In the race: Charles Champion, head of the Woodland Hills-based online horse racing wagering firm Youbet.com, isn't taking his winnings and leaving. He's moving the company to the next level with an international attitude and eye on acquisitions.

When Charles F. Champion joined Woodland Hills-based Youbet.com, Inc in the spring of 2002, he figured that he'd stay at the then-struggling dot.com for only a few months: just long enough to turn around the company's culture and steer it on the road to profitability. After all, Champion had spent virtually his entire career in the newspaper industry, working on the business side of operations at the Daily News of Los Angeles, The Orange County Register, The Chicago Sun-Times, and the Philadelphia Inquirer and wanted to return to the publishing industry as soon as possible.

Champion's desire to move on as soon as possible seemingly made perfect sense. At first glance, Champion and the online horse racing wagering firm didn't seem like a good fit. Champion had little if any interest in horse racing, having only attended four horse races in his life. Additionally, Champion professed to having very little knowledge about the world of technology. But somehow, the two seemingly disparate entities mixed perfectly, as Champion began having immediate success at reorganizing the near-bankrupt firm.

Holding a company-wide meeting as his first order of business, Champion bluntly addressed the company's shortcomings. Telling the employees the unvarnished truth that if things didn't change, everyone would be on the street in three months, Champion then asked for resignations from the employees that weren't committed to turning Youbet.com into a winner. Following this bold move, Champion then removed the hinges off of his door to demonstrate to his team that from that point on, Youbet.com didn't just have an open door policy, it had a no-door policy. Focusing on the virtues of focus and trust, Champion's overhaul of the firm allowed it to become profitable this year for the first time in its history. Champion's leadership abilities spurred such rapid revenue growth that last month Youbet.com finished fifth in Deloitte & Touche's rankings of the 50 fastest growing technology companies in Los Angeles. With a staggering five-year growth rate of 930 percent, Youbet ranked as the fastest growing technology company in the Valley.

Question: Youbet has experienced a 930 percent increase in revenues over the last five years. What do you attribute this type of growth to?

Answer: Part of it is simply timing. We're in a space where the installed customer base in horse racing is looking for more convenience. The Internet allows them to do this from their own home or their office up to 20 hours a day, seven days a week. Additionally, we've built up our infrastructure and our financial and capital models to the point where we can invest a fair amount of money in marketing to grow the business, while still maintaining profitability.

Additionally, we're a very focused company. We understand our marketplace. We understand our customers and collect a lot of data on them. We know virtually what time of day they like to come online and everything they do while they're here.

Q: When you took over Youbet, the company had yet to turn a profit. What was the process like of turning the company around? What specifically needed to be done?

A: Experience told me that the first thing I needed to do was sit down with the team that we inherited and set some ground rules. We needed to describe to the employees where the business was, where it was going and what needed to be done to turn it around. The problem with Youbet was a cultural problem and a leadership one. It wasn't the engineers. It wasn't the people answering the phones. It was focus at the top.

We brought in a strategic firm and went to work on the business and started to focus on revenue generation, customer segmentation and the like. I also wanted people to know that we were attacking problems not people. People are predictable to me: they want to come to a place where they can do their best work. As a CEO, you need to create an environment where they do that. You need to make them bring their brain to work and establish an environment of trust. If you can do that with the right creative people, you're going to have a decent business.

Q: Now that the company has finally become profitable, what are you going to ensure that it stays that way?

A: There are three or four things that we plan to concentrate on. The first is that we plan to have a organic growth rate in the high teens to the low 20 percent for the next three years. A high organic growth rate is critical.

We've got financial models that are very attractive: 95 percent of our costs are fixed, five percent are variable. The variable expense, half of that has volume discount built in. It takes very little capital to maintain our operations and the cost of computing capacity is only decreasing.

Also, other companies in the industry will likely be consolidating and for us to make acquisitions makes sense. We're only operating at 20-25 percent of our operating capacity today.

The other thing is that we're going to diversify our customer base by going after international customers through acquisitions or through future partnerships. In the United Kingdom, it's okay for a customer to wager on sports, so we'd take a customer from the UK. But we wouldn't take US customers wagering on sports because it's not legal. We've already acquire one company, The International Racing Group in Curacao. It's been under our belt for three months and it has been performing very well.

Q: In the past year, the company has already begun to expand internationally? What's the international strategy going forward?

A: International represents at least half of our potential moving forward. Horse racing in the world is at least five times larger than it is in the United States alone. There is also sports out there and casino gaming. International opportunity is very important to us and we're prosecuting it aggressively. Hopefully, you'll see us acquire more international companies like IRG and also some outside horse racing, casino or sports gaming acquisitions in places where it's legal to that.

Q: Specifically, what types of acquisitions is the company eyeing?

A: We're looking for acquisitions that are accretive. There are enough variables in this business with regulatory issues and the like, that we don't need to get bogged down in a highly diluted transaction where you have to bet on the company. We're looking for acquisitions that are close enough to the core to augment or enhance our business, or that are identical to our business so that we can further utilize the system's capacity.

We also look for companies that are well-managed, though not perfectly managed. And hopefully, ones that don't have duplicative core competencies, but more ones that complement each other.

Q: There has been a good deal of discussion in the horse racing community about the graying of racing fans? How does Youbet plan to transcend this reality and appeal to a younger core base of fans?

A: Our two fastest growing groups are 21 to 30 year-olds and 31 to 40 year-olds. It's because of the way we target them, through useful sports sites like ESPN.com, CBSSportline.com, where we have exclusive agreements with them. We're looking for other such agreements.

Snapshot

Charles F. Champion

Title: Chairman, CEO, President, COO, Youbet.com Inc.

Born: March 1954

Education: North Hollywood High School 

Career Turning Point: When at 19 years old, three executives from the Tribune Company saw something in me and gave me the opportunity to be a leader and manager. The other turning point came in 1999 at the Philadelphia Inquirer, when I realized that it wasn't all about me. I realized that it was all about the team that I had working with me.

Most Admired People: General George Patton, Albert Schweitzer, Abraham Lincoln

Personal: Divorced, six children

Hobbies: Riding horses, playing golf, scuba diving