My Twitter profile describes me as follows: CEO of Alchimie Forever, Swiss entrepreneur, skin-care expert, author, speaker, lover of art and champagne.
I could add long time friend of Kelly Kovack, one of the women in the beauty industry whose brain I most admire. I have known her so long I don’t remember quite how we were introduced. She has helped me refine my brand’s identity and remains a key source of inspiration and contacts.
When she told me her brainchild BeautyMatter was coming to life, I was hoping her next question was going to be to ask me to contribute content to her site. And it was. And what quickly followed was a testament as to why I love her brain. She said: “The only rule I have is that my contributors have to have an opinion.” No problem. I have an opinion – I have many opinions!
So here I am, writing my first opinionated piece.
In January of this year, as I was defining goals for my growing, family-owned, bootstrapped brand, Alchimie Forever, I decided it was time, for the first time, to embark on the search for outside capital.
I spoke to entrepreneurs, to investment bankers, to people in private equity, to family offices, and to angel investors. My contacts, and the contacts I made through these conversations were all willing to take a meeting, but not (yet?) willing to invest. I realized that in our industry, a brand needs revenues of $20M to generate interest from PE firms, and revenues north of $75M to generate interest from a strategic partner.
All of these conversations led me to believe that what is right for my brand at this time is to continue to bootstrap it, continue to grow it on my own, even if more slowly. I ended up having six months of intense and enlightening conversations before reaching that conclusion. Here are the Cliffs Notes of those conversations.
Don’t be shy
Once I decided I wanted to explore the fundraising route, I made a list of all of my “somewhat-related-to-finance” contacts. I had a few. My very first call was to Vennette Ho, Managing Director of Financo. We had met a few times at industry events, she seemed kind, and, frankly, she was a woman – somehow less intimidating than a man. In addition to introducing me to two of her contacts, she gave me one of the best pieces of advice. She could tell from the “ums” and “ahs” in my call, and probably from the tone of my voice, that I was shy about this fundraising effort. It did seem to me a bit like asking for help, which I am not good at or fond of. “The only way to raise money is to put it out there that you are looking to raise money. Don’t be shy. I know it means you have to put your business out there, but there is no way around that.”
Wisdom from an entrepreneur who has “been there, done that.”
I thought in addition to speaking to people on the finance side of things, I should ask for the advice of entrepreneurs who had gone through the fundraising process. I turned to Paulo Lima of IT Cosmetics. Our 45-minute conversation was one of the most insightful. He encouraged me to be super clear and honest with myself about why I wanted to raise money: “Understand what you want the money for – to reinvest it in the business and make it grow, or take some chips off the table and diversify your wealth.” Another serious conversation I had to have with myself was to “figure out what % of your company you are willing to part with.” And I had to do my homework: “Do due diligence on any investor you are speaking with. Check references. For example – are they suing entrepreneurs? They are doing their research on you – do the same.”
If I did decide to go the route of fundraising, he suggested I think long and hard about how to spend that cash: “Use it for a capital expense, for an asset that goes on your balance sheet. Not for samples or employees. You will need more samples and employees in a couple of years – and then what? The one exception to this rule is to fund a one-time rollout cost to a large retailer that could help you scale.”
Private equity advice
I couldn’t go through this process without speaking to people in the private equity space. Three conversations stand out.
The first is the one with Gavin Turner, of Mainsail Partners. He was an entrepreneur himself, and now works with entrepreneurs who have bootstrapped their companies to success. He had a number of quotes I studiously wrote down, then digested.
- “Don’t raise money to grow faster; you will be better served to grow at a modest pace and own more – compound this over another 10 years and you will have a more valuable company.”
- “What is the minimum amount that you need, and can you get it from a lender?”
- “Never finance inventory with equity money; the most expensive capital in the world to finance inventory is equity.”
- “Don’t share what you’ve built too early; waiting is worth a couple points of growth.”
- “Entrepreneurs tend to undervalue the value of what they have built.”
- “Raising money removes options of lifestyle. Taking outside financing closes doors. Flexibility decreases with outside investments.”
- “Don’t do it halfway: either keep 100% of the company, or sell it. Otherwise you get the worst of both worlds.”
I also had the pleasure of speaking with Blythe Jack, of TSG. A legend in the industry, she was key in the growth of Clarisonic, NV Perricone, and IT Cosmetics, among others. Her advice resonated with me, and with what Turner suggested.
- “Fund things as long as you can with your own money. You have to deal with financial risk and cash flow concerns, but you don’t have the pressure of other people’s money. You retain the ability to create more value than if you do decide to raise money too early.”
- “Take money when it is being offered to you.”
- “There is a win in every meeting.”
- “Invest every ounce of energy in your hero SKU.”
On my initial list of “people-I-know-somewhat-related-to-finance” was Ken Landis, of Landis Capital, and also one of the founders of Bobbi Brown, and now an investor in Tula. He shared some very no-nonsense advice.
“Getting to be cash-flow positive is the goal.”
“The biggest mistake brands make is fixing sell-though shortfalls with new sell-ins. Don’t look at the sell-in, only look at sell-through.”
“Your goal with any retailer or distribution partner is to be important to them. If your sell-through is high, you are important to them. If you are in all their stores, you are important to them. Figure out a way to be important to them.”
Throughout a number of other meetings, I heard more great strategic advice, some captured successfully in a one-liner.
- “Productivity drives all.” –Rich Gersten, TenGram Capital
- “You get the investors you deserve.” –Adam Bain, Stormont Capital
- “I am eternally fundraising, which means I am eternally self-funding.” –Dan Obegi, JENU
- “Remember you want board members you can control.” —(Off the record)
- “Don’t necessarily wish for a bigger company: bigger company, bigger problems.” –Barbara Polla, my mother