman would come in
Freddy Foster's been here. the next Monday and say that --
And Ken, his foreman, never liked me, but we couldn't be in
business without Bob. And we needed more space, and we
said Bob we need a building and he said how big.
And he plowed down some cornfield and built us a
building. So we moved into this really
sparkly white building. But then in 1990 it still made
sense to put the companies
And Al and I came back together and started talking.
By this time something had
The two companies beforehand, ETC in 1989 was selling almost
$2 million worth of products. We were about 19 or 20 people.
Lighting Methods was selling
and they were about 65 people. $5.5 million worth of product,
didn't want to run a company But Al's an engineer and he
I can understand some days, but he didn't want to do this so
when we started talking this
ETC has to buy Lighting Methods. time, he said that's fine but
And the transaction wasn't very So I sbig.okay.
It was a couple million dollars.
that we needed to borrow a We did a business plan that said
two million dollars we needed to million and a half dollars, or
And we had the whole deal worked borrow.
to me, asked me, do you have the out, and then somebody mentioned
And I said oh, I suppose I financing sorted out?
This is another part of being shouldtoo stupid.e bank.
So I went to the bank and I said
They said where's your business gee, we nplan?2 million.
So I went back and wrote a
said hey, we need $2 million. buAnd they said we'll give youd
$1.2 million. Two weeks away from closing.
I said no, that's not going to
So then we found a new bank and this is where I learned that
bankers, I thought bankers were absolute.
They had a formula they applied and nowadays this is impossible
to believe what we've just been through, but I thought there was
no flexibility in banks.
bankers sell money, and so you This is when I learned that
deal. So we went to a different bank,
and we found a bank that would
Well, that was close enough. give us $1.5 million.
had a very simple and very And we closed the deal, and we
We were going to move all of the flawed business plan.
Middleton in six weeks. We were going to move 65 jobs.
We were going to move big punch presses, technologies that we
didn't know about, but we had this arrogant Midwest work ethic
attitude. We've got this great work ethic.
If we can build computers, we can obviously build dimmers.
Big fat wire, we can do that. And then we looked at the
workforce, and this is my personal mistake.
We looked at the workforce in Rochester, and Rochester is a
much different place than Madison is.
Madison has very little manufacturing.
Rochester is a big industrial town.
Kodak, Xerox, IBM, Bausch & Lomb, all were huge unionized
operations. And the type of people that Al
could afford to hire in his business were young people
trying to get the skills to get a union job or people who didn't
fit in in a big structured
job market. So we looked at these people and
oh, god I was so stupid.
need them. I said well, you know, we don't
people in Wisconsin, with a few So we wiexceptions.them with
Of the 65 people, we had
we really, really needed. ideEngineers, product people,at
service people, mainly. Sales people.
And so before the acquisition actually happened, we went to Al
and we said Al, we're going to
that we get to hire these make a conpeople.on the sale
So we need to speak to them beforehand.
And we would sign them to nondisclosure agreements.
We'd sit down, and I knew these people, I'd worked with them for
three years for the most part,
Bill, we're going to buy and I'd sit down and I'd say so,
to move it to Wisconsin and we Lighting Methods and we're going
And we would talk for about an want you to come with us.
that every one of those 12 hour and what we discovered is
buy your company and we're going people heard only we're going to
all they heard in an hour of to move it Wisconsin and that's
That's all they took away. discussion.
saying can I come? They each came back the next day
What about vacation? Yes, we want you.
Will you help me with moving What about little things?
Will you help me find a place to expenses?
This sort of thing. And it was really eye opening,
and I think this is one of the
this about people that when firconfronted with a reallying
shocking thing, you shut down.
hear you're fired and you don't hear the rest of the things that
are said. And so this is a discovery.
About a week before the sale
was in place, I convinced Al to let us have a company meeting at
his factory because I wanted the
hear what was happening from us, people of Lighting Methods to
coming back in through the back from Al and mdoor.t from a rumor
And so we had company meeting that went like this.
We were standing in the grungy
this space. There were 65 people standing
around. I was in a suit, different suit
now, and Al was standing next to
And we had done one thing right. me.
that the people would ask from We took those dozen questions
wrote them out on a handout with our previous experience and we
explanations of what was going answers on them with some other
And as we started to talk we had to happen.
So it went like this. Al stood up, he said well this
is Fred Foster, he is the president of ETC.
