Letter reprinted with permission from The MountainEAR, December 4, 2003

Valley Motorsports Park promises much more than reality can provide


To the Editor:

Club Motorsports Inc., developers of a proposed 250-acre racetrack facility in Tamworth, New Hampshire, claims that it will provide jobs to 40 Tamworth residents. On a November 22nd news broadcast, Club Motorsports Inc. (CMI) was even quoted as offering 200 jobs.

In actual fact, the optimistic financial assumptions that CMI is currently circulating to prospective investors state that at best, within the next five years, CMI expects to generate only 20 to 25 seasonal jobs for local Tamworth residents at an average pay of only $30,000 per year. In contrast, CMI anticipates creating 15 year round jobs for non-local employees at an average salary of $100,000 per year.

According to CMI’s financial assumptions, its CEO Stephan Condodemetraky plans to pay himself $240,000 per year, more than ten times more than the average Tamworth wage earner.

At the recently built BeaveRun racetrack in Pennsylvania, which was designed by CMI’s racetrack designer, the developer said there would be 100 jobs. A local Pennsylvania resident notes that in actuality the BeaveRun track employs 8 teenagers in summer, 3 adults in the winter months. Is there any reason to think that CMI's proposed Valley Motorsports Park in Tamworth would turn out differently?

As a professional private equity investor who has reviewed hundreds of startup business plans, I feel qualified to provide an evaluation of CMI’s proposed financial model. As part of my due diligence, I talked with some veteran racetrack participants who had also reviewed CMI’s business plan.

These racetrack veterans and I agree that CMI’s inexperienced management team has developed an unrealistic financial model based on many incorrect assumptions, and feel that CMI is likely either to: 1) fail to raise sufficient capital to complete construction of its $14 million racetrack; or 2) be forced to operate the business at a significant annual loss and go out of business within 3-5 years.

Simply put, CMI’s proposed racetrack venture is an ill conceived business concept. It is unlikely CMI could successfully raise capital from a professional private equity investment firm. CMI’s first investment bank, Arete Capital, was unable to raise the necessary capital and is no longer working with CMI. Arete and CMI are now embroiled in a lawsuit fight. Altogether, CMI has been trying to raise $14 million via equity and membership sales for almost 12 months and has to date raised only 25% of the necessary capital. CMI still needs to raise another $10.4 million to achieve its minimum racetrack objectives.

One possible reason for CMI’s lack of fundraising success is the proposed valuation of $15 million as today’s value of CMI’s racetrack business concept. As a point of comparison, the average valuation for software and biotechnology startups which raised private equity during 2000 to 2003 was just over $1 million.

Another important concern that any professional investor would have is that none of CMI’s management team appears to have any prior experience building, marketing or operating a racetrack.

CMI’s Condodemetraky is an avid entrepreneur who seven years ago grew a small consulting firm up to six employees. This one business success, however, is outweighed by the disappointing results of Condodemetraky’s more recent three entrepreneurial endeavors. Condodemetraky’s last company, Online Environs, was liquidated in September 2002 with net liabilities of $1.9 million, resulting in a $5.1 million investment loss for its primary investor (Jordan Industries).

CMI’s business model is based largely upon the company’s ability to sell 1500 memberships at $15,000 apiece to raise enough money to achieve its ambitious goals. However, as racing industry expert Lou Modestino pointed out in a recent New England Motorsports North column, “[CMI] will be lucky to get 500 members. The concept is very expensive and only appeals to an upscale group who can afford the expensive race/street cars”.

In its business plan, CMI projected selling 500 memberships during 2003 at an average price of $15,000 each. On November 22, 2003, CMI reported it had sold only 125 memberships. CMI says it has raised $500,000 from these membership sales, which means an average membership price of only $4,000 and over 70% below its targeted $15,000 sales price. CMI is currently discounting its Bronze memberships by 40% in an effort to attract more members. At this price, CMI would have to sell 3000 Brozne memberships to achieve its financial objectives. Does this sound like a promising business venture?

I am surprised that many Tamworth residents appear eager to embrace outsiders like the CMI team, all of whom reside in southern New Hampshire or Massachusetts, and to accept at face value CMI’s promises to create 40 local jobs and generate substantial tax revenues.

An important rule in private equity investing is only invest in new businesses led by people you know or by people with successful track records who have positive business references. None of the members of CMI’s management team live in the Tamworth area or were previously known to residents of Tamworth. And none of CMI’s management team has a positive track record growing startup companies. I have also not heard of anyone in Tamworth trying to call any of Condodemetraky’s prior business references.

Finally, the noise and air pollution from CMI’s proposed racetrack is likely to have a significant negative impact upon Tamworth’s natural resource-based tourism, which today is a large contributor to the town’s year-round economy. There is also a real risk that CMI will fail to raise enough capital to complete construction of the racetrack, and Tamworth will be left with a half-finished racetrack that becomes a real detriment in a town trying to attract natural resource-based tourism.

These questions, among others, are ones that I wish more Tamworth residents, and prospective investors, would ask CMI before risking Tamworth’s economic future and blindly accepting CMI’s many promises and optimistic financial projections.


Alex Moot

General Partner

Seaflower Ventures

Waltham, Massachusetts