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In June of 2002, the two partners behind Cervélo Cycles were in their office, staring at a document that could take their boutique brand to explosive success, or simply blow up in their faces. Gerard Vroomen and Phil White, a pair of engineers turned entrepreneurs, had nurtured their company to indie buzz on the strength of a reputation for superior technology and performance. Now they had a shot at the equivalent of a major-label deal: a contract to become the official supplier of racing frames to Team CSC, an up-and-coming Danish outfit with the potential to dominate the Tour de France. Sign the deal and Cervélo would be elevated to cycling's world stage. But was the tiny, seven-year-old upstart ready? Were its bikes? "We had an idea the deal would change the company; we just didn't know if it would be for better or worse," says Vroomen. "We thought it would be great, or it would kill us."

They signed. And things blew up—in a good way, at first. Team CSC soon rose to No. 1, putting Cervélo before millions of the world's most discerning bike buyers, who watched as CSC riders jostled with superstar Lance Armstrong at the front of the pack on the 2003 Tour. Cervélo's revenues grew fivefold as its bikes became status symbols for weekend road warriors from Silicon Valley to the Rhine Valley. Then came a second explosion: a series of blood-doping scandals embroiling the sport's biggest names, Team CSC riders among them. By last summer, the 94-year-old event on which Cervélo had bet its brand was so tarnished, some questioned its viability as viewers switched off and sponsors threatened to close their wallets. As for Cervélo's marketing strategy, things looked grim there, too. How do you make the case that it's all about the bikes when headlines scream it's really about the
medicine cabinet?

When I visit the company's head office in Toronto's Liberty Village, the sexy-cool address for dozens of new-media and design companies, the drama of the Tour de France and drug scandals seems far away. In fact, I'm greeted by the sight of plumber's butt on a fiftysomething guy who's trying to attach castors to the bottom of an office chair. He's introduced as a member of the much-lauded Cervélo engineering team. White is sitting at a desk in an office furnished with nothing but a filing cabinet and some framed pictures of Porsches. A couple of bike frames are lying around on the floor. This is the Canadian cycling success story? Where an engineer puzzles over an office chair?

In fairness, the company only recently expanded into this space, but White and Vroomen come by their apparent belief in substance over cool honestly. The story of Cervélo—a mash-up of the Italian word for brain and French for bicycle—began in an engineering lab, after all. In the mid-1990s, Vroomen, born in the Netherlands and today based at the company's European office in Neuchâtel, Switzerland, was tinkering on a bike design for time trials—short solo races against the clock—while studying at McGill University, and White, an American raised in Southern Ontario, agreed to pitch in. Though neither was an elite cyclist, they were—and are—bike snobs, combining a fascination for the practical efficiency of a well-designed machine with a passion for sleek and pricey toys.

The pair initially focused on triathletes and time-trial specialists—riders seeking any speed advantage and indifferent to aesthetics. Their break came when rising Canadian star Eric Wohlberg rode a Cervélo at the 1996 Olympics time-trial event. That first bike, White admits, was "butt ugly," but with its aeronautically inspired tubing, it gave riders an edge. White and Vroomen humped it around North America, showing up at bike races. Their first year, sales amounted to a paltry $25,000.

From the beginning, the two partners took an approach to marketing that made perfect sense to a pair of engineers: build lighter, more durable and more aerodynamic bikes, and savvy cyclists will gladly fork out $2,000 to $7,000 for the boost in performance. Not only was it the obvious strategy to them, but it had the advantage of being the cheapest. They bootstrapped their growth, and what money they made they reinvested in R&D, including $1,000-an-hour wind-tunnel sessions to seek ways of reducing drag. They drew inspiration from brands like Porsche, with its reputation for uncompromising engineering and a limited product line. A photograph in White's office of the iconic 911 (he drives a 911 GT3) is accompanied by a quote from the company's founder, Ferdinand Porsche, himself an engineer: "It is easy to have something new, but very difficult to have something better." Just as Porsche delivers race-proven technology to the autobahn, White and Vroomen intended to supply ordinary joes with the same bikes used by professional racers. "People will say, 'Hey, you're the Ferraris of bikes,'" says White. "And we go, 'No, no, no, we're not Ferrari. We're not trying to sell very few of something at an extremely high price.' Obviously we're a premium-priced brand, but you're getting value for it, and we're trying to get it out to as many people as possible."

In fact, Cervélo defines its market more by attitude than aptitude: The target customer is exacting and driving; it doesn't matter how hard he can attack a hill. "When I think of Cervélo, I think of racing and competition," says Elliot Gluskin, an American bicycle-market researcher. "[This positioning] appeals to people who understand the advantages of technology and are willing to spend to get it."