You might know that we buy our
I said yeah, you're not even consoles from him, Fred.
are you? going to take the bullet,
way of saying this. SoWe're buying your company.od
In six weeks we're going to move
I can't take any of you with us. it to Wisconsin, and I'm afraid
Then I went on and on and on Our plans are not to do that.
everything possible to make sure saying but we're going to do
And this is where I learned the phrase outplacement services..
Outplacement services, the
phrase that managers who fire people use to make them feel
better about themselves for firing people.
It says, basically what you're
out of a job but outplacement means we're going to find you a
job.
So we promised that we'd help It's ethem find jobs. right?
The six weeks turned into nine
Rochester. months before we moved out of
about May, I was out in From FRochester in May.990 to
Dick Titus, who is now our
company, was running president, who actually runs the
there. manufacturing and he was out
where I was, and he said Fred we And he came into the office
We need these people. What we found is this group of
people who we didn't think were really special, as lame duck
employees had taken production
gotten before. 30% higher than they had ever
stuff. They knew how to make this
there was no such thing as And more importantly we found
all done through oral tradition. documentation at LMI so it was
people. So we just completely changed
our mind in May of that year, and we started saying anyone who
wants to move to Madison, come
We would fly kids making six and on out.
look for houses to live. eight dollars an hour out to
we finished in November of that Ayear, we had moved 25 people,me
more than half of them were in
thought we didn't want, and all but three people had jobs.
We had succeeded in that. Now the three people who didn't
have jobs, two were woman with
and they could make more money large families, single mothers
them than they could working so they asked us to fire them and
we did. And one guy's rap sheet was
just too long.
rewarding to us, to me But it was really, I think,
were good to our word. personally, that outplacement we
jobs. We wBut more importantly, weheir
stumbled into the benefit of
Rochester to Middleton. There were more LMI people than
there were in ETC.
people, 25 Lighting Methods So there people.ly 20 ETC
Then by the end of the year we
hires. added another 45 people, new
didn't make that ETC was eating But what that LMI.is that really
It really allowed us to put the two companies together in a much
different shape.
think they're all generally pulp I don't like business books, I
read one once about mergers and aacquisitions while I looked at
the pictures. And there was a really useful
picture that describes
And we've tried it all sorts of different ways.
If you imagine one company is a circle and one company is a
square and you're going to put
just overlap them a little bit, usually in finance and that sort
of thing, but you leave them as separate companies.
Another one is the put the
and you come out with an circle and the square together
And the other one is the circle consumes the square and you just
have a bigger circle. With Lighting Methods we just
did the circle with the square
something entirely different and ended up with a triangle,
of both companies. with arguably the better parts
needed $2 million and the bank But remember when I said we
We got to the end of 1990 and we only gave us half a million?
That was a lot of money to us. had lost half a million dollars.
was too stupid. This is a time that I knew the
financial statements were horrible and bleeding red ink,
so our accountant would give
and I would just open up my bottom drawer and slide them in.
When I finally changed desks, I found a stack of unopened
financial statements. And I looked at them and I
understood why I didn't open
At the end of the year, we were nearly out of business.
There's a number at that have subsequently learned is an
important number. It's the debt to equity ratio.
It's how much the company has borrowed from the bank compared
to how much it's worth. And at that time you could
borrow twice as much as you're
You didn't need very many vice worth pretty easily.
that's okay. presidents of the bank to say
three to one debt to equity. You could go to three times, a
the whole board of directors of And by bank talk to you. to have
We had an eight to one debt to
That's the kind of number that equity ratio.
out and thrown us into they should have pulled the rug
I was pretty sure we were going to go out of business.
So I had a company meeting in our shipping area, the only area
big enough, and I stood up in front of everybody and I
explained, hey, this is where we
Showed them all the numbers. are.
choices, we're going to ask for a lot of concessions, we're
going to put in a salary and
our contribution to pension wplan, we're going to stop freep
hot lunch on Mondays, we used to
we're going to put in a bonus give everyboplan.ee lunch, and
I said we had an alternative. I used a really dirty trick.
I turned to everybody and I said
person to your left, look to the the alternative is look to the
yourself and which one of you personshouldn't be here?ok at
Dirty trick but it's really what
So over the course of the next we were confronted with.
We become profitable. yeaOur growth continued up.d.
And we didn't lose a single person.
