Burning Rubber

A few years ago, three friends from Boulder started a shoe company called Crocs, created a worldwide fashion phenomenon, and made millions of dollars for themselves. Then the trouble began.

Six years later, on a frigid spring day, Duke Hanson sits in a second-floor conference room at Crocs Inc.'s worldwide headquarters in Niwot. He is surrounded by several dozen styles and colors of rubberlike shoes—the offspring of the "ugly" clogs Seamans introduced to Hanson and Boedecker on their tropical boat trip. A handful of more traditional-looking styles—including the new YOU by Crocs fashion line for women, a pair of soon-to-be-introduced golf shoes, and several flip-flops developed by a newly acquired California company—are also on display. Hanson, whose easygoing countenance belies the challenges he currently faces as an executive at a near-billion-dollar global corporation, is wearing jeans and a wrinkled, burnt-orange shirt from the company's clothing line. He sets a paper coffee cup on the conference room table.

To say Crocs has come a long way since those lazy days on the boat would be an understatement of monumental proportions. In the weeks after Seamans introduced the clog to his friends—who had tried the shoes on and found them extraordinarily light and comfortable—Hanson set about drawing up a business plan to distribute the Canadian shoe in the United States. The three men had concluded that perhaps the shoe was so novel, so strange looking, so ugly, that people would have to try them on. And once they tried them on, well, they'd fall in love. Boedecker wrote the first big check. Trolling for investors and future employees, the trio brought in family and friends—even Ron Oliver, the Hannibal's captain.

With a team of five working out of a small office in Boulder, the company sold the first thousand pair of Crocs—so-named because of the crocodile's versatility on land and in water—at a 2002 South Florida boat show. Based on the success of its first model, the now-ubiquitous Beach shoe, the company began its meteoric ascent. Crocs transformed into a publicly traded company by 2006, saw its product line grow to roughly 250 models by 2008, and projects combined revenue to exceed $3 billion in the next three years. Today, many of the first investors are millionaires.

The funny-looking shoes, however, have become more than a cash cow to a lucky few: In less than a decade, they have become an international cultural phenomenon. The company has sold more than 50 million pairs worldwide and is among the most profitable shoemakers in U.S. history. Strapped-for-time moms buy the little rubber slip-ons for their children; doctors, nurses, and chefs wear them for comfort and the ability to repel stains and odors. George W. Bush and Rosie O'Donnell have been spotted wearing them. An acting legend (Al Pacino) and a Desperate Housewife (Teri Hatcher) each own a pair.

While critics branded the shoe a fad, Crocs the company, like Crocs the shoes, has been remarkably slip-resistant. Last year, revenue topped $840 million, up 138 percent compared to 2006 revenue, which was 226 percent higher than 2005. In the past three years, Crocs has vastly expanded its domestic and international markets, developed new manufacturing and distribution centers, diversified its product offerings, and created thousands of new jobs. When the company first moved into the Niwot office park three years ago, it occupied one building. Now it operates in three and a half buildings onsite, with offices from Beijing to the Hague. As of this summer, more than 4,000 people work for the company. In an era in which investors are perpetually looking for the next big thing, the shoe company from a sleepy village north of Denver became a Wall Street darling. When Crocs went public on the NASDAQ in February 2006, it raised $208 million and became the largest shoemaker IPO in market history. But perhaps no two figures in Crocs' recent run are more impressive than these: In 2003, the company sold 76,000 pairs of shoes. In 2007, Crocs sold more than 30 million.

With the growth, the founders made untold millions from their investments. Boedecker went on to spend more than $20 million of his fortune to start a nonprofit foundation to help children. Hanson donated money to the University of Colorado, where he earned his master's degree in marketing. Hanson, Boedecker, and Seamans joined private golf clubs, and the friends bought second-floor lofts in the same downtown Boulder building.

Yet where there is massive growth, there are sure to be growing pains. A year before the IPO, in late 2004, Boedecker made the surprising move of quitting as chief executive officer; a year and a half later, he relinquished his seat on Crocs' board of directors, shortly before he went into semi-seclusion as a series of personal legal problems engulfed him.

Today, Seamans is Crocs' chief technical officer, though Hanson says his friend is "not as full-time as he once was" and spends much of his time "consulting" and developing Crocs' products in Asia.

Hanson has held nearly a half-dozen jobs during his tenure at Crocs: He has helped run everything from day-to-day operations, to marketing and advertising, to acquisition integrations. Lately, though, Hanson is the go-to man for media interviews: the polite, funny, good-time guy who has become the face of the product—the Crocs logo, a smiling crocodile, is named "Duke"—as his business partners have quietly moved to the background.

Back in the conference room at Crocs' Niwot headquarters, Hanson admits the speed at which the company has grown has been "hard on all of us as founders, because we're not as much in control as we were four or five years ago." The massive growth has also been hard on the company itself: Beginning in November 2007, inventory buildup and legal challenges to the shoes' uniqueness caused the company's stock to tumble significantly.

The boat trip, which now seems a lifetime away, came at a much simpler time, one in which Hanson, Seamans, and Boedecker all had a grassroots mentality, an excitement borne of the anticipation that they might be on to something really big. That's all gone. "I'm sure when George, who hasn't had as much day-to-day work with the company for a couple of years, sees our shoes out there, he's probably melancholy at times," Hanson says.

He pauses, then reaches for his paper coffee cup, nervously. His hands are shaking.