But reaching those buyers isn't easy, and the Cervélo founders weren't content to remain a cult secret. So in 2002, Vroomen approached Bjarne Riis, the 1996 Tour de France champion who took over Team CSC in 2000, to discuss the possibility of Cervélo equipping his outfit. Vroomen had no expectation of landing a deal. Though the pair had long hoped to get their bikes into the Tour, they figured 2005 would be the earliest they'd be ready for that level; the call to Riis was more of a dry run to learn how the process works. But Riis turned out to be a forward-thinking iconoclast more interested in Cervélo's engineering-focused approach than in its pedigree. Vroomen left behind a bike in Riis's office, and that proved to be the clincher. In a matter of days, Cervélo received a contract.

The deal was a milestone for the company, and a puzzler for nearly everyone in Europe, the sport's cradle. "We announced the deal at Eurobike in 2002 and everyone was like, who's Cervélo?" says White. "We had two European distributors at that time, but you could count the number of bikes they'd sold on one hand." Still, this huge promotional opportunity came with significant risks. Once the deal was announced, "there was no flying under anyone's radar," says White. Any problem—a glitch in the supply chain or a design flaw exposed by the extreme conditions—would be a lasting blow to the nascent company's image. As well, supplying a Tour team meant providing between 150 to 200 frames of varying styles and specifications to 30 very picky riders. The company had cracked $1 million in revenues only a year earlier, and giving away roughly $400,000 worth of its very best product was no small undertaking. Vroomen and White were also concerned that catering to one demanding client would pull their staff away from servicing their existing—paying—business. It was no doubt a major break, Vroomen says, but "it wasn't cheap."

Whether it was the bikes or Team CSC's rising star under Riis's guidance, Cervélo hit the jackpot. The first year on Cervélos was the racing team's most successful season ever, capped with three stage wins in the 2003 Tour, most notably a long, dramatic solo breakaway by American Tyler Hamilton that gave the nearly unknown bike brand hours of television time before its target audience. By 2005, Team CSC was No. 1 in the world, and retained the title in 2006 and 2007. Cervélo's fortunes tracked those of CSC: In 2004, revenues jumped to $11 million, up from just $806,000 in 1999. Since then, sales have been growing by 40% to 70% a year. "When we started at CSC, we were active in just a couple of countries," says Vroomen. "Now we have [offices] in Europe and distributors and agents in 15 countries. Germany alone now is bigger for us than North America was when we started with Team CSC."

The deal was just a bigger version of the marketing vision Cervélo had from the start: Get the equipment under the bums of elite athletes and let their credibility wash over the brand. The other big thrust was consumer education. "If people test-ride our bikes and they're educated about our bikes, they tend to purchase our bikes," says Vroomen.

There are doubters, however, who suggest Cervélo's claims to superior engineering are just a branding shtick tacked onto a few minor design tweaks. "They're unbelievable marketing people," says Dennis Mizerski, owner of Racer Sportif, an established Toronto bike boutique. It's a hollow compliment. "There's nothing so innovative about their bikes," adds Mizerski, "but the other brands don't emphasize [the technology] as much." Needless to say, Mizerski isn't one of Cervélo's dealers. Instead, he sells his own house brand, Aquila, something that isn't as difficult to do as it sounds. It merely requires a trip to Taiwan or China to find a fabricator and choose a generic frame that suits your specs. Get it painted, dress it up with components, buy some liability insurance, and a brand is born.

Cervélo holds itself distinct from such private labels, citing patented design features and certified performance. There have been glitches, as when Cervélo had to recall a production run of one model two years ago due to a flaw White blames on a since-replaced subcontractor. But the firm defends its engineering bona fides earnestly. In 2003, Cervélo filed suit against Guru Bikes, a Montreal manufacturer whose sales rep questioned Cervélo's tech claims in an e-mail to a prospective buyer. The suit was settled a year later with a written apology and a retraction. Most gratifyingly, the prospective Guru buyer chose a Cervélo.

Though having their bikes under top riders was giving the brand massive exposure, the Cervélo partners had yet to see the overall Tour winner ride one. In 2006, they had high hopes. Lance Armstrong had retired after a seven-year winning streak, and Team CSC leader Ivan Basso was in spectacular form, favoured to stand on top of the podium.

What happened instead was a disaster: Basso was named in a Spanish blood-doping scandal, suspended from cycling for two years and sacked by Riis. The ultimate champion, Floyd Landis, was hit with doping accusations and eventually stripped of his title. Things only got worse from there. Last year, Denmark's Michael Rasmussen appeared headed for victory until he was removed from the race for seeming to dodge drug testers during training; eventual winner Alberto Contador was linked to past doping allegations aimed at his teammates.

