The Press Democrat: September 6th, 2009 4:03am

A BUSINESS PLAN TO RACE OUT OF RECESSION

By Michael Coit

Matt Stearn & Rod Towery on the track

Rod Towery and Matt Stearn

Put the pedal down and watch out for that wall!

ROHNERT PARK - A new brand of racing is coming to Sonoma County with Italian-made electric race karts speeding around a tight track inside a big-box retail building where bed and bath goods were once sold.

Racers can start their engines Saturday, Sept. 12th, at Driven Raceway in Rohnert Park, a bold venture by a pair of motor heads. Matt Stearn and Rod Towery left good jobs at a rapidly growing Petaluma high-tech firm and poured their life savings into the go-kart enterprise in the midst of a deep economic recession.

They're hoping the Bay Area's first electric go-kart track -- without the fumes and exhaust of indoor raceways that feature gasoline-powered karts -- will draw race fans from across the North Bay to pay $20 for a 30-minute racing experience.

"We both love cars, we both love racing, and we both love doing things that are on the edge," Stearn said. "We put it all on the line."

Their landlord, Codding Enterprises, and lender, Redwood Credit Union, anticipate the partners will pull into the winners circle down the road.

"You want something that's going to be successful," said Brad Baker, chairman and chief executive of Codding Enterprises. "It was the right place at the right time with the entrepreneurial vision of the tenant and they were able to take advantage of prime retail space that in a normal economic environment would probably not be available to them."

Driven Raceway wouldn't have made it out of pit row without a loan from Redwood Credit Union backed by the federal Small Business Administration.

"They've done their homework. They've done a very good job from taking this thing from conception to being ready for operation. We're really excited to be involved with them," said Michael Downey, vice president of business services for the credit union.

The heart of Driven Raceway is the fleet of 30 red, flashy go-karts made in Italy. Low slung and sleek with twice the horsepower of competing electric go-karts, the racing machines from OTL Italia can reach 45 mph. Junior models for drivers still years from earning their learner's permit top out at 20 mph.

The open-wheel go-karts look like miniature European racers, though a low bumper encircles the racer to minimize serious crashes. Safety is critical for fan enjoyment and to protect the partners' investment.

"They're well built. It's like driving a mini Ferrari," Stearn said.

Racers face a quarter-mile track that would challenge seasoned drivers. A single long straightaway offers a brief opening to hit top speeds. Several series of serpentine turns test drivers' skills to turn, brake, accelerate and maintain a fast pace -- all without crashing in a field of 10 racers.

"A lot of it has to do with the track design. It's important that you have room to pass," Towery said. "This is not bumper cars."

Lining the track are modular barriers connected by a webbing system that allows for various configurations. Safety is emphasized beginning with a drivers' meeting in a briefing room. Drivers wear thickly padded helmets with drop down visors. Track marshals govern races and have full control over kart speeds with portable remote controls. Speeds are programmed based on the experience of drivers in the field, yet speed is the goal with times and results recorded.

The technology continues to improve as indoor go-kart racing has become more popular over the past decade.

Racing brought Stearn and Towery together. They raced at a handful of other tracks in California and several other states over more than two years planning Driven Raceway.

"We always loved racing. We were trying to figure how to do a business around it and incorporate the whole family," Towery said. "The question was: how do you get that revenue-generating, profitable business?"

Their answer: Include miniature golf, mini bowling, arcade games and a café to offer something for everyone, he said.

Finding a large enough building at a good price was a major hurdle. Unable to negotiate a deal with the owner of the former Levitz furniture building in Rohnert Park, the partners reached agreement with Codding Enterprises on a lease that included significant improvements and low rent for the building that used to house Linens 'N Things. The creative reuse of the former big-box retail space comes at a time of high storefront vacancies. Retailers have gone bankrupt or closed stores as the recession sapped consumer spending.

"You just have to be open-minded. We felt retail is in a fairly prolonged slump," Baker said. "You could hold out for a better deal and you might be vacant for a year or two or three. It's a calculated risk." Starting a business in a recession can be financially perilous. Stearn and Towery put together nearly $3 million in loans, investor cash and their own savings. Selling the concept was easy. Obtaining the funding was difficult.

"We spoke to eight or nine banks. They loved the idea. It's that their funding was absolutely frozen," Stearn said.

Startups are a prime target for the federally guaranteed small business loan from Redwood Credit Union, Downey said.

"It gives us the opportunity to look at a greater range of businesses out there," he said. "We look for a very solid business plan. And they have to be prepared to come to the table with an equity position in the business."

The partners planned Driven Raceway while keeping their day jobs at Calix, a fast-growing telecom equipment company based in Petaluma. They didn't leave Calix -- Towery managed customer service, Stearn was in marketing -- until July.

"We studied this entertainment industry and this market and developed a business plan and marketing plan and concept and think it will be extremely successful," Stearn said. "Nothing's for sure. You have to work harder now."

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