It was amazing. And of those 25 people, we just
celebrated our 20th anniversary this last February, of those 25
people who came from Rochester, I think 14 of them are still
with us.
lead engineers, and they are a And they're managers, they're
And I find that to be a huge key part of our company.
Something else I learned at this advantage.
moved a bunch of people in we pohad to pave our parking lotwe
between the buildings we were in.
And I arrived late that day, and
and walk into my office. I had to park two blocks away
one of the buildings. And I got in to my office and If
felt sick to my stomach and I didn't know why, so I sat and
stared out the window, which I
stared out the window to figure kinout what the problem was.t I
And I finally figured it out. Something had changed.
And up until that point if ETC, I was what, 26, 28 years old, if
ETC had blown up I'd had gone back to school and gotten a real
job.
It wasn't very important. But walking past all of those
cars made me realize that ETC was now responsible for those
car payments. Responsible for those people and
many of those people had moved a
And it just completely changed thousand miles to join us.
No longer would I roll the dice like we did in that story with
I'd rather be sailing.
company that significant again. I wWell, maybe once or twice.h a
And it was a real change in my
And now we have families and mind set.
cases. houses and grandchildren in some
ETC started becoming much more So it was really a moment where
rather than an organization to of a community and an organism
I got to get going. I'm probably past my time.
So in 1992 we introduced some really revolutionary products:
the sensor dimmer, the obsession
spotlights. Those spotlights up there we
sell for about 250 bucks. We've sold three million of
them. It's just been a great product.
It's almost 20 years old. The patents are almost run out
on them.
able to make a brighter But ispotlight than that.been
It's really been a great
In 1994, we had really stayed in product.
We decided it was time to get bigger and become global and so
we, in 1995, we had a distributor in London so we
bought them and opened up European operations in London
with a suboffice in Rome. We opened up an office in Hong
Kong to serve the Asian market. And then in 1998 I got fired.
Well, kind of.
the London operation to run it, Wand he was supposed to replace
himself with a European and come
He came back before he replaced himself, but we were talking
about his reintegration into the
I was still trying to run the whole company and I had six vice
presidents and every Monday I'd have a meeting with them.
And to be honest I suck at daily
And so we were talking about, because now Bill, the sales guy
who was running London, had run a whole company, how could he
come back and be a vice president on par with all the
other vice presidents?
manufacturing, and we started talking about when Bill came
back we would turn ETC into two companies.
One would be manufacturing and
that, and Bill would run the operations and Dick would run
would become CEO. And I didn't deal with that.
I didn't deal with it.
with it was that I didn't want My false reason for not dealing
making two vice presidents more timportant than my other four
friends who were vice presidents.
The real reason is I wasn't ready to let go.
I pretty much thought that
put out to pasture. bAnd I wasn't dead yet in myg
mind. So I didn't pull the trigger.
And then apparently in some meeting with Bill at the other
end of a telephone in London, I went off on Bill.
I can't tell you why I went off on him, but I must have done a
really good job, I'm sure he can
But it took days, it was on a Monday, it took two days before
Dick calmed down enough to come into my office and say Fred it's
time to make me president.
At least I said hmm. Hmm, I said.
this. So One was it was simply the at
execution of the business plan
The rational way of looking at we had.
Or it was a palace revolt. it.
One of the problems is this is Guess which way I took it.
entrepreneurial speech here. my it's lonely at the top
directors. We don't have a board of
thing. I think for me it's a good
what to do. IBut I don't have a board ofme
directors to turn back and say
just been displaced. I've got a problem here, I've
And I did a trick that my wife, Susan, who used to work for us,
made me do once when she didn't think I had a real job
description, which is I made a
best, a list of the five things lI did worst, took those twod
lists and tried to come up with the five ways I could best help
the company.
lists of five I guess it is. I call it the list of fives, or
myself that I was not in the And that let me realize by
company on a daily basis. What I was really good at was
knowledge of the product, knowledge of the market, knowing
how to develop products, and
planning, operation, execution, process, all of that stuff,
procedures. And so that let me say okay,
we're going to come back and I'm
operations of the company. going to let Dick take over the
back to work for us. Bill, it turns out, didn't come
customers. He went to work for one of our
in London, and we didn't So we still didn't fill the spot
two. actually split the company in
of trying to run the company So Dick had the unfortunate job
And every time I saw Dick making with me still in his way.
I would find some way to a change, I would stop it.
because he was changing it from undermthe way I did it.rug out
And if I didn't happen to see it, somebody would come up to me
and say Fred, Dick is doing this.
