DCA Capital in the News

August 20, 2006
The Sacramento Bee

Karate company kicking up its heels
Capital chain planning major expansion

By Clint Swett -- Bee Staff Writer

With his chiseled build, intense gaze and barely suppressed energy, Dave Kovar seems every inch the martial arts master. But Kovar, 47, is also taking on the look of a business mogul.

With his brother Tim, Kovar, who founded Kovar's Satori Academy of Martial Arts, is about to embark on a major expansion of the Sacramento-based company, aiming to grow from the current 18 sites, including 14 in the Sacramento region, to more than 100 nationwide in the next five years.

Backed by nearly $3 million in recent venture capital funding and an experienced business team, Kovar is seeking to establish the largest chain of martial arts schools in the nation. Nationally, the company will be called the Satori Academy of Martial Arts; in this region it will retain the Kovar name.

In his 30 years as a martial arts instructor in Sacramento, Kovar has developed a national reputation as both a teacher and top competitor, industry experts say. He's earned a seventh-degree black belt in Kenpo karate and has black belts in nine other martial arts styles. He's also an acknowledged expert on teaching martial arts to children, and produces popular videos and other guides used by martial arts schools.

"Dave is respected by all the top martial arts guys as being a phenomenal teacher and an incredible athlete," said Rob Colasanti, president of the National Association of Professional Martial Artists in Clearwater, Fla., and publisher of Martial Arts Professional magazine. "There are few people in his class."

Sitting in his cramped office at company headquarters in Carmichael, Dave Kovar explained why he wants to branch out beyond his comfortable niche as one of the largest martial arts chains in the Sacramento market.

"If you do something well (on a small scale), it would be good to do it on a large scale, too," said Kovar, the company's chief training officer, who speaks at machine-gun speed.

"And I really believe in what we do. It's so much more than kicking and punching. It's about discipline and self-respect."

Indeed, on the striped mats that cover the floors at the Kovar sites, even small children -- in their pajama-like uniform known as a "gi" -- kneel quietly, listening to their instructors talk about the importance of good grades and tidy bedrooms, as well as how to parry a round-house kick.

There's very little squirming and horseplay. The students refer to their instructors and each other as "sir" or "ma'am" and bow when walking onto or off the mat.

"It really gives the kids a positive attitude," said Jonny Self, while watching her 6-year-old granddaughter Nicole at a Kovar studio in Greenhaven.

"It gives her confidence, and I know she enjoys it because she always wants to come to the workouts."

That's the message that appealed to Steve Mills, a partner in DCA Capital Partners, the Roseville venture capital firm that led Satori's latest round of funding.

He said the "soft skills" that go beyond self-defense and fitness give the Kovar schools a broad appeal. "The parents swear by it," Mills said.

Kovar has significant momentum going on the company's expansion. From just five schools in 2003, the privately held company has grown to 18 schools (with acquisition of a 19th nearing completion) and 4,000 students. All are in the Sacramento area, except two in the Bay Area and two that recently opened in the New York City area.

In the Sacramento region, Kovar's size is nearly matched by Robinson's Taekwondo, which also has 14 local schools. But it appears to have no serious national competition beyond Fort Lauderdale-based Premier Martial Arts, which licenses its name to independent operators.

Much of Kovar's recent growth was financed by capital from Rick Campbell, a Washington, D.C., entrepreneur and himself a black belt.

Campbell became a part owner and executive director of the company in 2003 when he plunged an undisclosed amount into Kovar's business after hunting for a martial arts investment opportunity.

He and the Kovar management team will oversee the expansion, which will be concentrated in existing markets on both coasts. "As far as we're concerned, we're right on target," Campbell said. "We'll probably continue to seek outside investors, not only for the capital, but for the expertise they bring to the table."

That was the case in April when the Kovars and Campbell brought aboard Dave Chamberlain, both as an investor and to oversee operations. A veteran of 27 years in the technology industry, including executive positions with IBM, Gateway and Novell, Chamberlain studied at a Kovar school for four years, earning a black belt earlier this year.

After a Bay Area software company he headed was sold in February, Chamberlain left the firm and joined Kovar, attracted by the business opportunity and company philosophy.

"The reason I stayed with Kovar wasn't the self-defense, it was the life lessons," Chamberlain said. "Martial arts helps you become more disciplined, and it extends to other parts of your life."

With the exceptions of a few franchise operations, self-defense schools traditionally haven't expanded far beyond their local regions, said Colasanti, who heads the national martial arts association. But he expects that's likely to change in the next few years as other martial arts schools gear up for expansion.

Unlike health club chains, where fancy facilities often draw customers, martial arts studios depend on the charisma and skills of their teachers to lure and retain clients, Colasanti said.

"Anytime you have a people-driven business, that's a limiting factor" to expansion, he said.

In addition, martial artists aren't necessarily well trained in business skills. What Satori can offer, Colasanti said, is accounting, marketing and other management support, allowing martial arts instructors to concentrate on what they do best.

"What Dave is attempting to do is take these schools and bring them under one umbrella," he said. "That would take the (business) pressure off them, and they would follow his (teaching) formula."

Plans call for Satori (the Zen Buddhist term for "enlightenment") to expand through a combination of acquiring existing schools and building new ones.

The Satori schools will feature uniform signage, color scheme and curriculum. Once established, each school is projected to generate about $500,000 in annual revenue, primarily from monthly fees of about $160 per student. Each school will provide daytime and evening classes in a blend of martial arts styles based on Kenpo karate.

Mills of DCA Capital said his venture fund was impressed by both the market opportunity and Kovar's track record.

"There are at least 17,000 martial arts studios (in the United States), none of which is a national brand," Mills said. "We believe there's a great opportunity to create a national footprint.

"Not only did they have a great martial artist, but Rick Campbell brought very professional business processes and procedures. He had the acumen to take what had been a mom-and-pop operation and make it very professional."

Asked how he felt about ceding so much control of his company to others, Kovar was practical.

"My strengths are in teaching and training staff," rather than running a business, he said. "It's like a horse crossing a river. He can swim, but he's much faster when he's on land."

About the writer: * The Bee's Clint Swett can be reached at (916) 321-1976 or cswett@sacbee.com.

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