Staples founder: Why I'm supporting RomneyAugust 29, 2012: 12:50 PM ET
Mitt Romney likes to talk about how he helped grow Staples into America's largest office supply company. Now its founder wants to tell his story.
FORTUNE -- The Republican National Convention tomorrow night will hear a primetime address from Tom Stemberg, the Staples Inc. (SPLS) founder who credits Mitt Romney with helping to grow the office superstore. He now works as a venture capitalist, investing in consumer goods and retail companies.
I sat down with Stemberg this morning in his Tampa hotel, for a wide-ranging discussion of his relationship with Romney and the current state of companies like Staples. What follows is a transcript:
Fortune: What is your basic argument for why Mitt Romney should be our next president?
Stemberg: I think there are a couple of cases to be made. The first is that Mitt is a great leader and this country is badly in need of leadership. Two, Mitt's a person who runs toward problems, not away from them. We have an administration today that refused to deal with the tremendous problems America faces. Twenty-three million Americans unemployed or underemployed, trillion dollar-plus deficits and, despite appointing a commission like Simpson-Bowles to address these issues, they simply have walked away from them.
Third, I think Mitt's broad range of experiences prepare him very, very well to be president of the United States. Specifically when you think about what private equity does, it tries to deliver better customer experience and value by being efficient. Staples is as good an example as any. We succeeded because we brought better value to small businesses by cutting out middle-men, buying direct, letting the customer do some of the work and so forth.
Mitt took the same approach when he was governor of Massachusetts. So things like registering your car online rather than waiting in line at the registry. His concept of merging the Turnpike Authority and the Transportion Department to get the roads maintained for less. A lot of those ideas are now in place, and speak to Mitt's general philosophy of providing better value to the customer while, at the exact same time, making it possible by being much more efficient. Massachusetts healthcare is another great example. He took the money that was being wasted by having indigent people going to the most expensive teaching hospitals' emergency rooms to get treated for the flu, and took all that money and rediverted it into providing universal healthcare without raising taxes. That's the kind of leader we want running this country.
Mitt's experience with you at Staples was basically through a venture capital deal, not a private equity deal…
Yes, it was a venture capital deal.
So do you feel qualified to discuss a business career that ultimately became much more about private equity than venture capital?
Yeah, I've been involved with Bain Capital companies for a long time. I served on the Duane Reade board after the buyout and invested in every one of their funds…
Including the first one?
No, not the first one. Every one from then on. So I'm very comfortable seeing how Bain operates. And the people around him operate much as he does. Mitt surrounds himself with very smart, very hard-working, good people who stay there for a long time, by and large. And those people work harder than any other private equity guys I know and thus create success.
Is it right that Bain was just one of four original outside investors in Staples?
Are you able to isolate what Romney brought to the table?
Mitt added value. I'll give you several example. Early on in Staples' life a lot of people didn't want to sell Staples because we were discounting 50% or more and the industry wasn't so sure that was a good idea. Household names like Hewlett-Packard (HPQ), IBM (IBM), Canon (CAJ) all refused to sell Staples. Ampad actually used to refuse to sell Staples.
We ran a vendor summit for all of our current and prospective vendors at the one place we could afford to do it: The International House of Pancakes, next to the original Brighton store. Mitt came in and was the speaker.
His speech was: "I was a consultant for many years and observed the growth of The Home Depot (HD). And a lot of vendors jumped on The Home Depot bandwagon and rode that train to great success. Other vendors were worried about it and didn't get on the train. In many cases, they ended up getting run over by the train. So ladies and gentlemen, you have to decide. This Staples train is leaving the station. Do you want to get on the train, or do you someday want to get run over by the train?"
And two months later, a bunch of key vendors began to sell us and I think Mitt's speech had a lot to do with it.
Here's the second example: We did a fair number of acquisitions at Staples, and the biggest one was going to be a public company in California [Viking Office Products, now owned by Office Depot]. And a bunch of us flew out but on the way back it was clear that we were having a serious case of buyer's remorse. The founder of the company, who I admire as one of the greatest entrepreneurs I've ever met, was going to retire, which is why the company was being sold. He wanted his number two guy -- Bruce Evans, who later became CEO of Office Depot (ODP) -- to become my successor at Staples. And, if he wasn't made my heir apparent, and therefore my COO, we had to pay him all kinds of money. And of course the question to ask was if this guy wasn't good enough to run a company that was a fraction of our size, how would he be good enough to run our company?
So this is on a Friday night. The press releases are being written on Saturday and we're going to announce it to the world the following night. Sunday we have our board meeting and we lay out our case. Mitt interrupts the conversation and say, "I've been listening and seen you guys do other deals, but you just don't sound excited. What worries you?" So we explained the human issues to him, and how I didn't think Nelson was better than our internal people. And Mitt goes: "This deal isn't signed until the board approves it and I can tell you right now that this board member isn't approving it." And the board then decided not to do the deal.
Again, that's Mitt Romney. He's insightful.
A third one, there's a commercial being cut on it. There was a guy at who worked for me at Staples named Eddie Albertian who, when he left his prior company to work for us, his then-employer had loaned him money to buy a house and called the loan. Mitt wrote him a check to loan him the money until Staples could do it.
If someone other than Romney had won the Republican nomination, would you be supporting them?
I'm a Republican, but I'd say I'm probably more socially liberal than the party platform. I'm a big backer of Planned Parenthood, for example, but I'm going to vote for Mitt Romney with great enthusiasm despite those differences. Some other Republicans I would have supported, but not all.
You're speaking on Thursday night. What's your job?
My job is to talk about the years of Mitt Romney at Bain and what he did for Staples in particular.
CNBC's Herb Greenberg recently asked if Staples is a metaphor for America, in that it was a once great company that's fallen on tough times. Fair?
I'm not going to comment on Staples because I think that's bad form.But what I will say about the office superstore industry is that it has three or four fundamental challenges that companies need to address.
One if that it's hard to be a technology seller without selling the leading technology company, Apple (AAPL). They've got to get Apple. Two, I think three companies ought to be two. And obviously I put my money where my mouth was way back when but it failed [Staples was blocked from buying Office Depot in 1997]. I think the FTC was wrong, and I think the FTC knows it was wrong and that a merger would be an effective and productive in providing value to the American consumer. Three: I think they need to spend more money and effort in passing the Main Street Fairness Act, or some version thereof, so that retailers with physical presence collect taxes the same way Internet retailers collect taxes and thus a level playing field?
Do you know Romney's position on that type of legislation?
He has no position on that, to my knowledge. The Republican Governors Association just came out in favor of it, though.
The Romney campaign has mostly kept his business experiences on the surface level, not delving too deep into the details. Is that a mistake, or is talking too much about Bain too risky?
I don't think it's risky at all. I think Bain is an incredibly ethical group and it's been my privilege to have worked with them. Both in the past and even today, since we're co-investors on Guitar Center. I never seen anyone smarter or people who work harder than those at Bain Capital.
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