I'd say he is, is he? And I would pull the rug out
from underneath him.
And when Bill announced that he wasn't coming back, we looked
around and we needed somebody to
So I looked around and my nose run the office in London.
and I decided I was not only the was bent any way and I looked
Middleton, I was also in the most superfluous person in
So I went to London. way.
London is a great city. It was like going back to high
school as a grown up because the
people. I don't know if any of you have
that fantasy but the fantasy in my mind is I could go up to any
varsity cheerleader who wouldn't
and simply ask her out on a date have talked to me in high school
So that's what the fantasy and she would say yes.
So in any case, not that I found reference was.
London. But I went to London and the
small company was at a point
earlier. that ETC was several years
climb and hadn't even seen the They had a whole mountain to
So I set myself the goal of not making the mistakes I had made
before and see if I help that company grow.
And my learning curve was vertical.
The European markets are so complex compared to this big
homogenous North American market
And the 30 people in London just we have.
was fabulous. After five weeks when I couldn't
take the British plumbing any longer, I got to come back to
America for a week. So it was a really interesting
time, but it also got me out of Dick's way, and he could fix the
company in the ways the company had to be done.
The little toy sailboats, I raced radio-controlled sailboats
on the round pond at Kensington Gardens.
I keep a boat in the clubhouse; I have keys to the palace gate.
So jumping ahead, another really
point in the company was when the 9/11 tragedies hit, it hit
us really hard. We got away September, not a
problem.
But in October our orders cut in We had a backlog of orders.
In November they were down half.
And even though the business had another half.
big part in our business for the been slowing down, there was a
The year 2000, everyone needed millennium.
was a glut in the market so the spobusiness was slowing down.ere
In the summer of 2001, we were
we'd never had layoffs other talking about having to reduce,
Rochester, we were talking about than when we closed in
And Dick said no we can do it through attrition.
And we we'll just be careful, and we'll wind it down gently.
Then 9/11 hit and we didn't have
And we're not a company, we are a company based on the quality
of people we have, and we just
what turned out to be laying off had no way of working through
workforce. or getting rid of 17% of our
So I went over to Dick's office, 63 people.
and we had the discussion where hewe said we have to do this.g,
And I said okay, how are we going to do it?
And he said well, I think we
through all of their positions should ask the managers to go
people they don't need and we'll and pick strategically the
So I got back in my car and at let the managers decide.
mobile phone in my car. And he called me before I got
back to the office and he said
we just planned. well, I have a problem with what
And he said what happens if we And I said what's that?
job and one person is employee have two people doing the same
has just been hired and the nmanager says we get rid of then
new person. What do we do?
And I said oh, damn.
underneath it. I'm not going to get out from
have the managers make their So what we agreed to do was to
decision on every single suggestions but then the final
me saying you've got a job or posiyou don't have a job.k and
Really a hateful, hateful place to be.
We did the layoffs. We did them as strategically as
we could but we had to do it so quickly that it actually had a
benefit.
Anytime you have to make a I guess there was a benefit.
urgency is a good way, you can dramatic change in the business,
forever and you never make any either plan it and it takes
get rid of so many people so changes, or because we had to
of the jobs and throwing the quickly it was like taking all
restack them as we came down. We found that every department,
eight departments, every day
how much we shipped that day. So now we have that down to onen
report. But we found a lot of
efficiencies by doing this, but it had a huge, huge personal
cost. Probably the hardest thing to do
at ETC right now is to convince Dick and me to let you hire a
new person. We make you hire a temp for a
year, prove that there's a job
and then, yeah, may be so because we don't want to have to
go back through that process
have to. until we have to, if you ever
So throughout the course of ETC, Really difficult thing.
companies that going back to and this kind of shows different
ETC did, Transtechnik in Germany companies that started before
see them join the rainbow, this anis when acquisitions haveyou
happened. So we brought the cultures of
many companies together,
and boy is that a challenge. international cultures together,
for thousands of years in They've beeEurope.g each other
And we have companies in France and Germany and England and it's
quite a challenge.
Right now we have, I think So we've grown by acquisition.
we moved into our headquarters there's another chart, in 2004
I got to build scenery. bThat kept me busy for a while.
Our atrium is decorated like
And this shows you an idea of Edwarour growth rate.ings.