But the biggest hit to Cervélo came when Riis publicly confessed that his Tour victory a decade earlier had been fuelled by blood doping and steroid use. Perfect: You build a company on the idea that your technology makes the fastest in the world even faster, and the guy whose team seemed to prove your point admits his biggest cycling accomplishment came while he was a living chemistry experiment. It was not the best summer, White concedes. "It's like…crap."

The sport was in turmoil. The newspaper France Soir ran a mock death notice for the Tour. TV ratings and sponsorships remained steady in France, but U.S. viewership, which had peaked at 558,000 in 2005, was barely half that for the 2007 Tour. In Germany, public broadcasters pulled the plug on Tour coverage. The legendary Discovery Channel cycling team, Armstrong's base of operations, disbanded last year, unable to find a sponsor after the cable channel pulled out.

The Cervélo partners, however, have stood by Team CSC. Vroomen and White claim the scandals are proof of the cycling establishment's commitment to rooting out the drug culture. And while Riis's dramatic admission was a blow, they support the man who gave them their big opportunity. Vroomen notes that the drug-testing regimen Riis had implemented before his confession is one of the most rigorous in the sport. "From the moment we got involved with Team CSC, I got the sense that the team was set up to prove something," he says. "It was a way for him to make amends."

Importantly, the pair believe Cervélo's positioning is sufficiently diversified. Despite the brand's close connection to the Tour, the company has never strayed from its roots in the triathlon market and now has the top-selling time-trial bike in the world. Its timing couldn't have been better: USA Triathlon memberships have more than quadrupled in the decade up to 2005, meaning the company has a growing slice of an expanding pie. Cervélo bikes are now so common at some triathlons that competitors tie balloons to their rides to identify them when making the transition from the swim phase to the biking portion.

Cervélo has never tried to pump up sales by going mass market. The closest it came was an experiment with a $1,000 model—a triathlon bike discontinued after one year because the company couldn't both turn a profit and maintain its standards. That contrasts with its larger competitors, brands such as Trek, which Lance Armstrong turned into a household name and which sells not just top-end racing bikes but huge volumes of consumer models. Another rival, Cannondale Bicycle, was recently bought by Montreal's Dorel Industries for $200 million (U.S.), and is now the high-end complement to Dorel's Canadian Tire fare.

But the partners believe it's the health- and fitness-conscious baby boomers who will ultimately drive Cervélo's business forward, and as with all things boomers touch, they want the best. "It's the high-end bikes that have been driving the road bike market," says Gluskin, the industry analyst. "These are people willing to spend $5,000 for the best stuff." White says the doping controversies have had a negligible effect on sales. In fact, road bikes have been the fastest-growing segment of the bicycle market in the U.S. since 2004, with sales growing by 70% over the past three years (similar statistics for Canada aren't available).

Some observers go so far as to claim cycling is the new golf, pointing to all-inclusive tours that recreational cyclists can take along the Tour de France route before or after the race each summer. And it's not unusual to see $50,000 worth of bikes parked on a weekend morning outside a Starbucks near a high-end bike shop, fuelling riders with caffeine before group rides. "It's one of the last intense physical activities you can do before you kick the bucket," says Steve Merker, former director of the Ontario Cycling Association and now the so-called chief cycling officer for Princess Margaret Hospital in Toronto. "All those A-type personalities can't do marathons because their knees are shot, but they can still ride." And a growing number ride Cervélos. "They're like the [BlackBerrys] of bikes," says Merker. "A lot of serious riders have to have one. Whether the design makes a difference or not, it's got the placebo effect."

The company's cachet among affluent wannabes and serious amateurs has made Cervélo a tasty acquisition target for a larger rival, but its founders say they don't want to sell. Instead, they've hired bike industry veteran Michael Marx as COO to run the shop so they can go back to tinkering. After this summer's Tour de France, they plan to return to puzzling over the ultimate prize of bike design: a 750-gram frame, or about 30 grams lighter than the current best. It will require more engineering and perhaps more patents. One possibility White and Vroomen have toyed with, only half-jokingly, is selling a bike without paint, which would save 50 grams.

But such advances take time. Cervélo introduced only one new bike for 2008, bringing its line to a modest 10 models. Of the nine holdovers, four frames were unchanged from the season before, and three were the same but for some new graphics. Is this the way to pump up your cutting-edge reputation, by boasting you've made no improvements? White shrugs. "People come to us and say, 'I want something new.' And we say, 'Wait and we'll make something better.'"