If we started, and it starts in 1979 because that's when I had
records to. You see that we had essentially
no business until 1989. In 1989-1990 we brought Lighting
Methods.
revolutionary products, and we In 1992, we introduced those
$200 million a few years ago grew from essentially nothing to
we've had. before the economic downturn
capital. We've done that without venture
strangest or most alarming We've done that without, the
mezzanine financing which means that our receivables were sent
to, or no lock box financing or asset based financing, our
receivables were sent to the
But right now we are financially bank before we got them.
We could pay off our debt if we wanted to.
And we are, by a factor of four,
factor of five, the largest company in our little business.
It's done because of the people.
products; it's not about the It's not about the best
I think the reason ETC has been successful all of this time is
that we have always tried to
the industry. fAnd if you focus on that, youin
automatically get the greatest
because the best people, the products and the best service
coolest stuff. best engineers want to make the
customers to be happy. The best sales people want their
and phone support people want to The best customer service people
And if you focus on the quality of people, I think success is
almost guaranteed.
I'm over. But I meant to ask this question
before I started. This morning at 3:30 when I woke
up and decided to do my homework
name it and I took a PowerPoint aI had, and I had to rename it,o
and I had to look up how to spell entrepreneur.
[LAUGHTER]
entrepreneur, and you're all in a class on entrepreneurialism,
is your vision, if you're an
start a company, have an idea, entrepreneur, do you want to
and cash out and fly around on and be an Internet billionaire
you want to build a company that your 767 in three years, or do
who are you responsible for your 35 years from now has 700 people
to you in spades? And I think there are two paths.
Today's business. I just don't get it.
This idea that you start an idea.
You borrow too much money.
You get angel investing. You borrow more money.
Second round venture capital. FAnd eventually the venture.
capitalists take your idea and
Or you get a couple million dollars and then you do it all
again and you're serial entrepreneur or whatever it is.
There are kind of two paths.
old-fashioned. I bet you my path is pretty
fact that the thing that keeps But it's hugely rewarding in the
I walk in and I don't want to be me going is there are many days
years, but I hardly ever get to my desk without somebody coming
up to me and showing me a picture of their kid, talking
about a new house they bought,
really screwed up about ETC we or saying there's something
I hardly ever get to my desk have to fix.
quality of people. without smiling because of the
works. And that's really why I think it
45 minutes. >> You don't have to apologize
for a darn thing, Fred. These are fabulous stories and
we thank you so much. I know the students aren't
necessarily used to how this
is if you've got a question, I operates, but what I want to do
I'll hand the mic over to you. want you to just wave at me and
have a question, and I'm going So just raise your hand as you
question back that you just asked the students, which is
essentially, if you were to have
your objective was, was it to drive this technology or was itt
eventually to be responsible for
How would you think you might all thhave answered that?re now?
Well, I've described a little earlier that at first we thought
we were going to get rich quick.
case. The rest of it was just beinge
too stupid to quit. There were times when we had an
eight to one debt to equity ratio, I should have quit.
Had I gone to business school and had an MBA I would have
realized how awful it was and I probably would have quit.
It just became something that we
We had to keep growing. And then as I kind of ended up
saying, I get a personal reward out of the interactions with the
people, and so I've evolved into
organization and the people, not somebody who did it for the
I care much more about the for the product.
life at ETC than I do making the longevity and the quality of
But we have people who care about the bright spotlights.
Hi, I'm Jeremy. And I was wondering how
expanding your business globally
Kong and Rome helped improve to places like Denmark and Hong
Wow, helped to improve the your system.
years. system, they didn't for many
immediately because the fellow Hong Kong was successful
into our trade show booth, he'd worked for our competitor for 26
years, walked into the trade
selling for Strand in Hong Kong, show booth, said I'm tired of
He had a business model. I want to open up ETC.
engineer, and his business model He took his secretary, his best
turnover this is the next fellow was when I reach this level of
And that worked for about nine I'm going to pinch from Strand.
But he always had revenue leading expenses.
In Europe when we opened up in
We thought that there was a Lonsingle European market.ve.
That's the first fallacy. Every country has its own market
and France has five of them.
south will not buy from somebody Somebody from Marseille in the
So the complexity of the markets in Paris.
And it took us 10 years and millions of dollars of
investment to turn the corner on
How it works right now and how that.
economy, you see that dip in it's helped is right now the US
That's a dip in the US market. sales?
London office and our Hong Kong Hoffice, they're doing really
well. And I remember standing up and
front of the employees when they
employees knew their bonuses knew their bonuses, the American
support we were giving London, were being reduced by the
had to address. I said someday I'll be able to
stand up in front of you and say
and I've been able to do that. your bonus is because of London
that's it's done. So tha>> Hi, I'm Lauren.od way
My question is, what was your biggest fear with starting your
own business and bringing your
Back then I didn't have any ideas tfear. table?
I didn't know to be afraid at any level.
It was a joke.
We did this is the basement for It $300 a piece.oke.
I don't think the fears, with more time committed to it and
more people responsible and more
concerns start coming up of, the customers out there, then
for Miss America live on first time our board was used
Largely because the night before television, I did not sleep.
had fly parts down there. But those kinds of tensions are
there for customer related
fear is every other company that tensions, but I think now the
years has had a ballistic curve. we've competed against over the
other side of that ballistic I never want to go down the
That's what scares the crap out of me.
I want that tick. That last tick is our budget for
2011. I want that to happen in the
biggest way.
Since your business has been >> Hi, I'm Melissa.
wondering what is your biggest around for 35 years, I'm
where technology is advancing cevery day and having to altera
your equipment and ideas to keep
Big question. Okay, I got another, you've just
identified another fear.
It's amazing. When we look at what we build,
we build these great big desks
inside of a big piece of which are essentially a PC
or $40,000 and now you with do hardware, sell them for $30,000
And that's pretty game changing. it on an iPad.
You hear all these stories about So technologies can change.
lights. thLight bulbs are going to beent
become illegal and you have to
fluorescents or LEDs. Those kind of technology changes
are challenging.
lighting technologies, but LEDs don't make as pretty light as a
glowing piece of tungsten.
challenging. So technological changes are
that is, and it's really hard Ifor me to do is I have to stepe
out of the decision making and
technology, younger people or letfresher people, make thosethe
choices.
smarter than they are. Which is really hard because I'm
So it's hard. >> Hi, I'm Jillian.
I'm just wondering, you said
because you like to have the your company is successful
just wondering if it's difficult best people in the industry, I'm
industry to work well together? >> Well, that's a good one.
How do you define the best
Dick Titus, who's the operations person?
best person as the person who gufollows the rules the mosthe
closely and causes the least
Our sales vice president has a problems.
a hump. A hump is somebody, an employee,
who works for you who is so difficult to manage, who causes
so many problems you just want
valuable you can't get rid of to slug thethem. they are so
I think you need both kinds.
outside of the box, who challenge authority and you need
people who follow process and procedure.
So I think you have to have a balance of character types.
I said it earlier, I don't think
organization as an organism. a company is as much an
you need to constantly work to It's a group of individuals and
them and challenge us and use our talents in the best way.
We have a final question over here.
Yeah. >> Hi, Tyler Lark.
I was wondering the best threat and competition is posed to
ETC's business by current entrepreneurs and startups and
if you view that competition
a start up? >> For years and years I've said
I'm more afraid of the little 10-foot square booth in the back
of a trade show than I am of the
big ones are doing. bigAnd so it's always been a the
concern.
reached a point and it's oh, At some point it's, I think we
we introduced these spotlights. rTo develop that spotlight anden
get the molds and tools made for
And that just set the itechnological bar or the
investment bar so high that it
small start up. wNow I think the challenge is
much greater because of the app store.
Certainly that is a concern.
business-changing concern because you got a bunch of a
little boxes, and the real
for, a theatre is different than, if your job is to repair
office copiers, you work for
down, my contention is you're Gactually a hero to the peoples
who use the copier because that gives them another excuse for
the fact they really haven't
cup of coffee while you fix the done the recopier.t or another
But if you build a lighting system and it's in a theatre and
a half hour before opening night
in the seats in the theatre and the lights blink, you can't nots
fix the problem.
organization and reliability You have to have a service
We're hoping that that helps us continue our business as we
respond to the technology changes.
That's our hope.
students for starting our semester right with lots ofe
great questions for you, Fred,
thanking you for coming and butalking with us today.in
And we wanted to provide you
forever be a Badger. with a sign that you will
Now can I get my diploma? >[LAUGHTER]
I think we can work on that.
No, I'd have to go to class, Thank you.
[LAUGHTER] it's all right.
Thanks everybody. Let's thank Fred Foster.
You're very welcome .